Latin America Transformed: Globalization and Modernity (Arnold Publication)

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First published in Great Britain in 2004 by Hodder Education, an Hachette UK Company 338 Euston Road, London NW1 3BH www.hoddereducation.com © 2004 Edward Arnold (Publishers) All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronically or mechanically, including photocopying, recording or any information storage or retrieval system, without either prior permission in writing from the publisher or a licence permitting restricted copying. In the United Kingdom such licences are issued by the Copyright Licensing Agency: Saffron House, 6–10 Kirby Street, London EC1N 8TS. The advice and information in this book are believed to be true and accurate at the date of going to press, but neither the editors, the contributors nor the publisher can accept any legal responsibility or liability for any errors or omissions. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing-in-Publication Data A catalog record for this book is available from the Library of Congress ISBN 978 0 340 80930 3 Typeset in Great Britain by Phoenix Photosetting, Chatham, Kent What do you think about this book? Or any other Hodder Education title? Please send your comments to [email protected]

To Catherine, Daniel and Sylvia


Contents

List of tables List of figures About the authors Preface

PART 1:

GLOBALIZATION AND MODERNITY 1

2

3

xi xiii xv xix

1

Latin America transformed: globalization and neoliberalism Robert N. Gwynne, Cristóbal Kay

3

Unravelling the concept of globalization in Latin America Globalization and the contemporary relevance of structuralism and dependency theories Globalization in the neoliberal era Social bases of neoliberalism Conclusion: a paradigm shift in theory and policy

5 11 14 17 19

Modernity and identity: cultural change in Latin America Jorge Larraín

22

Introduction The Latin American trajectory to modernity Some specific elements of Latin American modernity and culture Conclusion

22 24 32 38

Structural reform in South America and Mexico: Economic and Regional Perspectives Robert N. Gwynne

39

Historical contexts Economic policy change Impacts and problems of neoliberal reform Neoliberalism and economic spaces Conclusion

43 46 50 57 63 vii

Latin America Transformed

4

5

6

PART 2:

67

A region of small and dependent states Development policies prior to neoliberalism The debt crisis and the neoliberal remedy The meaning and impacts of globalization The neoliberal development model Cuba: island socialism amid global capitalism Migration and transnationalism Regional trading blocs The growing drug economy Conclusion

69 73 76 77 80 84 87 87 90 91

The urban revolution Alan Gilbert

93

Urban growth during the twentieth century Explanations for urban growth Rural–urban migration The geography of urban growth under the new economic model The urbanization of poverty Differential patterns of urban change An unpredictable future

94 95 98 101 102 104 114

The political economy of sustainable development Warwick E. Murray and Eduardo Silva

117

Natural resource use – economy or environment? Political-economic issues and implications Whose sustainability? The Chilean fruit export boom Environmental issues and implications The politics of natural resource extraction Conclusion

118 122 124 128 133 135

POLITICAL TRANSFORMATIONS 7

8

viii

Globalization, neoliberalism and economic change in Central America and the Caribbean Thomas Klak

139

Authoritarianism, democracy and development Eduardo Silva

141

Political economy and the state Democracy, authoritarianism and development Conclusion

141 143 154

The new political order: towards technocratic democracies? Patricio Silva

157

Neoliberalism, modernization and democracy The depoliticization of society Political legitimation and consumerism The technocratization of policy-making

157 159 162 164

PART 3:

SPACE, SOCIETY AND LIVELIHOODS 9

10

11

12

PART 4:

166 168 171

Livelihood transitions, place transformations: grounding globalization and modernity Anthony Bebbington

173

Conceptualizing livelihoods in Latin America Livelihoods since neoliberalism Livelihood politics Livelihoods, NGOs and development Globalization and livelihoods in Latin America Conclusion

174 181 183 185 188 191

Civil society, grassroots politics and livelihoods Sarah A. Radcliffe

193

Civil society in Latin America: social difference, rights and the state Civil society mobilization in the 1970s and 1980s Civil society and the transition to democracy Civil society and social difference Conclusion

194 196 202 202 207

Urban livelihoods, employment and gender Sylvia Chant

210

Household livelihoods Urban employment Gender and the urban labour market Conclusion

210 215 221 228

Rural livelihoods and peasant futures Cristóbal Kay

232

The lost promise of agrarian reform Globalization, neoliberalism and agriculture Peasant futures: a permanent semi-proletariat? The new peasant movement: indigenous and environmental dimensions Conclusion

232 234 240 246 249

LATIN AMERICAN FUTURES

251

13

The alternatives to neoliberalism Robert N. Gwynne and Cristóbal Kay

253

The neoliberal model evaluated Alternatives to neoliberalism

253 259

Bibliography Index

268 311 ix

Contents

Disenchantment The future of democracy in Latin America


List of tables

1.1 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4.1 4.2 4.3 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 5.16 5.17 5.18 5.19 6.1

Increasing asymmetries in the world economy, 1978–2001 Population and production in North and South America, 1965–2001 South America and Mexico: peak inflation years between 1970 and 1993 and inflation average, 1984–93 Chronology of trade liberalization in Latin America, 1985–91 Latin America: export growth during the 1980s and 1990s Latin America: changes in labour market indicators during the 1990s Latin America: open urban unemployment, 1985–2000 Latin American labour markets, 1990–99 Contribution to total manufacturing employment by size of firm, 1990s Latin America: employment growth by sector, 1990–97 Basic indicators for Central American and Caribbean countries and territories Trade dependency: selected Central American and Caribbean countries in comparative perspective Central American and Caribbean trading blocs: intra-regional exports as a percentage of total exports, selected years Latin America: urban share of population in selected countries, 1930–2000 Latin America: annual population growth, 1990–95 Economic growth in selected Latin American countries since 1950 Urban growth in major cities and countries of Latin America, 1950–2000 Poverty and inequality in Latin America during the 1990s The incidence of poverty in Latin America, 1970–99 Foreign direct investment: Chile, Colombia and Mexico, 1990–2001 Chile, Colombia and Mexico: export performance, 1965–2001 Chile, Colombia and Mexico: development of manufacturing exports, 1965–2001 Chile, Colombia and Mexico: manufacturing value added, 1950–99 Chile, Colombia and Mexico: economic growth by decade since 1980 Mexico: population growth rates in the major cities, 1950–2000 Mexico: growth of the maquiladoras, 1966–2002 Mexico: poverty and inequality, 1963–2001 Chile: annual population growth of the largest cities, 1952–92 Chile: poverty and inequality, 1970–2001 Colombia: the economy, murders and internal displacement, 1990–2001 Colombia: annual population growth largest cities, 1951–93 Colombia: poverty and inequality, 1978–99 Export specialization in Latin America, proportional values, 2000

8 41 44 49 52 54 55 56 59 60 70–1 72 88 95 96 98 101 103 104 105 105 105 106 106 107 107 108 109 110 112 112 114 121 xi


11.1 11.2 11.3 11.4 11.5

xii

Latin America: key labour market aggregates, 1990–99 Level and composition of unemployment in urban and rural areas of Latin America, 1990–99 Percentage of male and female labour force in the informal sector Women’s share of labour force, and key occupational and sectoral characteristics Wage differentials in paid employment by gender and age cohort

213 216 220 222 226

List of figures

1.1 3.1 3.2 3.3 3.4 3.5 4.1 4.2 4.3 4.4 4.5 6.1 6.2 6.3 8.1 9.1 9.2 11.1 11.2 11.3 11.4 12.1 12.2 12.3 12.4 13.1 13.2 13.3

Latin American countries and capital cities Schemes of economic integration in Latin America Hemispheric representation according to income and population size Latin America: export markets, 2001 Assembly industry and the Mexican border towns The economic power of Chile’s regions The small countries of Central America and the Caribbean The weekly banana shipment from Dominica to Britain Electronics assembly in Costa Rica Dominica’s non-traditional industrial exports Cuban economic growth rates, 1985–2002 Components of sustainable development Este valle está bajo Control The output of plantation forestry in Southern Chile Graffiti saying ‘Death to the Guerrillas’, Central Colombia, 2001 A livelihoods framework Male and female market traders, Otavalo, Ecuador Low-income settlement, Querétaro, Mexico Home-based commerce, Puerto Vallarta, Mexico Home-based footwear production, Léon, Mexico Home-based services – hairdressing, Puerto Vallarta, Mexico Man and machete, Liberia, Costa Rica Seasonal female labour in one of Chile’s Fruit-Packing Plants Truck bringing cane workers home from a day in the fields, Liberia, Costa Rica Inside a smallholder’s greenhouse, Peumo, Chile, 1996 The results of foreign direct investment in Chilean agriculture The informal sector in action Elderly beggars, Quinché, Ecuador

4 40 42 53 62 64 68 75 79 82 85 119 125 130 161 177 187 213 214 217 221 237 238 239 243 254 256 257

xiii


About the authors

EDITORS Robert N. Gwynne is Reader in Latin American Development at the School of Geography, University of Birmingham. In recent years, he has also been Visiting Professor at the Catholic University of Chile. His research interests focus on industrialization in the developing world and on the impacts of neoliberalism and globalization on regional and rural development in Latin America. He is the author of two books (Industrialisation and Urbanisation in Latin America; New Horizons? Third World Industrialization in an International Framework) and has recently co-authored Alternative Capitalisms: Geographies of Emerging Regions (2003, Arnold) with Thomas Klak and Denis Shaw. In addition he has written numerous articles in both geography and Latin American journals and chapters in a wide range of edited books. Cristóbal Kay is Associate Professor in Development Studies and Rural Development at the Institute of Social Studies in The Hague. He has held lectureships in the University of Chile and the University of Glasgow and has been Visiting Professor at the Catholic University of Peru. He is coeditor of the European Review of Latin American and Caribbean Studies and was the editor of The European Journal of Development Research. His books include Latin American Theories of Development and Underdevelopment, Labour and Development in Rural Cuba (joint author), Development and Social Change in the Chilean Countryside (co-editor) and Globalisation, Competitiveness and Human Security (editor).

CONTRIBUTORS Anthony Bebbington is Professor in the Institute for Development Policy and Management, University of Manchester. Previously he was Associate Professor of Geography at the University of Colorado at Boulder, and has also worked at Cambridge University, the World Bank and the Overseas Development Institute. In recent years he has held fellowships at the Center for Advanced Studies in the Behavioral Sciences at Stanford, and the UN Food and Agricultural Organization in Chile. His research in Latin America has addressed: NGOs and rural social movements; poverty and rural livelihoods; agricultural development; and more generally the links between development interventions and political economy. He is married with two young daughters. Sylvia Chant is Professor of Development Geography at the London School of Economics and Political Science. She has specialist interests in gender and development, with her most recent books including Women-headed Households: Diversity and Dynamics in the Developing World, Three Generations, Two Genders, One World (with Cathy McIlwaine), Mainstreaming Men into Gender and Development: Debates, Reflections and Experiences (with Matthew Gutmann), and Gender in Latin America (in association with Nikki Craske). She has worked mainly on Latin America (Costa Rica and Mexico), but xv


has also conducted research in the Philippines. Recently she embarked on work on youth, gender and livelihoods in sub-Saharan Africa with her LSE colleague, Dr Gareth A. Jones. Between 2003 and 2006, Professor Chant will be engaged in comparative research on inter-generational and household dimensions of gender and poverty in Africa, Asia and Latin America under the auspices of a three-year Leverhulme Major Research Fellowship. Alan Gilbert is Professor of Geography at University College London. He is the author or editor of thirteen books and more than one hundred chapters and articles. His latest book is the Latin American City (2003). His expertise is principally in the area of housing, urbanization and urban management in Latin America and South Africa. He has acted as a consultant and researcher for the IDB, World Bank, and UNHabitat for whom he has recently completed a report on rental housing. Thomas Klak is Professor of Geography at Miami University and Adjunct Professor of Geography at Ohio State University. His research analyses the theories, discourses, practices, and ecological consequences of development and urban sprawl. He is the editor of Globalization and Neoliberalism: The Caribbean Context (1998), and co-author of Alternative Capitalisms: Geographies of ‘Emerging Regions’ (2003) and The Contemporary Caribbean (2004). Jorge Larraín is Head of the Department of Social Sciences at the University Alberto Hurtado, Santiago, Chile and Emeritus Professor of Sociology at the University of Birmingham. His present research interests focus on culture, modernity and identity in Latin America, especially Chile. His books include The Concept of Ideology; Theories of Development, Ideology and Cultural Identity and Identity and Modernity in Latin America. Warwick E. Murray is Senior Lecturer in Human Geography at Victoria University, New Zealand. In 1997, he gained his PhD from the University of Birmingham (UK), which built on a year’s fieldwork in Chile investigating the impacts of neoliberalism on small farmers. He has held lectureships at the University of the South Pacific (Fiji) and Brunel University (UK), and has extended his research on globalization, political economy and rural development to the Pacific Islands and Rim. His work has been published in journals including Economic Geography, European Journal of Development Research, Journal of Peasant Studies and Journal of Rural Studies. In 2002 he co-edited (with Jonathan Barton) a special edition of the Bulletin of Latin American Research entitled ‘Chile: A Decade in Transition’. He is currently Managing Editor of the academic journal Asia Pacific Viewpoint. Sarah Radcliffe teaches Latin American studies, and social and cultural geography, at the Department of Geography, University of Cambridge. Her current research interests include indigenous development and transnationalism, theories of the state and citizenship, and gender and development. Her books include ‘Viva! Women and popular protest in Latin America’ (Routledge, 1993) and ‘Remaking the nation: place, identity and politics in Latin America’ (Routledge, 1999). Eduardo Silva is Professor of Political Science and Fellow of the Center for International Studies at the University of Missouri, St. Louis. He is author of The State and Capital in Chile, and co-editor of Organized Business, Economic Change, and Democracy in Latin America and Elections and Democratization in Latin America, 1980–85. In addition to contributions to edited volumes and public affairs pieces, his articles have appeared in World Politics, Comparative Politics, Development and Change, Global Environmental Politics, Journal of Latin American Studies, Journal of Interamerican Studies and World Affairs, Latin American Politics and Society, Bulletin of Latin American Research, Latin American Research Review, and the European Review of Latin American and Caribbean Studies. xvi

xvii

About the authors

Patricio Silva is Professor of Modern Latin American History at both the Department of Latin American Studies and the Institute of Social and Cultural Studies, Leiden University. His recent research has focused on the technocratization of the political arena and civil-military relations in several Latin American countries. He is co-editor of several books, including The Soldier and the State in South America, The Politics of Expertise in Latin America and Designers of Development: Intellectuals and Technocrats in the Third World.


Preface

Welcome to the Second Edition of Latin America Transformed. Four chapters (5, 9, 11 and 13) are completely new and the other nine chapters have been updated, with most of them considerably revised and changed. In addition, all chapters now have recommended web sites for readers to consult, along with suggestions for further reading. The maps and diagrams have been produced by Kevin Burkhill and Anne Ankcorn at the University of Birmingham. As editors we were very gratified by the many favourable reviews that the First Edition received. Its aim was to make more comprehensible the radical series of transformations that had taken place in the economic, political, social and cultural life in Latin America in the last quarter of the twentieth century. It adopted a political economy approach in order to unravel such concepts as globalization, neoliberalism and modernity and how they related to the transformations that Latin America was experiencing. In the Second Edition, we have maintained the importance of this political economy perspective in the first two parts of the book. All chapters have been significantly updated and revised, and there is one completely new chapter (The urban revolution, by Alan Gilbert). We think that the Second Edition is a considerable improvement on the First Edition in that we more systematically introduce another dimension – that of understanding the dynamics of people’s livelihoods. The third part of the Second Edition focuses on how people weave their way through, make sense of and live out the structural transformations that are taking place at the level of the city, the countryside, the state or world economy. The emphasis is on how people construct their livelihoods from below, albeit framed within these wider political and economic structures. In this part there are two completely new chapters (Livelihood transitions, place transformations, by Anthony Bebbington; and Urban livelihoods, by Sylvia Chant) and the other chapters have been substantially revised. One criticism of the First Edition was that it lacked a conclusion. In this Second Edition, the editors have grasped the nettle and, in part four, discuss the political economy of Latin America’s future. If the analysis proves prescient, we may later be asked to do a Third Edition! Robert N. Gwynne Cristóbal Kay September 2003

xix


1 GLOBALIZATION AND MODERNITY


1 Latin America transformed: globalization and neoliberalism Robert N. Gwynne, Cristóbal Kay

Globalization has been associated with a series of economic, political, social and cultural metamorphoses in Latin America. This book aims to explain the various components of these metamorphoses, explore theoretical debates and contribute to a greater understanding of how these transformations are affecting the people of Latin America (see Figure 1.1). It could be argued that studies on societal transformations in contemporary Latin America have been characterized by their strong fragmentation along disciplinary lines. Since the early 1980s, political scientists have directed their attention to the processes of democratic transition and consolidation taking place in a large number of countries (see Chapters 7 and 8). During the same period, economists have focused on analysing the policies of macro-economic adjustment and trade liberalization implemented in order to regenerate economic growth across the continent (see Chapters 3 and 4). Meanwhile, several sociologists and social anthropologists have begun, in recent years, to examine the nature of the social and cultural transformations generated by modernization and the increasing globalization of Latin American societies (see Chapters 2, 10 and 12). Geographers have tried to examine change at different scales of analysis and by foregrounding place and livelihoods in their analysis (see Chapter 9). There are many ways of examining how transformations have occurred in Latin America and the Caribbean in the past few decades. Political economy provides one set of tools. Part 1 of this book uses a political economy approach in order to unravel the concepts of globalization and modernity and how they relate to economic, political, social and cultural change in the region. The emphasis is on interpreting the broad structures that frame the several transformations that are taking place. These interpretations cast their analysis at a macro-level, creating arguments that seek to explain the transformations in the region by reference to international, national and regional processes. In the first two parts, all authors attempt to contextualize their different disciplinary foci within a broad political economy approach that consciously tries to integrate political, economic, social and geographical phenomena. In several chapters, key theoretical perspectives and debates, as far as they exist, are used to analyse these transformations in a critical manner. Other chapters, while discussing theoretical issues, present more empirical evidence to examine the various transformations of Latin America and discuss the adequacy of current theories. Another dimension is to focus on how people weave their way through, make sense of, rework and live out these structural transformations. Part 3 aims to understand the dynamics of people’s livelihoods. The emphasis in these chapters is on how people construct their livelihoods from below and within the existing structural constraints of the current phase of globalization. We hope that, by having chapters that rely on one or the other of these two dimensions, this book will provide a more comprehensive picture of Latin American transformation. The challenge is to focus on the weave that knits together global and local networks and which has produced and continues to generate distinctive chronologies of place and livelihoods. 3


Havana

MEXICO

CUBA

DOMINICAN REPUBLIC

Mexico City

Santo Domingo

GUATEMALA

BELIZE HONDURAS

Guatamala City San Salvador

Tegucigalpa

EL SALVADOR Managua

NICARAGUA Caracas

San Jose Panama

COSTA RICA

VENEZUELA GUYANA Bogota

SURINAME

FRENCH GUIANA

COLOMBIA Quito

ECUADOR

PERU BRAZIL

Lima

La Paz

Brasilia

BOLIVIA

PARAGUAY Asuncion

CHILE Santiago

ARGENTINA URUGUAY Buenos Aires

Figure 1.1 Latin American countries and capital cities.

4

Montevideo

The concept of globalization has been strongly linked to the economic (see below), but in this book we aim to emphasize the political, social, environmental and cultural components of globalization as well. The globalization of politics has impacted upon Latin America in such diverse forms as the shift to systems of democratic governance and greater concern for human rights (see Chapter 8). Meanwhile, global environmental concerns (such as global warming) have impacted upon government and public attitudes to the environment in many countries, while the growth of media emanating from the core economies (and most particularly the United States) is transforming social customs and cultural practices in much of urban Latin America (see Chapters 2 and 5). One ought to add that there is also evidence of local reactions to the processes of globalization, as with the rise in grassroots movements representing local environmental issues (see Chapter 6) and indigenous movements (see Chapter 10). In terms of economic globalization, it should be emphasized that capitalism has always been an international system. However, today, the international integration of the world-market economy is progressing at a very rapid pace. This process encompasses economic transformations in production, consumption, technology and ideas. Many social scientists define the current reality as one of unprecedented globalization and call for new forms of global governance (Soros, 2002). The idea that we have entered an era of globalization is so often repeated in the news media and in scholarship that it has the status of a truism, so obvious that it is beyond refute or need for empirical substantiation. Many observers go one step further, presenting globalization as an unquestionable empirical manifestation of contemporary capitalism. Against this trend, there is now also a powerful antiglobalization movement that receives considerable media attention (see Box 1.1).

BOX 1.1 The anti-globalization movement The process of globalization has unleashed an anti-globalization movement, largely situated in the countries of the North. In the past decade, it has organized major protest actions in Seattle, Washington, DC, Genoa and other cities where international organizations such as the World Bank have organized key meetings. The anti-globalization movement is a broad coalition of a great variety of groups who wish to voice their concern about the negative impact of the process of globalization on such issues as the environment, labour rights, working conditions and the cultural identity of groups and nations. However, these anti-globalization protests have not yet coalesced into a permanent and coherent social movement. While it may not have fundamentally contested or changed the global capitalist system, it has been relatively successful in raising more widespread concern about the negative consequences of the globalization process. A major antiglobalization movement in the South is being shaped by the Social Forum, which has so far had three gatherings in Porto Alegre, Brazil. Thousands of representatives of NGOs, trade unions, and other organizations from the North and the South meet during a week or so to discuss a great variety of issues concerning the economic, social and political impact of globalization and neoliberalism on mainly the peoples of the South. It attempts to forge an international movement that counters the power of transnational corporations and the policies pursued by governments in the North and the South, which try to further neoliberal globalism. These anti-globalization gatherings and protest movements view globalization as an umbrella term that covers a variety of current transformations which they attribute to the spread and intensification of capitalism, and which they view as having deleterious effects on peoples, cultures and the environment throughout the world. 5

Latin America transformed: globalization and neoliberalism

UNRAVELLING THE CONCEPT OF GLOBALIZATION IN LATIN AMERICA


Theses of globalization It may, therefore, be useful to refer to some of the key discourses on globalization in the social science literature (with reference to Latin America, see Harris, 2002) . This will demonstrate that globalization is a contested concept with a range of arguments and interpretations associated with it. One attempt at classifying the interpretations of globalization was that of Held et al. (1999), who argued that there were at least three such discourses, or as they call them, theses: hyperglobalist, sceptical and transformationalist. The hyperglobalist thesis According to the hyperglobalist thesis, globalization defines a new epoch of human history in which traditional nation–states have become unnatural, even impossible units in a global economy (Luard, 1990; Ohmae, 1995). The key assumption is of movement towards global markets and global prices. In this model, national economies become ‘subsumed and rearticulated into the international system by international transactions and processes’ (Michalak, 1994: 53). Although nationally determined policies still operate, they are subordinate to wider international determining factors. The key actor becomes the transnational corporation (TNC), detached from constraints of government regulation and unconstrained by any specific national base. The TNC can thus be seen as the single most important force in economic restructuring both between and within nation–states. This thesis privileges an economic logic to globalization and argues that economic globalization is bringing about a ‘denationalization’ of economies through the establishment of transnational networks of production, trade and finance (Strange, 1996; Deardorff and Stern 2000). Held et al. (1999) maintain that within this framework, at least two discourses prevail. On the one hand, there is the neoliberal version, which welcomes the triumph of individual autonomy and celebrates the dominance of the market principle over state power that such a thesis of globalization implies (Ohmae, 1995). On the other, this thesis has neo-Marxist adherents for whom contemporary globalization represents the triumph of oppressive global capitalism (Peet and Watts, 1993; Petras, 1999). Petras and Veltmeyer (2001a), indeed, would argue that globalization constitutes a new form of imperialism for the twenty-first century. The steady erosion of old hierarchies and the generation of new patterns of regional winners and losers are emphasized. A new global division of labour replaces the traditional core–periphery structure and a more complex architecture of economic power evolves. In the creation of these new world geographies, the neoliberals stress advantages in global competition. Some spaces within a country may be made worse off as a result of such competition, but other spaces will have a comparative advantage in producing certain goods for global markets. The neoliberals tend to see all countries (rich and poor) benefiting from globalization, although within each country significant restructuring will take place. In contrast, the neo-Marxists believe that global capitalism creates and reinforces structural patterns of inequality both between and within countries. The sceptical thesis Facing the tidal wave of globalization discourse, a few sceptics have countered that many of the fundamental features and empirical manifestations of global capitalism today remain much as they were in the nineteenth century (Hirst and Thompson, 1999; Wallerstein, 2000). Hirst and Thompson (1999: 2) argue that in some ways ‘the current international economy is less open and integrated than the regime that prevailed from 1870 to 1914’. Using statistical evidence of world flows of trade, investment and labour from the nineteenth century, Hirst and Thompson argue that contemporary levels of economic interdependence are by no means historically unprecedented. The sceptics think that ‘true’ globalization must imply a fully integrated world economy, which remains a long way into the future. One crucial economic factor of the world economy, labour, remains relatively immobile, particularly compared with capital. More generally, this thesis sees the world economy as one in which the principal economic entities are still states, and their governments are involved in facilitating the process of increasing economic 6

The transformationalist thesis This thesis sees globalization as a powerful transformative force which is responsible for a massive ‘shake-out’ of societies, economies, institutions of governance and world order. The direction of this ‘shake-out’ remains uncertain, since globalization is conceived as an essentially contingent historical process replete with contradictions. ‘At issue is a dynamic and open-ended conception of where globalization might be leading and the kind of world order which it might prefigure’ (Held et al., 1999: 7). Contemporary processes of globalization are historically unprecedented, such that governments and societies across the globe need to adjust to a world in which there is no longer a clear distinction between international and domestic, external and internal affairs (Rosenau, 1997). This thesis emphasizes the continuation of global divergence – increasing inequalities between and within countries. Distinctions between North and South or First World and Third World ‘overlook the ways in which globalization has recast traditional patterns of inclusion and exclusion between countries by forging new hierarchies which cut across and penetrate all societies and regions of the world’ (Held et al., 1999: 8). Globalization in this book What is interesting from a Latin American viewpoint is that most perspectives (apart from the hyperglobalist) do not see global convergence (that is, fewer inequalities between and within countries) resulting from globalization. Growing inequalities appear to be the result of production, exchange and finance becoming increasingly transnational in dimension. We tend to favour the transformationalist thesis, in which a great variety of outcomes is possible. Some countries, regions, communities and households will benefit economically from being more closely linked to the fortunes of the global economy, but others (and perhaps the majority in Latin America) will be disadvantaged. As a result, globalization is associated with new patterns of global stratification in which some states, societies and communities are becoming increasingly enmeshed in the global order while others are becoming increasingly marginalized (Held et al., 1999: 8). Our main critique of the transformationalist approach is that it does not foreground the reaction of local communities and individuals to what they regard as the overwhelming force and reach of global economic processes; in Part 3 we attempt to confront this limitation. Globalization and differentiation within Latin America Divergence between countries and unevenness between different regions of the world, therefore, have become interwoven with globalization. Some argue that, as a result, ‘globalization’ (a word which implies convergence) can be a misleading term for the unfolding process. Table 1.1 gives some 7


interaction at the global scale. International phenomena are outcomes that emerge from the distinct and different performance of national economies (Michalak, 1994). This can explain the increasing importance of trading blocs in the contemporary world. It could be argued that individual states make significant efforts to come together in regional groupings in order to achieve greater economic stability within a world economy that is increasingly uncertain as markets (and thereby prices) become more ‘global’ in character. Sceptics emphasize the enduring power of national governments to regulate international economic activity. Thus, they regard the early twenty-first century as indicating only heightened levels of internationalization. Economic interactions occur between predominantly national economies, although some of these economies may link together into trading blocs where the law of ‘one price’ can become a reality (unlike in the global arena). However, it could be argued that the law of ‘one price’ has so far only been achieved in the European Union, where full labour mobility within the trading bloc distinguishes it from other examples. Sceptics see globalization as increasingly marginalizing the countries of the world periphery. Globalization provides economic growth for core economies and certain countries of the semi-periphery, but a whole series of economic and political factors retard the economic growth of the poorer countries of the world, most notably in Africa.


TABLE 1.1: Increasing asymmetries in the world economy, 1978–2001 Year

1978

1990

2001

A – Per capita income of six core economies

US$7,899

US$20,945

US$30,406

B – Per capita income of six Latin American countries with highest GNP

US$1,602

US$2,721

US$4,373

US$676

US$770

US$1,227

Ratio A–B

4.9

7.7

7.0

Ratio B–C

2.4

3.5

4.2

Ratio A–C

11.7

27.2

29.0

C – Per capita income of six Latin American countries with lowest recorded GNP

A – six core economies: USA, Japan, Germany, UK, France, Italy. B – six Latin American countries with highest GNP per capita in 2001: Argentina, Uruguay, Chile, Brazil, Mexico, Venezuela. C – six Latin American countries with lowest recorded GNP per capita in 2001: Haiti, Honduras, Bolivia, Guatemala, Ecuador, El Salvador (no data set available for Nicaragua and Cuba). Sources: World Bank (1980), (1992) and (2003b).

indication of the increasing asymmetries between the core economies of the world on the one hand, and the semi-peripheral and peripheral countries of Latin America on the other (for a full discussion of these concepts from world systems theory, see Gwynne et al., 2003: Chapter 2). In Table 1.1, the Latin American semi-periphery is represented by the six countries with the highest Gross National Product (GNP) per capita in 2001; they are Argentina, Uruguay, Chile, Brazil, Mexico and Venezuela. Meanwhile, the periphery is represented by the six poorest countries of Latin America and the Caribbean, with World Bank data sets for the years in question. This category thus includes Haiti, Honduras, Bolivia, Guatemala, Ecuador and El Salvador. The evidence for increasing divergence between Latin American countries on the one hand, and the core or developed economies on the other, is indisputable. Already in 1978, the per capita income enjoyed by inhabitants of the core economies of the world economy was virtually five times that of the semi-periphery of Latin America and 12 times that of the lowest income economies. By 1990, after the lost decade (see Chapter 3), the ratio had increased to virtually eight and 27 times respectively. Since 1990, the ratios have stabilized to a certain extent. Indeed, the changing ratios between the core economies and the semi-peripheral countries of Latin America between 1990 and 2001 showed some indication of convergence (ratio A–B in Table 1.1). However, it should be borne in mind that this period is followed by severe economic crises in two of the semi-peripheral countries in question, Argentina and Venezuela. After 2001 the shift to divergence has probably resumed apace. This volatility in economic relationships between core and semi-periphery introduces the concept of truncated convergence (ECLAC, 2002a). This concept acknowledges that there will be periods in which convergence may occur, but that these will be relatively short-lived and temporary. Nevertheless, it should be emphasized that the divergence 8

• the export profile of virtually all of the smaller countries of Latin America is dominated by primary products, much as it was in the 1950s; • the export profile of the larger, more-industrialized countries of Latin America is characterized by labour-intensive consumer products or components. Certainly the case of Mexico, and particularly the type of industrialization experienced in its northern cities, has been well documented in this respect (Sklair, 1989). Nevertheless, both large and small states in Latin America must increasingly pursue national goals and objectives within globally defined parameters and structures (Watson, 1996). The consequence of being more fully inserted into the global economy means less and less room for policy manoeuvre. In part, this is because the governments of developing countries are more dependent on the policy approval of the global institutions that ‘supervise’ the world economy (such as the IMF, the WTO and the World Bank) and on the investment decisions of transnational companies that can be strongly swayed by the verdicts of international institutions. Latin America in its global context The fall of the Berlin Wall and the crisis of the Soviet world in the late 1980s have reasserted the dominance of the world capitalist system and emphasized the importance of economic success in establishing nodes of power in the world. The demise of the bipolar world, which had been based on Cold War political ideologies, shifted the emphasis to the variations of political economy within the capitalist world system. Some have argued that the world is now tripolar (Preston, 1996), centred on: 1 North America, with the USA, in particular, re-emphasizing its global hegemonic power in both political and economic matters. 2 Japan and the first-generation newly industrializing countries (NICs) of East Asia, such as Taiwan and South Korea. These countries had formerly been closely linked politically to the USA in the bipolar world. This region has emerged as a global economic pole, deriving its power from its success in manufacturing in general, and knowledge-intensive industries in particular. 9


between the core economies and the six poorest countries of Latin America has continued to increase and has reached extreme levels – by 2001 the mythical average inhabitant of the core economies was nearly 30 times better off than those living in the poorer countries of the Caribbean, Central America and the Andean region. As well as asymmetries between regions in the global economy, there are growing asymmetries within Latin America and the Caribbean. The data in Table 1.1 distinguishes between the performance of countries of the semi-periphery and periphery within Latin America (ratio B–C). The divergence between the richer and poorer countries of Latin America continued to grow apace – a virtual doubling of the divergence ratio in 23 years to reach a ratio of 4.2 by 2001. In this book, we make the distinction between the larger countries of South America and Mexico (Chapter 3) and the smaller countries of Central America and the Caribbean (Chapter 4). Larger countries have been more successful at industrializing and developing more complex economic structures; they have slightly more room for manoeuvre in a globalized world than smaller countries. Meanwhile, as Tom Klak argues in Chapter 4, the smaller countries are economically vulnerable, not only in terms of traditional sectors such as agriculture, but also as regards new sectors such as garment assembly and offshore finance. What is true is that the Latin American periphery and semi-periphery are becoming increasingly differentiated. Those spaces (whether at the scale of the nation–state, region or city) that are becoming both more fully inserted into the global economy and more able to achieve a sustained improvement in international competitiveness, seem to be operating like new growth centres within Latin America, attracting capital, technology and labour (if the latter’s mobility is allowed). To what extent are these new centres linked to the growth in manufacturing or service activity? Analysis of the nature of export growth within Latin American countries still reveals that:


3 The European Union, a regional bloc in the process of both enlargement and deepening, and with increasing links to Eastern Europe and parts of the former Soviet Union. There are at least two important characteristics of this tripolar world relevant to Latin America. First, transnational corporations from these three poles have identified hinterlands or spheres of influence, where they can subcontract labour-intensive operations and extend the regional markets for their products. European corporations have identified Eastern Europe; firms from the key East Asian NICs have targeted China and the second-generation NICs of East Asia (such as Malaysia and Thailand). North American corporations have identified Latin American countries in this respect. Second, the great majority of direct foreign investment (DFI) during the 1980s and 1990s of the large transnational firms originating in the three poles has been in countries of the other two poles (Hirst and Thompson, 1999).This cross-investment has been particularly noticeable for firms from the East Asian pole (that is, Japanese and South Korean firms investing in North America and Europe); North American firms have tended to concentrate on DFI in Europe, and European firms in North America. The important issue for Latin America has been that major corporations from North America and the other two poles have often preferred to cross-invest rather than to invest in Latin America. In the two peak years of global investment (1999 and 2000), only 7.8 per cent of the US$2580 billion of DFI was directed to Latin America. Meanwhile, the North American and West European poles received 80 per cent of this investment (ECLAC, 2003a: 23). There are three spaces in Latin America which have maintained significant amounts of DFI: Brazil, Mexico and offshore financial centres. The sheer size of Brazil’s market (a population of 175 million in 2002) has attracted a wide variety of investment. Between 2000 and 2002 Brazil received 30.6 per cent of the US$235 billion of the DFI channelled into Latin America (ECLAC, 2003a: 32). Most of this was directed to the metropolitan areas and cities of Brazil’s south-east region where manufacturing activity and high-order services are highly concentrated at the national scale. Meanwhile, since Mexico negotiated to become a member of the North American Free Trade Area (NAFTA) in the early 1990s, European, Japanese and North American firms have increased their investment in the country, particularly in the Mexican North. These investments reflect TNCs trying to gain favoured access to the key US market from a proximate location with relatively low labour costs. In the first three years of the twenty-first century, Mexico received 22.4 per cent of Latin American DFI (ECLAC, 2003a: 28). Meanwhile, offshore centres, such as the Cayman Islands, have continued to gain greater proportions of DFI targeted at finance. Between 2000 and 2002, offshore financial centres received nearly 20 per cent of Latin American DFI (ECLAC, 2003a: 13). Overall, then, virtually 75 per cent of Latin American DFI is now invested in south-east Brazil, northern Mexico and a handful of offshore financial centres in the Caribbean. In the globalizing tripolar world, how then can we interpret the geography of Latin America? How are its component parts being integrated within the global economy and the global political system? The key political and economic relationship is that with the United States, the dominant player in the global economic and political system of the early twenty-first century. There are then important political and ideological issues at stake. However, it would seem that Latin American countries see themselves, after the demise of both the Second World and the military dictatorships of Latin America, as more influenced by US policy. There are some variations within Latin America. Some countries have become closer to the United States partly due to stronger economic links, such as Mexico (see above) and Chile (with the signing of a free trade agreement). Other countries (such as Argentina and Venezuela) have had more fluctuating relationships due to a range of ideological and political differences. Brazil has generally attempted to steer a more distant but consistent course in its relationship with the USA. Nevertheless, economic relationships between North America and Latin America are asymmetrical. Exports from Latin American countries to the USA (outside those of Mexico and Brazil) are mainly in the form of primary products, with manufactured products dominating in imports from the USA. 10

GLOBALIZATION AND THE CONTEMPORARY RELEVANCE OF STRUCTURALISM AND DEPENDENCY THEORIES As authors, we have been interested in exploring the continued relevance of theories of development that have emerged from Latin America (Kay and Gwynne, 2000). We have argued that Latin American theories of structuralism and dependency would seem to have more relevance in a period in which the forces behind global capitalism have been less restrained than when these theories were originally formulated. However, few commentators have attempted to go back to these theories and relate them to development issues raised by globalization (notable exceptions are Munck, 1999; Frank 1991; and dos Santos, 2002a). This seems a serious omission given that these theories saw the problems of under-development and development within a global context. The following section highlights some themes in which these theories would appear still to have relevance. Increasing asymmetry and the role of the state A central vision of structuralism was its conceptualization of the international system as being constituted by asymmetric centre–periphery relations. Similarly, dependency theory took as its starting point the world system rooting under-development within the unequal relationships within it. The economic divide and income gap between the centre or developed countries and the periphery or under-developed countries have widened continually, especially during the debt and adjustment decade of the 1980s, thereby vindicating the predictions of structuralist and dependency theories as opposed to the neoclassical and neoliberal theories which foresaw convergence. Nevertheless, within the peripheral or dependent countries, a few have succeeded in achieving remarkable and consistent high rates of economic growth in the past three or four decades, as well as improvements in equity.This is the case of the first generation of East Asian NICs such as South Korea, Taiwan, Hong Kong and Singapore. In particular, the larger countries of South Korea and Taiwan, through their spectacular export-oriented industrialization success, have acquired semi-peripheral status and may be considered as core economies (Gwynne et al., 2003). In this sense, the structuralist and ‘associated-dependent development’ view of Cardoso (1973) is more relevant as compared with Frank’s (1967) ‘development of under-development’ version of dependency, which is at odds with the development achieved by these countries (see Kay, 1989, for a full exposition of these theories). 11


Exports to the USA are also lower than US exports to Latin America.The US trade surplus with Latin America is in contrast to its long-standing trade deficit with Japan and East Asia. Nevertheless, the importance of Latin American trade to the US economy is low – only about 8 per cent of its exports go to Latin America and the Caribbean (excluding Mexico). Meanwhile, the three countries of the North American Free Trade Area (the USA, Canada, Mexico) are the dominant destinations for exports from the Central American and Andean countries – nearly 50 per cent of their exports go to NAFTA. Only the export trade of Mercosur countries (Brazil, Argentina, Paraguay, Uruguay) is not dominated by NAFTA. The trade of goods and services and the movement of capital are very mobile between Latin America and the United States. However, this is much less true for labour. In a truly globalized and market-oriented world, labour should also be free to move as labour represents a key factor of production – and neoliberal economic models are supposedly based on the free flow of factors of production between countries. Indeed, international business seems to depend on executives, professionals and workers migrating from one part of the world to another. However, such labour mobility is restricted to travel within the core economies or to travel by people from core economies to developing countries. For labour in Latin America, there is little opportunity for legal migration to core economies unless the migrant is professional, highly skilled or owns considerable capital. Illegal migration is an option for unskilled labour, as with migration of Mexicans and Central Americans to the USA, but this produces another set of problems and insecurities (see Chapter 10).


It has to be stressed that such a dramatic transformation in East Asia was possible due to the central role played by a national developmentalist state with a forceful industrial policy (imposed after sweeping land reform) in the pursuit of international competitiveness and growth (Gwynne, 1990; Kay, 2002a). This has confirmed the position of structuralists and dependentistas who pointed to the importance of the state in promoting development. But the East Asian model has shown that this state intervention has to be selective and temporary, ensuring that firms acquire international competitiveness within a specified period. Contrary to initial claims by neoliberals, the success of the NICs of East Asia was state-induced rather than market-driven, as expressed so well by Wade’s (1990) phrase of ‘governing the market’. The World Bank has tried to accommodate some of the many critics of their initial interpretations of the NICs with their ‘East Asian miracle’ study (World Bank, 1993) by recognizing the influence of the state. But this has in turn spawned further criticisms as the basic argument of the World Bank has not changed as they continue to argue that the less state intervention the better. In our view, the role of the state in peripheral economies is crucial so as to ensure competitiveness and guard against the increasing vulnerability of each country in a globalizing world economy. Financial vulnerability and dependence The Latin American debt crisis of the 1980s and its aftermath can be seen as a further illustration of the contemporary relevance of dependency theory. With the vast increase in capital mobility and its availability in the world economy since the 1970s (see Gwynne et al., 2003: 120), the economies of developing countries have become more and more dependent on foreign capital. This greatly increased their exposure and vulnerability to changes in world capital markets and substantially reduced their room for policy manoeuvre. In the aftermath of the debt crisis the international financial institutions were by and large able to dictate economic and social policies to the indebted countries, especially the weaker and smaller economies through structural adjustment programmes (SAPs). While Brazil and Mexico were able to negotiate better terms with the World Bank and foreign creditors, Bolivia and other small countries were unable to do so. Since the debt crisis, there have been significant fluctuations in the capital flows to Latin America. In short, they have experienced both feast and famine. This is extraordinary given that most countries have followed the Washington consensus (see below) and liberalized financial markets in order to attract international capital. Net flows (the balance between outflows and inflows) of private capital into Latin America averaged only US$8.2 billion yearly between 1982 and 1989 in the aftermath of the debt crisis. This well-documented famine in capital inflows was followed by the inflow of private capital rising steadily through the 1990s. By the end of the 1990s they averaged virtually US$110 billion a year (World Bank, 2001a); virtually 75 per cent of these flows in 1998 and 1999 came from direct foreign investment. Subsequently net flows have declined substantially, although the significance of direct foreign investment in terms of the overall inflow of capital has remained (ECLAC, 2003a: 13). What are the explanations for this volatility in capital flows? The impact of the financial crises in some key Latin American countries on the behaviour of international investors provides one reason. The Brazilian devaluation of January 1999, the first Argentine crisis of October 2000 and the second and prolonged Argentine crisis that started in late 2001 are cases in point. It could be argued that international investors have shifted from risk-taking strategies in the 1990s to risk-aversion strategies in the early part of the twenty-first century. There is also the problem of contagion. When a financial crisis breaks out in one Latin American country, international investors not only withdraw funds from that country but also from its neighbours (even if there is no apparent financial problem in those neighbouring countries). Bankers argue that contagion is partly linked to liquidity constraints – when the price of a particular instrument falls, they are obliged to sell other types of holdings in order to restore their own liquidity. Furthermore, bankers not only use similar risk assessment systems but also evaluate the performance of investments over short periods of time. These factors exacerbate the effects of contagion both within and between Latin American financial markets. 12

Unequal exchange Recent studies have confirmed the deterioration of the periphery’s terms of trade in relation to that of the core economies (ECLAC, 2002a: 38), a fact first highlighted by structuralism and incorporated into dependency’s unequal exchange theory. This does not necessarily mean that foreign exchange earnings have declined – often the case has been the contrary due to the continued rise in the volume of commodity exports from the periphery. But it does mean that a substantial part of the periphery’s economic surplus is transferred to the core economies, further strengthening the power of the core’s capitalist class. The lesson continues to be that Latin American countries should shift their export structure to higher value-added commodities and services rather than continuing to export basic primary commodities which can lead to resource depletion and negative environmental consequences. It should not be forgotten that structuralist theorists were among the first to argue that Latin American governments should encourage industrial exports which they saw as the next phase of the region’s industrialization process (Kay, 1989: 40). However, governments (apart from Brazil and Mexico) failed to act, or did so too timidly. Some countries that tried to diversify into manufacturing exports were hampered in their efforts by protectionist measures from the US government. Technological dependence Dependency writers put particular emphasis on technological dependence. Structuralists had pointed to the weakness of the Latin American ISI process in the 1960s and 1970s (Jenkins, 1977; Gwynne, 1985) due to the difficulties it was experiencing in moving from the consumer goods industries to the capital goods industries, which are the source of some of the new technologies. The larger countries, such as Brazil, had managed to develop a substantial intermediate goods industrial 13


The debt crisis and its aftermath demonstrated the impacts of the volatility of capital flows, particularly those from short-term credit. Meanwhile, in the 1990s, the rise and fall of portfolio investment added a further volatile component. Such volatility can have serious implications on national economies through their impacts on exchange rates. For example, when net capital inflows grow, the value of the domestic Latin American currency also rises, creating an overvalued exchange rate (which in turn has a negative effect on exports). However, when net capital inflows decline (sometimes leading to net capital outflows), the value of the domestic Latin American currency can drop precipitously as the domestic currency is sold by international investors. Such a roller-coaster pattern tends to deepen recessions and require painful economic adjustments (Griffith-Jones, 1998). It has been argued that Latin American countries should adopt a fixed exchange rate in order to reduce the impacts of such volatility. However, the extreme financial disasters that followed the ending of the Chilean fixed exchange rate in June 1981 and the Argentine fixed exchange rate in November 2001 (after nearly ten years of operation) demonstrate that this is a problematic conclusion. It could be argued that Brazil has weathered a number of financial crises in the past decade due to its policy of a floating exchange rate. There has been a high volatility in capital flows and exchange rates but a financial crash (as in Argentina after 2001) has been avoided. Nevertheless, this shows the heightened vulnerability to and dependence of Latin American countries on the sharp swings in capital flows.The failure to expand national savings through the 1990s and early twenty-first century has increased this vulnerability. The only point of optimism is that since the late 1990s, direct foreign investment has become the main component of net inward flows to Latin America (ECLAC, 2002a: 62). Because these flows are linked to physical investments, their volatility is less than those of portfolio investment and short-term capital flows. Overall, though, most of Latin America remains highly dependent on international financial markets, which in turn impose a series of constraints on Latin American governments. The populist Brazilian President, Luis Inácio ‘Lula’ da Silva, was quick to recognize this not only during his presidential campaign of 2002 but also during his early period of office.


sector, for example, the steel and chemical industries (Baer, 1969). Despite the increasing presence of transnational corporations (TNCs) in Latin America, there has been little technological diffusion, which has confirmed dependency theory’s critique of TNCs. Government policy has failed to develop an indigenous technological capacity in Latin America and could have acted more decisively to ensure that TNCs made a contribution to this process. Nevertheless, Brazil and to some extent Mexico have acquired some competitive technological capacity largely as a consequence of a deliberate industrial policy (Gereffi, 1994). With the new biotechnology, electronics and communications revolution the more advanced economies have gained a further competitive advantage in the generation of new technological capabilities over Latin American countries. This has increased further the latter’s technological dependence (Castells and Laserna, 1995). Through the remittances of royalties, profits and interest payments Latin American countries continue to transfer a significant net economic surplus to the core economies in general and the United States in particular. Such surplus transfers arising from technology payments, foreign investment and the unequal exchange in foreign trade mean a significant reduction in funds which could have been used for domestic investment within Latin America. Globalization: constraints and opportunities Neither structuralism nor dependency theory foresaw the rapid growth of world trade in the postwar period. This has acquired a new dimension in the present phase of globalization with its time and space compression, and the more recent impetus to liberalization of the world economy with the reduction of barriers to the mobility of goods, services and capital across frontiers, thereby creating new opportunities for international trade and foreign investment. These globalization forces have certainly reduced even further the room for manoeuvre of national development policies as compared with the ISI period, thereby confirming one of the key tenets of dependency theory. Today, international market forces rule with even greater strength than in the past and national states have to take even greater consideration of these global market forces than before, as otherwise they can be faced with large withdrawals of foreign capital (as in the case of Mexico and Argentina during the 1994–95 and 2001–3 financial crises, respectively), the wrath of the international financial institutions and difficulties with international firms and investors. Meanwhile, the reinforcing processes of globalization and liberalization have opened up new export opportunities for Latin American economies and have attracted increasing amounts of foreign investment to the region. In some Latin American countries the export sector has been able to give a new dynamism to the national economy. This dynamic capacity of the world trade system has been under-estimated by structuralists and seen as having negative consequences by some dependency writers. While some of these misgivings are justified, it has detracted from focusing more firmly on the key issue of the domestic policies pursued by the state and the class and other social forces which shape those policies, as well as the internal market forces in the periphery.

GLOBALIZATION IN THE NEOLIBERAL ERA In the years since the first edition of this book, the limits of the neoliberal process of globalization have become much more evident. In many Latin American countries, opposition to the negative effects of the neoliberal policies has become more vocal and grown in strength. The most dramatic situation has been in Argentina, which defaulted on its debt in late 2001, unleashing a major social and political crisis after exposing the fragility of the economy (Tedesco and Dinerstein, 2003). Hundreds of thousands of protesters took to the streets not only in Buenos Aires but throughout most major cities of Argentina, clamouring for a change in economic policy as well as for a renewal of the country’s political leadership (Burbach, 2002). There was a succession of five presidents in a few weeks; all were unable to deal with the spontaneous political mobilizations among the working and middle classes and which took place largely outside the traditional political system. The economy 14

Definitions, economic characteristics and variations The use of the term neoliberal has numerous problems in terms of its ideological connotations. For example, in international policy circles, the term Washington consensus (Williamson, 1990) tends to be used, indicating virtually the same package of reforms. In their original formulations, neoliberal reforms have normally emphasized economic reforms as opposed to social policies or political reform (Kay, 1993). Hence, perhaps, some writers have talked about ‘the new economic model’ (Bulmer-Thomas, 1996b). The economic package of reforms has focused on at least five main areas: fiscal management, macro-economic stability, privatization of state firms, labour markets and trade liberalization. As governments became committed to neoliberal policies during the 1990s, they tended to stress the political and economic advantages of creating a more technical, strict and transparent approach to macro-economic management in order to improve the running of the national economy. Thus, fiscal reform has emphasized the need for the reduction of budget deficits, the creation of strong budget and tax offices and, even, an independent central bank (as in Chile in 1989). In countries such as Argentina and Peru, Treasury ministers used this policy in order to justify the slashing of public expenditure, particularly in economic sectors – but also in social areas. However, as neoliberal policies evolved during the 1990s, the need to increase public spending in social areas, such as education, health and welfare, became more of a priority, as in Chile under the Concertación government. One key concern of the IMF in relation to Latin America was that of high inflation. The IMF strongly emphasized policies that would reduce inflation and subsequently maintain price stability. It highlighted the importance of the relationship between the growth of the money supply and inflation. High inflation would discourage investment and therefore have a negative impact on growth. Thus, money supply became the crucial variable for governments to measure and regulate. This meant reducing the fiscal deficit as this was one of the main sources of monetary expansion. Strict control of the money supply normally led to high interest rates, particularly in the early stages of reform, again dampening down investment. The reduction in the powers of the state in the neoliberal model was further justified through privatization. In some countries, most notably Argentina, policies of privatization became intimately linked to those of fiscal reform. Privatization had the objective of eliminating supposedly inefficient and insolvent state enterprises, thereby reducing government expenditure. Furthermore, the sale of these firms to the private sector was supposed to boost income for government during economic restructuring, when government finances were at their most vulnerable. In Argentina, the funds from privatization tended to be classified as government income – rather than being saved in a Stabilization Fund for future use. When there were no more state enterprises to privatize, the Argentine Treasury thus faced two immediate problems – a significant drop in annual income and the lack of any savings to draw on from a Stabilization Fund. Privatization also introduced the need to create strong regulatory bodies so that competition would be ensured in areas of potential monopoly (such as electricity production and distribution), and that the private sector companies would actually work more efficiently than the companies from the former public sector. 15


plummeted by 20 per cent of its GNP, unemployment rose to over 20 per cent of the labour force and poverty shot up to include about half of the total population. The country’s fall from its premier position within Latin America could not have been more painful and demoralizing. Although neoliberal policies might not be fully responsible for the crisis, they were certainly a major factor in the country’s downfall. For several years the IMF had shored up the Argentinean economy with generous loans, exacerbating the malaise and postponing the implementation of necessary corrective measures. At the time of writing, the country, which the IMF and neoliberals had heralded as one of the model countries, still has not found a way out of the crisis, although the country seems to have left the worst behind.


Another key neoliberal reform was that of restructuring labour markets. New wage and employment bargaining systems were introduced, giving more power to employers and less to trade unions. New employment laws were passed in order to make labour markets more flexible and to reduce the social security contributions and responsibilities of employers. Overall, these reforms have restructured labour markets in favour of employers, as they have gained a more flexible system of hiring and firing and lower wage and non-wage costs (see Chapters 11 and 12). Private sector employers were seen as the key targets of trade reform. Trade reforms were concerned with making Latin American economies more outward-looking and private sector firms keener on becoming more competitive in the international market place. Trade liberalization emphasized the need to promote exports (partly through the use of more effective exchange rates) and to reduce tariffs on imports. Such reform aimed to create more international competition for firms so that they could change their focus from producing for just the home market to supplying global markets. At the same time, governments were supposed to avoid direct interventions in the economy (such as through industrial policy) and to encourage the inward flow of direct foreign investment from TNCs. These were the core of the neoliberal reforms that were put into place to varying degrees in Latin American countries (Edwards, 1995; Thorp, 1998). These transformations in political economy were not similar in all countries. The commitment to and the extent of neoliberal reform in Latin America varied substantially in the 1990s. There was a difference between Chile (with over two decades of reform and a shift from authoritarian to democratic governance), Argentina and Peru (late but committed converts) and Venezuela (where conversion to neoliberal reform between 1989 and 1992 was short-lived and was closely linked to corruption) (Stallings and Peres, 2000). Finally, the Brazilian conversion to a form of neoliberalism under President Cardoso in the 1990s indicated the consolidation of the neoliberal paradigm on the continent (Cammack, 1997). Thus, overall the shift in policy package has been distinctive. Why have these reforms become so widespread? Global factors Why has neoliberalism become the dominant paradigm in Latin America? There are perhaps two relevant geographical scales upon which to attempt an answer: the global and Latin American. At the global scale, the package of economic reforms was strongly supported by international institutions such as the World Bank and the IMF – hence the relevance of the label that the consensus was forged in Washington (Williamson, 1990, 1993). These international institutions gave strong external support for the adoption of a neoliberal framework. The technocracies of these institutions combined with networks of economic and political advisers throughout Latin America to actively push for reform, particularly in the wake of the debt crisis. The neoliberal model had surprising converts in other parts of the world. The late 1980s and early 1990s saw the collapse of the Soviet system and the very different economic model of state direction and central planning. The introduction of market reforms in Eastern Europe and the countries of the former Soviet Union, and the apparent vigour with which governments and the populace shifted from planned to market economies gave neoliberal reform considerable impetus in Latin America (Stiglitz, 2002). Latin America could also look to the economic success of certain East Asian countries, which had embarked on outward-oriented policies since the 1960s (though with strong state involvement), thus justifying more export-oriented strategies for Latin American countries (Gereffi and Wyman, 1990; Jenkins, 1991). Continental factors At the Latin American scale, there were a number of relevant historical and comparative factors. In the 1980s, neoliberal policies provided a framework to extricate Latin American economies from the severe debt crisis of that decade, in which access to external finance was suddenly curtailed (see Chapter 3). In many countries, the adoption of a new paradigm also constituted a wider response to 16

SOCIAL BASES OF NEOLIBERALISM In order to consider the present nature of neoliberalism and its future sustainability, it is important to assess how firm the bases of consensus for this paradigm are and what are the challenges to this consensus. Has any social consensus been achieved in order to support the neoliberal order, or is it just a technocratic consensus of government circles and their advisers (see Chapter 7)? The technocratic and economic base It has been argued that the growth of technocratic support for the neoliberal model emerged as a reaction to the deficiencies of the previous inward-oriented paradigm based on protected markets and industrialization. Economic growth based on ISI had encountered both economic and political difficulties (Gwynne, 1985). The technocratic argument was that due to the power of the state in the ISI model, opportunities for private investment were crowded out, fiscal budgets were characterized by permanent and large deficits, inflation tended to be high and the firms engaged in ISI production (whether public or private) had become inefficient and uncompetitive internationally. These economic difficulties were compounded by the political. Industrial firms continued to demand higher rates of protection in order to survive, which discriminated against exporters and agricultural producers. In some countries, the emergence of a substantial industrial base had given rise to an industrial working class that was gaining in political significance. Meanwhile, industrial firms emphasized the high social contributions that they were burdened with and complained about the expensive nature of the rudimentary welfare states that were being created. The technocratic forces that came to favour neoliberal strategies were not only defined by what they were against but also by what they were for. The theoretical attraction of free market models, 17


the perceived economic failure of the previous political economy paradigm of inward orientation (Kay, 1989; Dietz, 1995). The intellectual justification of inward orientation came from structuralism and dependency theories (Kay and Gwynne, 2000). The decade of the 1990s witnessed big advances in the globalization of the Latin American economy, with capital flows, trade and investment increasing significantly (ECLAC, 2002a).The inwardoriented model was effectively cutting Latin American economies off from the advantages (and problems) of being more fully inserted into a globalizing world economy. Neoliberal policies provided the framework for Latin American economies to increase trade with other world regions and increase inward investment and capital inflows from firms and banks in those regions. Furthermore, there is the question of the link between neoliberal reform and governance. During the late 1980s and 1990s, the link between neoliberal policies and democratic governance has become particularly strong in Latin America (Haggard and Kaufman, 1995) – particularly through transitions to democracy in former authoritarian governments (see Chapter 7). There have been significant shifts from authoritarian to democratic governance in all Southern Cone countries and Brazil during the 1980s and 1990s. In all cases there has either been a shift towards or maintenance of neoliberal economic policies in the aftermath of the democratic transition (see Chapter 8). Shifts to neoliberal reform did not always come immediately. In the mid- to late 1980s, heterodox stabilization plans were attempted in Argentina with the Plan Austral and the Plan Cruzado in Brazil. However, these plans met with failure and thus allowed the neoliberal paradigm to gain further influence. It could be argued that the failure of these stabilization plans helped to persuade the population that the bitter pill had to be swallowed. There was no soft option to the shock treatment in order to stop the trend of rampant inflation. Political parties that have come to power after the demise of the authoritarian governments that instigated neoliberal policies have subsequently maintained them (as in the case of the ‘Concertación’ governments in Chile since 1990). These parties have argued that democratic governance allows for and encourages greater public participation and representation in the policy process.


a smaller state and the importance of achieving macro-economic stability were some of the main themes (Gwynne, 1990). The great majority of technocrats had been research students in the economics and business schools of US universities (Centeno and Silva, 1998). Before the debt crisis, such technocrats had presented neoliberal policy alternatives but had been unable to command sufficient political support for their implementation. After the debt crisis, this changed dramatically and they became the main agents of economic change not only through direct political appointments (such as Treasury ministers) but also through the range of advisers and civil servants required by government (see Chapter 8). They became part of an international network of advisers, all broadly sympathetic to market-oriented solutions, macro-economic reform and outward orientation as a way out of the debt crisis. In spite of delays, the evolution of this new government technocracy has occurred in most Latin American countries. In Argentina and Peru it was delayed until the early 1990s, in Brazil until the mid1990s. In these countries, the technocratic elements supporting more market-oriented policies had to struggle for the policies to be put in place – against the continuation of both populist and inwardoriented policies. Indeed, in Peru, it should be remembered that Fujimori actually came to power on the back of a populist agenda in the 1990 election; it was only after extensive consultations with influential international institutions and networks of Latin American (and Peruvian) technocrats that he was converted (and forcefully) to the neoliberal agenda. Thus, technocrats became influential agents in the installation of the new paradigm. There was an important distinction as to whether the technocratic force pushing the neoliberal agenda was linked to democratic or authoritarian governments. Within democratic structures, government ministers and technocrats needed to explain and justify the concepts behind radical policy changes to a wide public. Within authoritarian governments, such changes were imposed from above, often with little justification or consultation. Technocrats within authoritarian governments tended to become more dogmatic as a result, able to impose theoretically consistent policies but unwilling to listen and react to the many who suffered from the fundamental restructuring of the economy. Meanwhile, technocrats within democratic governments have often been both less rigidly ideological in their policy formulation and more willing to adapt policy to political realities (see Chapter 8). The social and political base It is worth emphasizing that the neoliberal model had little social and political base in the early stages of its evolution – apart perhaps from a limited number of entrepreneurs associated with export industries. In general, entrepreneurs in the protected sectors of agriculture, finance and industry were not supportive of more outward-oriented policies as this would bring increased competition and would change their political influence in relatively closed markets. How did the social and political base develop? In many countries, it developed as a response to the impacts of the debt crisis and the need to shift power to export-producing sectors and, subsequently, to foreign investors – both in terms of finance and productive capital. During the 1990s, there was a surprising extension of the political base as centre-left coalitions and governments (as in Chile and Brazil, for example) were converted to more socially responsible modes of neoliberal economic reform (Demmers et al., 2001). A range of social democratic parties adopted the Washington consensus (Bresser Pereira, 1996), although they emphasized the need for social policies and welfare programmes to smooth over the hardships of the transition and the restructuring process. The expansion of the political base supporting neoliberal reform gave it a wider sense of social support and legitimacy during the 1990s. In the early twenty-first century, this range of support has dwindled, particularly in those countries that have experienced financial crises (most notably Argentina). New centre-left parties that have been elected into government, such as the Workers Party in Brazil, have targeted policies that focus on reducing the dramatic inequalities inherent in Latin American societies (such as Lula’s campaign 18

CONCLUSION: A PARADIGM SHIFT IN THEORY AND POLICY Latin America has thus experienced a paradigm shift in both theory and policy. Two immediate conclusions can be mentioned in this context. First, there is the comparison between the theoretical sources for the two recent paradigms; whereas important elements of structuralism and dependency originated from within Latin America, the present neoliberal paradigm has been driven more by external sources. Second, the inward-oriented paradigm had been the dominant one of the twentieth century (stretching from the 1930s to the 1980s); this may lead one to see the new neoliberal paradigm as the one that will be more representative of the twenty-first century. We will return to this issue in Chapter 13. This has opened a new chapter in Latin America’s evolution, particularly in terms of forming new relations with the world economy. It can be termed a paradigmatic change and related historically to Latin America’s insertion into the global economy of the nineteenth century. While Latin America’s economies at that time could rely on the comparative advantages of its natural resources, the important issue today is how competitive advantages can be generated and created – at the level of both the nation–state and the firm. This requires new conceptualizations. Structuralism underestimated the key importance of competitiveness of the world market in transforming economies and societies. Structuralism thought that Latin American economies could shield themselves from global forces and that they could continue to rely on comparative advantages in minerals and basic primary products while promoting inward-oriented industrialization. In contrast, the ‘pure’ form of the neoliberal model believes in completely opening up national economies to global markets without state mediation. It therefore seems willing to sacrifice uncompetitive sectors (most notably in industry) to foreign competition. The corollary for this has been a return to relying on natural resource advantages and what has come to be known as nontraditional exports (see Chapter 12). Some key leaders in Latin America (such as Cardoso in Brazil) and neostructuralist thinkers (see Chapter 13) have seen the need for the state to bring about the necessary institutional changes for the Latin American economies to build up competitive advantages. The need to be part of the world market is now fully accepted, but it is also identified that there is a crucial role for the state in (for example) developing human resources. This can be seen as an interpretation of the East Asian model of economic success based on industrial competitiveness and its application to Latin America (Fajnzylber, 1990a, 1990b; Gwynne, 1990). Such social reconstruction can be very painful, affecting many layers of society – the industrial working classes (as industrial plants are closed or modernized), the state-employed middle classes (as governments privatize and reduce employment in the public services) and uncompetitive (often inward-oriented) sectors of the capitalist class. In the main, this process has been driven by highly centralized national governments and has often operated in the form of a state-driven social restructuring. This has occurred in authoritarian governments, most notably that of the Pinochet dictatorship in Chile (1973–90). However, democratically elected governments also initiated marketorientated reforms and even managed to be re-elected on such a platform (Menem in Argentina, Fujimori in Peru and Cardoso in Brazil). It could be argued that such governments have required strong presidential systems in order to succeed. The model of state-driven social restructuring has responded to the exigencies of the global market and the pulling down of the economic barriers between the national economy and the world market. In a way, it has represented a repressive approach to the demands of the social losers of the new 19


against hunger in Brazil in 2003) and have kept their broad adherence to the technocratic elements of the neoliberal economic agenda more in the background. The achievement of macro-economic stability that helped the neoliberal programme generate wider legitimacy during the 1990s has thus been interpreted as a necessary building block for governments who aim nevertheless to target more directly the huge social problems that confront them (Ocampo and Franco, 2000).


economic model. This social restructuring has had varying impacts on different social groups and has varied from country to country. On the whole, less protection has been given to certain sectors (such as the industrial working class, the peasantry and indigenous groups) than to others (such as the entrepreneurial middle class and the new financial groups that have emerged). The capitalist class has been more able to readjust to the changing circumstances and realities of the international market and, as a result, has not only expanded in size and influence but has also become the key national winner of the paradigmatic shift. Ultimately, it is transnational capital that has reaped the benefits and consolidated its global power with the neoliberal turn.

FURTHER READING Buxton, J. and Phillips, N. (eds) 1999 Developments in Latin American political economy: state, markets and actors. Manchester University Press, Manchester, and St. Martin’s Press, New York. Focuses on the interaction of the state and the market as well as on traditional and emerging actors such as the military, guerrilla movements, NGOs and women. Chase, J. (ed.) 2002 The spaces of neoliberalism: land, place and family in Latin America. Kumarian Press, Bloomfield, CT. Explores the various ways that households, communities, women and ethnic groups deal with market relations and state policies in everyday life. Green, D. 2003 Silent revolution: the rise of market economics in Latin America. Second edn., Latin America Bureau, London, and Monthly Review Press, New York. A popular and well-written critical analysis of Latin America’s neoliberal economic reforms. Gwynne, R. N., Klak, T. and Shaw, D. J. B. 2003 Alternative capitalisms: geographies of emerging regions. Arnold, London. Examines the effects of globalization and economic and political transformation in Latin America and the Caribbean, and compares them with those occurring in East Central Europe, the former Soviet Union and East Asia. In this sense, it provides a unique approach in terms of books published in both geography and the social sciences. Kay, C. 1989 Latin American theories of development and underdevelopment. Routledge, London. This still provides the most comprehensive and systematic introduction to Latin American theories of development. The origins of structuralist and dependency theories are scrutinized alongside those of marginality and internal colonialism. Kirby, P. 2003 Introduction to Latin America: twenty-first century challenges. London and Thousand Oaks, CA: Sage Publications. A comprehensive, accessible and engaging overview of the economic, social and political forces shaping contemporary Latin America. Munck, R. 2003 Contemporary Latin America. Houndmills, Basingstoke and New York: Palgrave Macmillan. A lively, concise and readable text that provides a general introduction to the region. Swanson, P. (ed.) 2003 The companion to Latin American studies. Arnold, London, and Oxford University Press, New York. An original companion to literary and cultural studies that situates the region in its historical, social, political, literary and cultural context.

WEBSITES Consejo Latinoamericano de Ciencias Sociales, http://www.clacso.org/, is the site of the Latin American Council for the Social Sciences with links to member research institutions throughout the region. Many of its books can be downloaded. Economic Commission for Latin and the Caribbean, http://www.eclac.cl/, probably has the most economic and social data on Latin America that is available from its publications, particularly in 20

Facultad Latinoamericana de Ciencias Sociales, http://www.flacso.org/, is the site of the Latin American Faculty of Social Sciences which has research centres in various Latin American countries and offers postgraduate study programmes. Inter-American Development Bank, http://www.iadb.org/, has data and analyses on mainly economic affairs. Latin American Network Information Center, http://lanic.utexas.edu/, perhaps the richest Internet site on Latin America for information and analysis on a great variety of topics, and links to other useful websites. A good starting point for those interested in Latin American studies. Latin American Studies Association, http://lasa.international.pitt.edu/, the website of the largest association of Latin Americanists in the world.

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its annual Statistical Yearbook for Latin America and the Caribbean. Most of its recent publications can be downloaded.

2 Modernity and identity: cultural change in Latin America Jorge Larraín

INTRODUCTION This chapter will concentrate on contemporary issues of modernity and identity in Latin America since the 1970s. However, it must be pointed out that since the beginning of the nineteenth century modernity has been presented in Latin America as an alternative to identity, as much by those who are suspicious of it as by those who badly wanted it at all cost. In part, this has been the result of essentialist conceptions of cultural identity which freeze its contents and do not consider real cultural change. If identity is considered to have been fixed during colonial times in a traditional and deeply religious mould once and for all, then any modernization started after independence could only be achieved at its expense. But this opposition between modernity and identity is also a consequence of the fact that modernity in Latin America has been often conceived as a process intrinsically connected with the trajectory of Western societies (Europe and the United States) in which a particular set of institutions allowed the development of a market economy, a democratic polity and an autonomous scientific knowledge. Instead of conceiving of modernity as a way of dealing with basic problematics of social life which seek autonomy in the political and epistemic fields and rational control in order to satisfy basic needs, it confuses the particular institutional answer of Western societies with a general and necessary feature of modernity (Wagner, 2001a, 2001b). This leads to an over-simplified conception of modernity which totally conflates its different trajectories in a single Western model which has to be accepted by all. This means that it has to be brought from outside into Latin America, thus seeming to be totally alien to it. Hence it appears to exist in the region in conflict with its true identity. Some oppose it for this reason and others want to impose it in spite of this reason. The former believe that modernity cannot succeed in Latin America; the latter believe that Latin America’s identity has to be dismantled. Both recognize the existence of a conflict which has to be resolved in favour of one or the other. Modernity and identity are conceived as absolute phenomena with opposite roots. Contrary to these positions which present modernity and identity in Latin America as mutually excluding phenomena, I would like to show their continuity and interconnection. The same historical process of identity construction has been, from independence onwards, a process of construction of modernity. It is true that modernity was born in Europe, but Europe does not monopolize all its trajectory (Wagner, 1994; Therborn, 1995). Precisely because the search for autonomy and rational control can lead to alternative institutional solutions, modernity has been actively and not passively incorporated in Latin America. There are important institutional differences with Europe and the United States, of that there is no doubt. But this does not mean that Latin America has totally failed to modernize. Latin America has a specific way of being in modernity. Latin American modernity is not exactly the same as European or North American modernity; it has its own trajectory. But because it has frequently tried to copy North American or European institutional models, it is neither purely endogenous nor entirely imposed from without, some call it subordinate or peripheral (Parker, 1993: 81; Brunner, 1994: 144). 22

BOX 2.1 Stages of the Latin American trajectory to modernity (source: Larraín, 2000: 7–8, 22–4) In Latin America’s independent history there have been roughly five alternating stages (to which a sixth could be added): 1. from independence to 1900: a period of expansion: oligarchic modernization; 2. from 1900 to 1945: a period of crisis: the end of oligarchic domination and the emergence of populism; 3. from 1945 to 1970: a period of expansion after the Second World War: developmentalism; 4. from 1970 to 1990: a period of crisis: dictatorships and the ‘lost decade of the 1980s’; 5. from 1990 to 2000: a period of expansion: neoliberalism; 6. from 2000: still within a neoliberal orientation, a period of crisis sets in. The consequences of it are still hard to assess (see Chapter 13).

The criteria for periodization are complex and try to link four main factors: (1) economic trends; (2) cultural developments; (3) political changes; and (4) key international events. The assumption is made that when there are important changes occurring in all these variables which more or less coincide at a particular time, then a new stage appears. But obviously there is hardly ever a perfect match and changes occurring in certain variables may be displaced in time in relation to those occurring in others. For example, if we focus on the second period entitled ‘the end of oligarchic domination’, from an economic and international point of view it seems to start in 1914, from a cultural point of view it has already been present since 1900 and in the sphere of politics it seems to start in the 1920s in some countries and in the 1930s in others. Hence the dates 1900–45 are only a rough approximation. Nevertheless, at the heart of the stage, the changes in all four factors are deeply interrelated.The stage which appears to have started in 2000, mainly because of the economic and political crises in Latin America, will not be dealt with since it is still very hard fully to anticipate its effects and to determine its main characteristics. I shall very briefly review the first three stages in order to concentrate on the last two (1970–2000). Yet before doing this it is perhaps useful to be more explicit about the connection between these stages and the process of globalization. If one of the effects of globalization is the diminishing power of local circumstances in the life of whole regions so that they are increasingly affected by what happens elsewhere, then these stages show the deep impact of certain international events on Latin America. The process of independence at the beginning of the nineteenth century was greatly influenced by the Napoleonic invasion of Spain and its main ideas were drawn from the French Revolution, British liberalism and French positivism. The second stage of crisis reflected the impact of the First World War, the Russian Revolution and the Great Depression of the 1930s. The expansion of North American and European capitalism after the Second World War brought about the third stage of development and modernization in Latin America. The world recession, the end of the Fordist period and the rise in oil prices in the 1970s 23

Modernity and identity: cultural change in Latin America

Elsewhere I have argued (Larraín, 2000) that within five distinct stages, Latin America has been simultaneously modernizing and constructing its cultural identity, and yet these two phenomena, in spite of being intimately interconnected, have been persistently perceived as opposing alternatives. Whether identity or modernity are favoured is not entirely a random process. Theories that privilege modernity tend to crop up and are more prevalent in times of accelerated development and economic expansion. Theories that emphasize identity have emerged with greater force in periods of crisis in which economic growth and general welfare stall or decrease.


affected the fourth stage of negative growth and reinforced the prevailing pattern of dictatorships.The boom of world capitalism and the overwhelming tide of neoliberalism in the 1990s, deeply affected the fifth stage of Latin American modernization.

THE LATIN AMERICAN TRAJECTORY TO MODERNITY From independence to 1900: oligarchic modernization Two features of this stage must be underlined. First, at this time liberal ideas are adopted, lay education expands, a free press is established, a republican state is built up and democratic forms of government are introduced. However, all this occurs alongside substantial restrictions for the wider participation of the non-educated classes. Second, contrary to the US trajectory, industrialization was postponed and replaced by a raw material exporting system which did little to modernize the productive sectors. Latin American modernity during the nineteenth century was more political and cultural than economic and, generally speaking, very restricted. In spite of these limitations. The modernizations introduced went hand in hand with a reconstitution of cultural identity in which the values of freedom, democracy, racial equality, science and lay education attempted a considerable advance. This was particularly notable in comparison with the prevalent values of colonial times that were heavily influenced by a monopolistic Catholic religion, closely related to political authoritarianism, not very open to scientific reason and steeped in slavery, racism and the Inquisition. The eighteenth-century French Enlightenment, British liberalism and, particularly, the Positivism derived from Auguste Comte, played a very important ideological role in this process. Just as much as the Creoles wanted freedom to trade with Britain and the rest of Europe, they also wanted cultural freedom from the tutelage of the Church. They thought the new ideas were their only hope, to bring about ‘order and progress’ to the newly emerging republics. Not that the new Enlightened values and practices totally displaced the colonial cultural pole, but at least they modified and transformed it in some important respects. Pro-modern thinkers of the time felt that modernity could only be achieved as long as the IndoIberian cultural pattern was totally replaced by a new one, but were unable to see how deeply influenced by the old racist prejudices they still were. At the same time, their vision of modernity was shaped by the naïve wish to become a true image of the United States or Europe. Latin America was still to be civilized and its barbaric cultural features eradicated. Sarmiento is the most representative writer of the time. He explicitly argued that the real struggle in Latin America was one between civilization and barbarism (Sarmiento, 1945: 58). The former was represented by Europe and the United States, the latter was the result of Latin American racial inferiority. This vision was more or less shared everywhere in Latin America by other positivists. It is therefore not surprising that one of the policies they proposed to modernize Latin America consisted in improving its racial composition by means of European white immigration (Sarmiento, 1993: 408). For Sarmiento, another way of compensating for Latin America’s racial inferiority was ‘instruction, education diffused through the mass of the inhabitants’ (cited by Martínez Estrada, 1968: 134, 137). Modernization, therefore, depended upon Latin Americans being able to replace their colonial and racial heritage by means of immigration and/or scientific education. For nineteenthcentury Latin American authors there was clearly a need to achieve modernity by destroying the colonial cultural identity. But obviously, it was not easy to dismantle such an identity and they themselves unwittingly shared its racism and elitism. The opposition between barbarism and civilization was not only explicitly developed in critical essays, but was also an important subtext of many romantic literary works of the time. Unlike European Romanticism, which wanted to escape from civilization to find refuge in nature, Latin American Romanticism wanted to escape from the isolation and barbarism of nature. For example, in José Mármol’s novel Amalia (1945), civilization is represented by a small group of intellectuals to which the three protagonists belong. They struggle against the tyrant Rosas but in the end succumb and are 24

From 1900 to 1945: the crisis of oligarchic modernity By the turn of the century oligarchic power had begun to crumble, the so-called ‘social question’ comes to the fore, new populist regimes emerge which widen the franchise and incorporate middle classes into government, and the processes of import-substituting industrialization are initiated. Thus, while in Europe an economic and political crisis of liberal industrial capitalism is experienced (Polanyi, 1957: 29), in Latin America it is the prevalent oligarchic and aristocratic agrarian export-oriented system which enters into its terminal phase and incipient industrialization processes start with some success. This stage of crisis and change in Latin America is accompanied in its beginnings by the emergence of anti-imperialist feelings, by a new revaluation of mestizaje, by a new indigenista current of thought that criticizes the discrimination of the Indian communities, and by a growing social consciousness about the problems of the working class. In general, most of these trends showed a renewed interest in Latin America’s specific cultural identity and opposed the kind of modernity offered by the North American or European models. At this time, a realist tendency in the writing of novels develops and expresses in a literary form the turbulence of these times. This realism could be rural, naturalist, social or indigenista (Franco, 1980: 215–61). In general, the various forms of realism are related to the difficult times of change in which the old Latin American order is beginning to be challenged, thus producing a crisis of identity. These novels do not offer clear-cut solutions to the problems of identity but hint at different possibilities which stem from the virtues of popular characters and geographical places (Xirau, 1992: 185–203). At the beginning of the century, in the context of North American expansionism, a group of intellectuals raised their voices against the United States and its hegemonic aspirations in relation to Latin America. José Martí of Cuba, Ruben Dario of Nicaragua, José Vasconcelos of Mexico, Rufino Blanco Fombona of Venezuela, Manuel Ugarte of Argentina joined their critical voices to that of the Uruguayan José Enrique Rodo. The latter achieved an enormous influence with his book Ariel, which was published in 1900. It criticized ‘nordomanía’, the Latin American inclination to copy foreign models, especially North American, and advocated a return to its own reality (Rodó, 1993: 304–17). Against the positivist idea that mestizaje degenerated the race, Vasconcelos (1927: 14; 1993: 339) celebrated the values of mestizaje and of the Latin race and contrasted them to the characteristics of the Saxon race. In a similar vein, the works of indigenista authors like Valcárcel (1925) advocated a return to Indian values and customs in opposition to the European cultural heritage. Later on, and in the context of the Great Depression, this difficult period seems to promote very pessimistic discourses which underline the negative features of Latin American identity or try to rescue the Hispanic features of the Latin American character (Eyzaguirre, 1947; Lira, 1985). Thus, for instance, Martínez Estrada (1946) focused on the idea of resentment as best expressing the Latin American ethos and Alcides Arguedas (1975) described the duplicity of the Bolivians. The Hispanist currents of thought regretted the conscious neglect of the Hispanic culture and attributed to it the Latin American failure to make a worthwhile cultural contribution. Although these harsh selfcriticisms did not seem to leave room for any pride in Latin American identity, they still wanted to emphasize the peculiarities of the Latin American cultural identity as against the European pattern. The point was to explain why Latin America was different and why modernity could not succeed or had failed. From 1945 to the 1970s: industrial expansion A third stage from the end of the Second World War can be recognized, characterized by consolidated democracies, a wider participation and important processes of modernization of the 25


killed. They appear surrounded and confronted by the hostile pampa, Rosas and his black and mulatto agents, gauchos and Indians, all of which represent barbarism.


socio-economic base. Growing industrialization and expanded patterns of consumption, education and urbanization should be emphasized. The expansion of the mass media and of radical political movements seeking profound structural reforms are also noteworthy (García Canclini, 1989: 81–2). Most states developed interventionist and protectionist policies which controlled much of economic life and introduced some aspects of a welfare state in health, social security and housing. In spite of all this, the benefits of modernity continued to be highly concentrated and the masses of the people continued to be excluded from them. The process of modernization and change was accompanied and promoted by modernizing ideas and theories coming from abroad. Essay writing was replaced by the irruption of the social sciences. They propounded the dismantling of the traditional agrarian cultural identities and their replacement by modern values and institutions. First, came the ideas of the North American sociology of development, usually called the ‘modernization theories’ in the 1950s. These put forward the idea that Latin America was in transition from a traditional to a modern society and that Western industrial societies were the ideal model which would inevitably be reached. The modernization process was conceived as a historical necessity which would repeat the same stages previously experienced by advanced societies. A more critical local variant, the pioneering economic work of the Economic Commission for Latin America, focused on the existence of a centre–periphery world system which favoured the central industrial countries. This is why it propounded the idea that Latin America had to modernize its societies by switching from a raw material export-oriented economy to an industrialled economy (Gwynne, 1985). The disillusion with the results of import-substituting industrialization processes in the 1960s and early 1970s led to ideas of imperialism and dependency and to the resurgence of Marxism and socialism. A powerful critique of the capitalist system as unable to deliver economic development in the conditions of the periphery predominated (see Chapter 1). Capitalism, it was said, did not work in Latin America because it was dependent upon the main industrial centres.The aim of socialist projects was to struggle against dependency to bring about a more autonomous national development. In spite of the widespread prevalence of social analyses centred on Latin American development, the issue of identity was present in two forms. On the one hand, implicit in the various modernizing approaches, there was a project for a new identity, a kind of developmentalist identity whose goal was economic development, in which the state played a central role and the value of equality was very important. The economic system continued to be capitalist but the modernizers wanted to humanize it, and by following populist policies they wanted to protect the workers and redistribute national income in their favour. On the other hand, it was also possible to find during this period a few works which more directly tackle the issue of culture and identity (Martínez, 1987: 221–35). Yet just as in the second half of the nineteenth century, Latin American identity was again defined in terms of an opposition to Europe, which represents, if not civilization per se, at least a culture with a positive selfaffirmation and self-confidence which Latin America lacked. Thus, Ernesto Mayz Vallenilla (1959) would argue that the Latin American has a permanent dissatisfaction with the present and is searching for the new. Caturelli (1961) would affirm that the Latin American ‘is the unrealised, the purely virtual, the imperfect, the immature, the essentially primitive’ (1961: 41). Murena (1954), in his turn, would maintain that Latin Americans were expelled from Europe (paradise) due to a second original sin, thus leaving history and the Spirit behind. Octavio Paz’s classic The Labyrinth of Solitude (1950), is another expression of these feelings of uprootedness and abandonment which appear at this time.The Latin American is in search of his/her origins, and can be compared to an orphan who is conscious of having been uprooted and needs to start a passionate search. At the same time the Latin American rejects the past, condemns his/her origins and reneges on his hybridity. All these approaches express a conflicting view in which the admiration for European culture is mixed with the feeling that Latin America’s identity cannot find its own course. Hence the ambivalence which in some cases leads to a proposal of total rupture (Murena) and in others to a total fusion (Mayz, Caturelli, Paz). 26

From 1970 to 1990: dictatorships and the ‘lost decade’ By the beginning of the 1970s a new phase can be identified, characterized by a slowing down of economic growth and a falling rate of profit in industrial nations. In Latin America the processes of industrialization and development lost their dynamism; economic growth came to a standstill and even became negative during the 1980s, and, as a consequence, social and labour agitation became widespread. The international recession resulted in unemployment, inflation and increased political instability everywhere. Radical social movements and parties which had been getting stronger since the 1950s accentuated their demands for changes in social relations and justice. The challenge of the Chilean socialist experiment and of populist experiences of the left elsewhere precipitated a series of confrontations which ended in a wave of military dictatorships. It started with the 1964 military coup in Brazil and was followed by coups in Argentina (1966 and 1976), Bolivia (1966), Peru (1968), Ecuador (1972), Chile (1973) and Uruguay (1973). Dictatorships changed the direction of economic policies by opening up their countries to foreign investment and international markets. They implemented in practice the first neoliberal ideas. But it took many years before a new stage of expansion began to yield some economic fruit and some improvement for the common people. In the case of the Chilean dictatorship, it took the first four years (1973–77) for the harsh economic policies to begin to have some acceptable results, only to plunge again into a deep financial crisis in 1982 (Moulian, 1997: 201–12). It has to be remembered that during the 1980s, the so-called ‘lost decade’, Latin America suffered economic decline. From the point of view of political and social modernity, dictatorships meant an important regression insofar as they abolished democratic institutions, systematically violated human rights, dismantled forms of social participation and consistently sought to destroy social organizations representing the poorest sectors of society. The exclusion of wide social sectors increased as unemployment levels soared and salaries plummeted. And yet, simultaneously, a new booming consumer society for the relatively well-off was created. The market-oriented consumer society of material and symbolic goods which had grown in the 1950s and 1960s became consolidated in the 1970s and 1980s. But the irony of this new stage is the simultaneity of the massive expansion of television, publicity, production of compact disks, etc., and the presence of dictatorships and repression. In the Brazilian case, Ortiz has argued: the cultural movement post-64 is characterised by two sources which do not exclude each other: on the one hand it is defined by the political and ideological repression, on the other, it is a moment of the Brazilian history in which more cultural goods are produced and diffused. (1988: 114–15) 27


Corresponding with the Latin American post-war economic boom there emerged a notable literary boom which gave Latin America’s literature a universal dimension. On the emergence of this new literary wave the expressions ‘magic realism’ (Asturias) or Carpentier’s ‘real marvellous’ which had been used to refer to Latin American literature in the 1940s, resurfaced again. In the new novels frequently fantastic and incredible things occur. Mythical cities like Comala, Macondo and Santa María appear which symbolize Latin America’s isolation disrupted by the external forces of modernity, or represent in a concrete form relevant parts of its historical past. In its content, the Latin American novel of this time does not necessarily reflect favourably upon the processes of modernization that were occurring but rather critically questions the injustices and problems which Latin American peoples suffer. Although the new novel breaks with the realism and social denunciation typical of the first half of the twentieth century, it clearly has a political dimension (Martínez, 1987: 39-40, 238–40). Carlos Fuentes has defined this dimension in terms of an interest in exploring ‘the problem of power in the Hispanic world’ (Martínez, 1987: 240). For Vargas Llosa the point is rather that great novels often appear in moments which precede profound historical transformations: ‘when the world they reflect finds itself in a state of decomposition, when its foundations are eroded and when that world will justly disappear’ (Vargas Llosa, 1974: 37).


This also happened in Argentina and Chile, but it was in Brazil where the interest in culture of the authoritarian state is most evident in the creation of new cultural institutions: Conselho Federal de Cultura, Instituto Nacional do Cinema, EMBRAFILME, FUNARTE, Pró-Memória, etc. (ibid.: 116). The military government believed that communications and media were crucial for national integration. The mass culture undergoes an enormous expansion in Latin America as shown by the growth in the number of TV sets from 31.2 million in 1980 to 64.8 million in 1990.

BOX 2.2 Mediazation of modern culture (source: Thompson, 1990, 1995) Mediazation is ‘The general process by which the transmission of symbolic forms becomes increasingly mediated by the technical and institutional apparatuses of the media industries’ (1990: 4). This process comprises that the media are increasingly shaping the way in which cultural forms are produced, transmitted and received in modern societies and the modes in which people experience events and actions which occur in spatially and temporally remote contexts (1990, 12–20, 225–48; 1995: 46).

Television became the most important means of cultural consumption in Latin America (Marin, 1999: 257–9). Large international conglomerates start controlling the media and the popular mass culture of the continent. But at the same time a true cultural industry emerges in Latin America which produces cultural goods for the mass market. Its best expression is the telenovela (soap opera), a genre which Chile, Mexico, Brazil, Argentina, Venezuela and Colombia develop and export. While the North American soap opera is addressed mainly to a female public in the afternoon, the Latin America telenovela is a massive ‘prime-time’ early evening product (Ortiz, 1988: 145). The ambivalence of Latin American modernity The exhaustion of the state-led pattern of industrialization in the 1970s, and the succession of military coups which followed, started a process of re-appraisal among intellectuals which was reinforced by a sense of continuous failure. The deep crisis went hand in hand with a profound identity crisis, which was marked by pessimism and renewed doubts as to whether the road to modernity that had been followed could be wrong. The rise and fall of so many intellectual fashions and the persistence of enormous economic problems and widespread poverty, not to speak of the brutal activities of military dictatorships, could not but raise doubts as to whether the relentless pursuit of Western modernization could bring about any real solution. Three overlapping types of critique emerged which emphasized: 1 the opposition of Latin American identity to modernity; 2 the lack of authenticity of Latin American modernity; 3 its unexpected results due to telluric factors (those which come from an all-powerful and uncontrolled nature). Among the latter is what Brunner has aptly called ‘macondism’ (1994: 167), which grants a superior explanatory power to Latin American literature. For instance, Ainsa (1986: 23) has argued that Latin American identity has best been defined and expressed by its literature which shows societies profoundly influenced by telluric factors of portentous and enigmatic character. Macondo is the metaphor for the magic and marvellous character of Latin America, full of mysteries, which challenges the purely rational understanding of it. For Brunner Macondo means that foreigners will not fully understand Latin America and that ‘they will not be able to impose upon us a pattern of modernization which does not fit into our mystery’ (1994: 172). Macondism is therefore more defensive than conservative. It does not deny the possibility of modernization, but suggests caution, 28

at the moment that Europe opens up to the political, scientific and philosophical critique that harbingers the modern world, Spain closes itself in and encloses its best minds in the conceptual cages of Neo-scholasticism. We, Hispanic peoples, have not succeeded in being really modern because, unlike the rest of the Western peoples, we did not have a critical age. (1990: 44) For Paz (1990) there is a big difference between North America and South America. North America speaks English and is the daughter of the tradition that founded the modern world, especially its three fundamental processes: the Reformation, democracy and capitalism. South America speaks Spanish or Portuguese and is the daughter of the Catholic monarchy and the Counter-Reformation. In a similar way, Carlos Fuentes (1990) argues that Latin Americans are sons of the Spanish CounterReformation, a veritable wall erected against modernity, and that often they prefer ‘preserving the weight of anachronistic societies’. However, he also suggests that Latin Americans often have violently reacted against tradition, by adopting in an uncritical fashion the last version of Western modernity: ‘we are a continent in desperate search of its modernity’ (Fuentes, 1990: 12–13). The ambivalence of Latin American modernity is also the argument of the historian Richard Morse: the Weberian process of disenchantment of the world never could be completely internalized in Latin America, not even by its most modern sectors. Once more, the reason is sought in the Spanish rejection of the scientific and religious revolutions, which impedes the long-lasting implant of European individualism and utilitarianism (Morse, 1982: 178). The diagnoses of these three authors is quite similar, but their conclusions differ. Morse (1982: 162, 200, 218), the most optimistic, believes that as a result of the lack of complete assimilation of what he calls ‘the great Western design’, Latin Americans develop a rationality of ‘compromise’ and that the structure of their character is better prepared to ‘preserve humanity’ within industrial society. Fuentes (1990: 14) suggests that Latin America’s cultural continuity will provide the only solution for the future, but has some doubts and wonders whether ‘we could transpose into political life the strength of cultural life and between both of them create development models more akin to our experience, to our being’. Paz is the most pessimistic and concludes that Latin America has reached only a pseudomodernity: the liberal revolution, initiated with independence, did not result in the implant of a true democracy or the birth of a national capitalism, but in a military dictatorship and in an economic regime characterised by the latifundia and the concessions to foreign consortia and enterprises, especially North American. (1979: 63) 29


because Latin America is supposed to be the world of the unexpected and of uncontrollable telluric forces. It can be suggested that this is the implicit position of the authors of the so-called literary boom of the 1960s who continued to publish their novels during the 1970s and 1980s. I have already suggested that the novels of the 1960s were suspicious of modernizing processes. In this respect there is little difference between them and the novels of this period, apart from the fact that the new novels and short stories can now focus on the reality of dictatorships. Good examples are La Casa de los Espíritus (1983) by Isabel Allende and El jardín de al lado (1981) by José Donoso. They are deeply marked by the tragic events, human rights violations and exile brought about by military dictatorships. Yet these terrible events continue to be treated within the framework and with the peculiarities of the new novel, only that there is no longer the same interest in experimentation as in the 1960s. Ainsa has called these works the ‘narrative of internal resistance’ (1986: 502). Octavio Paz, Carlos Fuentes and Richard Morse, in their turn, highlight the idea that Latin America’s modernizing processes have not been entirely genuine and authentic. They argue, in various ways, that Latin America has had fundamental difficulties in modernizing in accordance with the European model. For Paz the main cause of this is that Spain and Latin America could not carry out in depth the Weberian process of rationalization because they did not experience the Enlightenment in the eighteenth century:


Paz’s point is that liberalism proved barren in terms of the evolution of Latin American culture and could not compare itself with colonial poetry or pre-Columbian architecture. And yet the new liberal values masked the old pre-modern realities and this would have been the beginning of inauthenticity. The consequence is that: At the beginning of the 20th century we were already installed in full pseudo-modernity: railways and latifundia, democratic constitution and a caudillo in the best Hispanic-Arab tradition, positivist philosophers and pre-Columbian caciques, symbolic poetry and illiteracy. (1979: 64) Finally, modernity has also been attacked for supposedly negating Latin American identity. Methol Ferré (1981) and Morandé (1984: 144–5) criticize modernization processes in Latin America for they would oppose its true religious identity. Modernization, as has occurred in Latin America, would be antithetical to its most profound being insofar as it has sought its ultimate foundation in the European Enlightenment. According to Morandé, Latin America’s intellectual elite were unable to recognize their deepest cultural roots, thus leading their countries into modernizing experiments which, by ignoring Latin America’s true identity, could only fail. For Morandé and Methol Ferré, the identity denied by an atheistic modernity has a privileged reservoir in popular religiosity. These theories are certainly improbable. The problems pointed to by Paz, Fuentes, Morse and Morandé, are not necessarily an expression of the failure of modernity in Latin America, but an expression of Latin America’s specific manner of being in modernity.They confuse a crisis of modernity with scepticism about the possibility of a true modernity. New conceptions of Latin American identity The doubts about and reactions against modernity are also lived as an identity crisis. In the 1980s forms of neo-indigenismo and religious fundamentalism emerged which wanted to go back to a supposedly original cultural identity which could make up for the failures of modernity. The neoindigenistas resorted once more to exploring the Latin American origins and the forgotten cultural patterns present in the Indian communities, in the hope of finding there the elements of a new alternative way ahead, which included community-oriented and ecological dimensions. Luis Guillermo Lumbreras, for instance, argued that the whole process of development in Latin America has been misdirected from the start and the only solution is to recover ‘the knowledge of our ancestors’ and ‘to make use of that knowledge’ (Lumbreras, 1991: 22). Anibal Quijano (1988: 62; 1991: 34–8), in his turn, makes a critique of instrumental reason and dreams of a utopia constructed upon the basis of an alternative historical reason.This reason comes from the past and was cultivated by the Indian communities, but also has roots in the present: the solidarity, collective effort and reciprocity remain alive in the mass of the urban poor, in their popular kitchens, in their co-operatives and in their forms of organization to survive. In this contemporary current one still finds the idea that Latin America’s future depends on it being true to some age-old Indian traditions or principles which were forgotten by instrumental reason, alienated Enlightened elites, and neoliberal modernizing attempts. Morandé (1984: 144–5) argues that what is typical of Latin American identity was formed from the meeting of Indian cultures and the Catholic religion. This occurred orally – the Indians did not have written texts – and so the result was an ethos, a founding experience of togetherness which has four essential characteristics: • • • •

It was formed before the Enlightenment. It has a necessary Catholic underlying structure. It prefers sapiential to scientific knowledge. It is best expressed in popular religiosity.

According to Morandé, Latin America’s intellectual elite were unable to recognize their own identity, thus leading their countries into modernizing experiments which, by ignoring Latin America’s true identity, could only fail. Contrary to the Protestant work ethic and the need to save and invest as a 30

From 1990 onwards: the neoliberal stage The stage which opens up after the end of dictatorships continues with, and accelerates, economic and political modernization under the influence of an already consolidated neoliberal ideology. Once more the concerns about identity recede as the neoliberal optimism gets the upper hand everywhere. The free market and open economy policies produced an expansion of primary exports but also in most countries a significant reduction of industrial production and industrial employment. Mexico and Brazil managed, after a while, to expand their industrial exports. The rest, on the contrary, followed a more radical laissez-faire model. Although exports of primary products became more diversified, they were associated with declining levels of industrial production and employment. In this, the Latin American trajectory to modernity (with the exception of Mexico and Brazil) is very different from the Asiatic one where the state assumed a very important role in the acquisition and adaptation of firstclass technologies and in the promotion of industrial exports (Gwynne, 1996a: 228–9, 220). These economic processes now occur in a new political context which values democracy, participation and respect for human rights. The democratization of the state in Latin America has made some progress but many problems still remain. In some cases, like the Chilean one, the former dictatorship left a constitution and laws full of undemocratic elements which it is hard to change. It is not surprising at this time that some authors openly propound the idea that Latin America must abandon its old identity in order to be able fully to enter modernity. Claudio Véliz (1994), for instance, maintains that the main problem that modernization has in Latin America is the cultural resistance which the essential Latin American identity has opposed to it. Véliz agrees with Morandé that Latin American identity is Baroque, but he sees it as an obstacle to development.The failure of Latin America to modernize until the 1990s is due to its own Baroque identity, to its aversion to risk and change, to its distrust of the new, to its preference for stability and central control, to its respect for status and old loyalties. Nevertheless, after many centuries of resistance to change, the magnificent baroque dome has begun finally to deteriorate and crumble under the impact of banal cultural artefacts coming from the Anglo-Saxon world, from trainers to toasters and computer graphics. Véliz advocates in the 1990s an Anglo-Saxon kind of modernity.This goes to show that in his view, the process of modernization in Latin America is externally led and antagonistic to its cultural identity (1994: 219–22). Even postmodernism is received in Latin America in a way that does not antagonize modernity. For many authors like Brunner and Lechner, postmodernism seems to be a particular way or modality which modernity assumes in the Latin American periphery. They even find in Latin America 31


proof of salvation, Latin American culture puts an emphasis on work as sacrifice and on religious festivities as ritual squandering. Basically, Latin Americans are not supposed to be motivated by technical progress, and the subordination of their ethos to instrumental rationality is a form of alienation, a mistake punished by chronic failure. According to Morandé, this does not necessarily mean that the Latin American identity is anti-modern. He argues that Latin American identity was created within a different kind of modernity: the Catholic, Counter-Reformationist, Spanish, Baroque modernity. What threatens Latin American identity is not just any kind of modernity but the modernity which entails a process of secularization, the modernity stemming from the Enlightenment. It follows that, given the Catholic substratum of this identity, secularization is not just a threat to the Church but, more fundamentally, a threat to Latin American culture itself. This irreligious threat succeeded in converting the Latin American elites to instrumental reason, but it did not succeed against the popular religiosity of the mestizos, which has resisted all attacks, to remain even today the most spontaneous and genuine expression of the cultural ethos. Yet by the end of the 1980s and in spite of these attacks against modernity, the project of rapidly modernizing even at the cost of identity was becoming dominant in Latin America, supported by the increasingly overwhelming success of neoliberalism. Notwithstanding this, both sides seem to share the idea that modernity is something external, which either has to be prevented from expanding in order to preserve identity or has to be brought about at all cost in order to change the old identity.


postmodern features avant la lettre and tend to relate the new dynamism and openness of Latin America’s modernization processes with these postmodern features. Many writers have used the tenets of postmodernism to underpin neoliberal positions (Hopenhayn, 1993: 101–9). Whereas in Europe postmodernism can represent an option for identity against modernity, in Latin America postmodernism, barring some exceptions, supports modernization against identity. However, as in other times of accelerating development and economic expansion, a new kind of identity seems to be implicitly advocated and discursively constructed by the neoliberal project. Its bearer is the figure of the successful and innovating entrepreneur and its promise is widespread (credit card) consumption as the linchpin which could deliver the masses. Individual success, conspicuous consumption and privatized welfare come to replace equality, state-sponsored welfare, fairness and general austerity. The point now is no longer justice, full employment or industrial development, but rather to become winner nations comparable with the Asian Tigers. The 1990s in Latin America witnessed an enormous expansion of television and other communication technologies such as cable and satellite TV, videocassette recorders, DVD players, and so forth. An interesting aspect of the Latin American consumption of television in the 1990s is the fact that locally produced programmes outperform in the ratings the US-produced programmes. In Brazil seven of the top ten programmes in home ratings in the first four months of 1997 were nationally made, of which the top two were telenovelas (Marín, 1999: 293). In Chile, in 1998, more than 60 per cent of the 50,000 hours of transmitted programmes are nationally made. If prime time is taken into consideration (when more than 70 per cent of television sets are turned on), then during some months of the same year, 81 per cent of programmes were nationally made (Catalán and Souza, 1999: 6–7). In Mexico, Argentina and Colombia something similar occurs. Television has also become the first source of information for Latin Americans. In literature new trends are apparent. Of course the old guard who became famous in the 1960s continue to produce novels that sell very well all over the world, but in the 1990s it is possible to detect the emergence of younger authors who write novels and stories with a different perspective. Politics is not one of their main concerns and they tend to be shaped by the new emergent individualism. This is reflected in their outlook towards life and in the kind of narrative they write. They no longer want to continue with the tradition of magical realism, nor are they concerned with nature, rural society, left-wing politics or Latin American identity. Fuguet and Gómez, the editors of a new compilation of stories and members of this generation put it like this: the great theme of Latin American identity (who are we?) seemed to give way to the theme of personal identity (who am I?). The stories of McOndo are centred on private and individual realities. We suppose that this is one of the legacies of the world privatising fever. (1996: 15) They accept that they live in a world of McDonald’s, malls and computers and that present-day culture is a mass hybrid culture controlled by the media. What they consider as Latin American is the supposedly more genuine Indian, left-wing, folkloric or rural traditions. The new authors write about modern life in the cities, about the middle or upper classes. The protagonists in their novels and stories come from the upper classes. It can be said, therefore that the fiction written by these authors, as much for its private topics and depoliticization as for its new kind of upper-class protagonists, contributes to shape the new forms of identity which are emerging from the neoliberal period.

SOME SPECIFIC ELEMENTS OF LATIN AMERICAN MODERNITY AND CULTURE The combined construction of modernity and identity in Latin America which I have explored historically in five stages has produced certain specific features and characteristics which can be 32

Clientelism, traditionalism and weak civil society The first feature I would like to refer to is clientelism or cultural and political personalism. This is connected with the populist stage but its effects have remained until today. Recruitment of civil servants, university lecturers and mass media journalists continues to be done through clientelistic or personalist networks of friends and supporters.The processes of public openness for a job are absent, scarcely developed or work in a purely nominal fashion when procedures are ‘fixed’ to favour a preselected individual. Clientelistic recruitment flourishes in Latin America and shows as much the absence of normal channels of social mobility as the narrowness and high competitiveness of political and cultural environments. Education, acquired skills and personal achievements are not enough to secure access to certain political or cultural jobs. Well-placed ‘contacts’, ‘godfathers’ or ‘friends’ are required to facilitate entry. Because the system depends on the patronage of certain individuals who exercise institutional power, it secures the personal loyalty of the recruited and favours institutional immobility. Thus, veritable institutional fiefdoms are created which, because of their discriminatory character, are almost impenetrable for those who do not belong to the group that controls them. A second feature could be called ideological traditionalism. In putting forward his theory of transition to modernity Germani spoke in the 1960s of the ‘fusion effect’, by means of which modern values could be reinterpreted in contexts different from developed societies, with the result that traditional structures were reinforced (1965: 104). A particular form of this fusion effect was ideological traditionalism which was that leading groups accepted and promoted changes necessary for development in the economic sphere, but rejected changes required for such a process in other spheres (Germani, 1965: 112). In late modernity a similar phenomenon takes place which consists in that certain leading groups advocate total freedom in the economic sphere but appeal to traditional moral values in other respects. Thus, they emphasize almost a religious respect for authority and order, the traditional family and the national heritage, or they may even cast doubts about democracy and oppose, for instance, divorce laws or the decriminalization of adultery for women. A good example of this is Chile where adultery was a crime for which women only could be punished until 1995, and where until this very day, a divorce law has not been passed due to Catholic and conservative opposition. These fusions are not exclusive to the developing world. However, traditionalism in Latin America has stronger institutional bases than in Europe or the United States. One of them is the extraordinary power and influence of the traditional Catholic Church over political and legislative matters. This can be explained by the privileged role which the Catholic Church has played since colonial times in the maintenance of social and political order. The Church and religious mechanisms have played a central role in the exercise of authority and the political control of people. A significant phenomenon which differentiates Latin American modernity from others is the lack of autonomy and development of civil society. In Latin America, civil society is weak, insufficiently developed and very dependent upon the dictates of the state and politics. This is a consequence of the absence of strong and autonomous bourgeois classes developing the economy and culture of society independently from politics and any state support. Brunner (1988: 33) rightly argues that in contrast to the modernity of central or core countries, Latin American modernity suffers from a ‘voracity of politics which swallows everything and behind which everyone seeks protection or justification: equally entrepreneurs, intellectuals, universities, trade unions, social organizations, clerics, the armed forces’. 33


presented more systematically. These cultural features should not be essentialized; they are the result of history and they can change, be modified or even disappear altogether. But they still have an important presence today and are the results of a specific historical evolution. I have selected those characteristics which seem most relevant and which mark a contrast with other trajectories to modernity. I make no claim to being exhaustive.


Universities, institutes and even the media are vulnerable to or depend upon state action. It is not rare to find that a good number of research and consultancy institutions depend almost exclusively upon services rendered under contract to various state organizations. Many cultural centres are directly created by local governments and managed by the political majority which controls them. Hence politics exercises a disproportionate influence upon civil society and cultural institutions. Authoritarianism, legalism and masked racism One cultural aspect which has survived from colonial days, at times in a moderate form, at other times in a more extreme form, is authoritarianism. This is a trend which persists in the political field, in the administration of public and private organizations, in family life and, in general, in Latin American culture which concedes an extraordinary importance to the role of, and respect for, authority. Its origin is clearly related to three centuries of colonial life in which a strong Indo-Iberian cultural pole was constituted which accentuated religious monopoly and political authoritarianism. As De Imaz has put it, ‘for three centuries there existed a clear relationship between political authoritarianism and the legitimating role of the Inquisition’ (1984: 121). Flores Galindo has documented how the seventeenth-century religious congregations’s persistent struggles against idolatry in the central sierra of Peru had the connotation of political control: ‘the relative precariousness of the military system forced an apparent hypertrophy of religious mechanisms, so that, in that way, through fervour or more frequently fear, control over men could be secured’ (1994: 66). In spite of the democratizing influences of Enlightenment thought which certainly achieved some partial moderation of the authoritarianism of the Indo-Iberian cultural pole from independence onwards, its cultural force has not easily been extinguished in Latin American social and political life. In the particular case of Chile, various authors have highlighted the historically crucial role of Portales’s strong and authoritarian government in the formation of the Chilean state (Edwards, 1987; Góngora, 1981). Portales’s central idea was that, due to a lack of republican virtues, democracy in the mid-nineteenth century had to be postponed and unconditional obedience to a strong authority had to be established. The action in favour of the public good of such authority could not be hindered by laws and constitutions. It divided the country between the good (men of order) and the bad (conspirators to whom the rigour of the law had to be applied) (Góngora, 1981: 12–16). It is not surprising that General Pinochet’s regime should have frequently invoked such a conception in the late twentieth century. A feature that also comes from colonial times and has survived in different ways until today is a peculiar approach to principles, laws and norms whereby they tend to be formally upheld but practically flouted if they go against your interests. The origins of this tendency are many. On the one hand, it had to do with the plight of the Indians who were forced to convert to Catholicism under duress. In order to save their lives many of them formally accepted the new religion but secretly continued to practise their own, often using the same Catholic ceremonies or liturgical celebrations for their own purposes. On the other, a similar form of pretence was also practised by the Spanish conquistadors whenever they were faced with royal decrees and laws, which in themselves might have been very just and good, but which having been drawn up too far away, could not be practically implemented without causing damage to conquistador interests. This was expressed by the traditional formula ‘se acata pero no se cumple’, which in respect of any such royal command roughly meant ‘it is obeyed but not implemented’. This happened invariably with respect to legislation meant to protect the indigenous peoples from the abuses of the conquistadors. Almost without a doubt the king and his administrators knew that this was going on, but they too turned a blind eye in the belief that the crown’s own interest would be affected if they demanded total compliance with the royal edicts. García de la Huerta (1999: 123) has suggested that this chain of complicity in the flouting of the law might have also reached the highest ecclesiastical hierarchy. The interesting thing about these procedures is that the practical unwillingness to comply with the law did 34

BOX 2.3 Racism denied Flores Galindo (1994: 215) has observed that: In Peru nobody would define himself or herself as a racist. Nevertheless, racial categories not only tinge but sometimes condition our social perception. They are present in the configuration of professional groups, in the messages transmitted by the media or in the call for beauty contests . . . racism exists notwithstanding racial terms, suppressed in the procedures of public identification, do not have official circulation. Yet a masked and even denied phenomenon, does not cease to be real. Raúl Béjar (1988: 213–14) has argued that in the case of Mexico: it is a commonplace to say that in this country there is no racial discrimination . . .; [yet it is possible to affirm that] prejudice has grown in the cultural history of Mexico . . . [and that this affects] especially the Indian or quasi Indian . . . blacks . . . and Chinese.

As pointed out earlier, various governments attempted to ‘improve the race’ by means of ‘whitening’ policies which favoured European immigration in the late nineteenth and early twentieth centuries. In contemporary Latin America, spatial segregation exists in the form of Indian areas being the poorest and most abandoned. Meanwhile, shanty towns in cities contain a bigger proportion of people with darker skins, be they Indians, mestizos, mulattos or blacks. There is no equality of opportunity for them. Some surviving Indian groups constitute true internal colonies, geographically segregated, oppressed by mestizos, and subject to special laws and forms of administration. Nevertheless, the very fact of mestizaje and that in many cases social classes overlap with gradations in the skin colour (the darker the skin, the lower the class) leads frequently to affirmation of racism. This has even a base in the social sciences, which have often underlined the differences between the Spanish treatment of Indians and blacks and the British treatment of them. Gilberto Freyre, in his classic book Casa Grande e Senzala (The Masters and the Slaves, 1946) argued that the treatment of slaves in Brazil was better than in North America, especially due to closer, even sexual, relationships between masters and slaves in the plantation economy. Many historians and social analysts have subsequently noted that whereas in North America the white settlers imposed their separation from Indians and blacks, in Latin America a wide process of mestizaje took place, thus producing a continuum of racial gradations. From this the myth arose that in Latin America a ‘racial democracy’ 35


not question its validity or legitimacy, but on the contrary, had to proclaim respect for the norm. Principles are transgressed but in such a way that they are simultaneously recognized, thus keeping the appearance of respect. This is crucial because in this way the principle of authority, so important in Latin America, is not violated. This feature accounts for both excessive legalism, the formal and ritualistic adherence to the norm, and readiness to ignore it in practice. Examples of this are found everywhere in contemporary Latin America. It can be seen, for instance, in the way in which Latin American Catholics profess their obedience to the Pope’s teachings about contraception, but massively use it, often with the complicity of local priests. It can also be seen in the wonderful declarations about human rights which appear in many regional constitutions while at the same time the governments which made them systematically violate human rights in practice. Another important feature is masked racism. The existence of racism in Latin America is well documented, even though it is a relatively neglected area of social sciences and generally is not perceived as an important social problem. It is clear, though, that from very early days, there was in Latin America an exaggerated valuation of ‘whiteness’ and a negative vision of Indians and blacks.


existed and that racism was a problem for other countries (Cubitt, 1995: 122–6). This idea continues to be believed today and shows its prevalence in that, with the exception of some degrees in anthropology, there is a significant absence of courses and studies on Latin American race problems in social science degrees. Exclusion and solidarity One of the most decisive features of Latin American modernity is the great extent of social marginality and the informal economy. In spite of the obvious progress of modernization and the dynamism of capitalism in the area, they have never been able to reach most of the population. A high proportion of the economically active population has never gained access to formal productive work and therefore lives a life of exclusion and marginality, in casual petty trade or petty criminal activities (for a fuller discussion, see Chapter 11). In some countries like Peru, it is estimated that more than 50 per cent of the economically active population fall into this category. About 25 per cent of the population of Latin America’s major cities have no proper jobs, earn no regular income, and live in slums located on the periphery of big cities, in conditions of extreme poverty, thus constituting a marginal underclass. The problem is compounded by the absence of an efficient and extended welfare state. This is why it is imperative for many people who suffer from poverty and social exclusion to organize a complex system to survive. Hence the emergence of the informal economy, of private organizations such as work co-operatives, popular kitchens, and a series of practices based on solidarity, reciprocity and mutual aid.This does not necessarily indicate the emergence of an alternative rationality to modern instrumental rationality, as many authors in the 1980s suggested (Quijano, 1988; Parker, 1993); on the contrary, it can even be considered an expression of the same rationality insofar as it resorts to the only means that make possible a precarious survival in very difficult circumstances. The phenomenon of exclusion as much as the phenomenon of solidarity has important effects on the processes of identity construction in vast popular sectors. The former clearly has negative effects in that individuals become accustomed to the idea that they are surrounded by a hostile and unfair world in which, whatever their personal effort, positive results are never guaranteed.The link between action and result is broken; the external world appears uncontrollable, and therefore everything that happens tends to be conceived in terms of fate or luck. When someone learns that his/her efforts are useless, a disposition could emerge which in social psychology has been called the ‘learned hopelessness syndrome’ (Montero, 1987: 29–41), which is characterized by a fatalistic conception of life, by a lack of plans and a passive attitude which derive from a situation in which the individual has ceased to believe that his/her personal effort can change or influence the things that happen. On the other hand, the experience of solidarity and communal participation in the resolution of problems could partially return trust in that the external world is not seen as always hostile and threatening, and common actions can achieve positive results for all. These experiences return to individuals the sense that what happens is related to their own actions and that they have an important responsibility in the construction of their own destiny. Collective actions in solidarity restore a sense of individual value and relink individual effort to positive result. From learned hopelessness it is then possible to go to learned hope. The lack of equality of opportunity, access to jobs and social security for vast sections of Latin American society has made solidarity and popular collective organizations for survival an almost permanent feature of Latin American modernity and identity. Politics It is also necessary to refer to the fragility of the political institutions in Latin American countries (see Chapters 7 and 8). Since independence Latin America has seemed to the world a continent of revolutions and caudillos, military coups and conspiracies, where the institutional order is permanently under threat. So much so that important scholarship has been devoted to explain Latin America’s systematic political instability (Huntington, 1968; Kling, 1970). The wave of military dictatorships in the 1970s and the 1980s included countries like Chile, which had had a reputation for institutional stability 36

The religious factor Finally, religion is a crucial dimension of Latin American identity. There are at least three important religious sources in Latin America: the African, the Indian and the Christian. The complexity of the religious phenomenon and the variety of religious identities in Latin America are of such magnitude that I cannot adequately deal with them here.Thus, I have chosen to concentrate on religious identities of Christian origin, which are undoubtedly the most important ones since they affect the vast majority of the Latin American population. In colonial times a religious identity was constructed in Latin America which had authoritarian and intolerant features, and opposed scientific endeavours and privileged external rites. The presence of this Catholic element in Latin American identity was very deep and persistent and in many ways still shows its strength in several respects. Given the centrality of Catholicism for Latin American identity, it is not surprising that the process of secularization started much later and has been slower than in Europe. Nevertheless, its advance can be noticed in the progressive displacement of Catholicism as the central element of the region’s cultural identity. From being the principal nucleus of all aspects of culture, Catholicism became a particular identity, one cultural element among many others of various kinds. In this sense, secularization has not meant the end of religion or religious sentiments in Latin America, but rather the loss of centrality of a narrow Catholic religious world-view and the arrival of pluralism. The traditional Catholic identity in Latin America has been challenged not just by the process of secularization but also by the construction of new religious identities. The most important has been the Pentecostal movement in the 1980s and 1990s, which is rooted in the poorest sections of society. It is politically more conservative and focuses upon personal conversion and a change of lifestyle. The advance of the Pentecostal movement has been spectacular on all fronts, as much in the number of pastors and new members as in the number of churches and the frequency of religious practices. The biggest growth has occurred in Brazil, Chile, Nicaragua, Guatemala and Costa Rica. Several explanations have been put forward for the extraordinary success of Pentecostalism in Latin America. Many of them use the old Weberian scheme which sees Latin America as a region in transition from traditional society to modernity. Lalive (1975: 86), for instance, has argued that Pentecostalism offers a refuge to the poor by allowing them to recreate within the congregation a kind of traditional society which gives them security and strength to bear the discriminatory features of the new modern society in the making. David Martin (1990: 13) puts forward the thesis that Pentecostalism in Latin America is the vanguard in the religious field of a vaster penetration of AngloSaxon values which would allow its change towards modernity and development.The Weberian thesis does not explain why it is Pentecostals and not historical Protestants who succeed in attracting the poorest urban sectors. This suggests that there must be something special about Pentecostalism, a 37


since independence. True, Latin America now has returned to democracy, but the symptoms of institutional weakness remain quite evident, especially in Argentina, Venezuela, Colombia, Peru and most of Central America (apart from Costa Rica). Although since the beginning of the 1990s there has been a marked revaluation of formal democracy and of respect for human rights in Latin America, there has been also a simultaneous loss of prestige by politicians and, more recently, an increasing distrust of traditional politics in general. In some relatively stable and economically successful countries like Chile, this has led to a relative depoliticization of society, in particular of the young. In other countries like Argentina, Peru, Brazil and Venezuela, which are less stable and suffer enormous economic problems, there has been a process of repoliticization directed against traditional politics and increasingly assuming a new populist slant. The election of Lula da Silva in Brazil, Chavez in Venezuela and Gutierrez in Ecuador (the last two without significant party support), coupled with the close possibility of similar events in Argentina, Paraguay and Peru, show this new trend which puts the political system under pressure and challenges the neoliberal policies of the 1990s.


particular ability to translate the Protestant message into the forms of expression of popular culture (Sepúlveda, 1996: 95–7).

CONCLUSION Looking at the Latin American trajectory to modernity, it is possible to affirm that it has been an important part of the process of identity construction: it does not oppose an already-made-in-thepast, essential and immovable cultural identity, nor does it entail the acquisition of an alien identity (Anglo-Saxon, for instance). Modernity and cultural identity are both processes which are being historically constructed and which do not necessarily entail a radical disjunction even if there are tensions between them. The features of Latin American modernity which I have explored constitute, for better or worse, important elements of Latin American cultural identity today. But of course, nothing prevents their critical appraisal or their change in the future. Nevertheless, there has been a manifest tendency among Latin American intellectuals to consider modernity as something external and in opposition to identity. This never entirely resolved dialectic between modernity and identity is ultimately a major feature of Latin American culture.

FURTHER READING Larraín, J. 2000 Identity and modernity in Latin America. Polity Press, Cambridge. This book further develops the views on identity and modernity in Latin America expressed in this chapter. It maintains the thesis that cultural identity is being permanently constructed and that it has done so not in opposition to but inextricably linked to the processes of modernization. Miller, N. 1999 In the shadow of the state – intellectuals and the quest for national identity in twentieth-century Spanish America. Verso, London.This book seeks to explore the role of intellectuals in the construction of national identities in the twentieth century, especially in Chile, Cuba, Argentina, Mexico and Peru. Paz, O. 1967 The labrynth of solitude. Allen Lane, London.This is a Latin American classic which deals with Mexican identity but could be extended to the rest of Latin America. Véliz, C. 1994 The new world of the Gothic fox. University of California Press, Berkeley, CA. This proposes the thesis that the arrival of modernity in Latin America means the necessary dismantling of its old baroque cultural identity.

WEBSITE Latin American Network Information Center, www.lanic.utexas.edu, an initiative of the University of Texas at Austin, facilitates access to Internet-based information on Latin American culture and literature.

38

3 Structural reform in South America and Mexico: economic and regional perspectives Robert N. Gwynne

In the past 20 years, Latin America has undergone the most significant transformation of economic policy since the 1930s. A series of structural reforms has changed the economies of South America and Mexico from being closed and state-dominated to being more market-oriented and more open to the rest of the world. National economies have become more closely integrated into the world economy – particularly through cross-border flows of trade, investment, financial capital and technology.These reforms have often been labelled neoliberal due to their emphasis on increasing the influence of markets and decreasing the significance of government in economic decision-making. Reform has caused economies to become more closely inserted into the process of globalization, a process which has brought very varied results to the peoples of Latin America (Stiglitz, 2002). The nature and impact of these economic reforms in South America and Mexico are the central questions being addressed in this chapter. In this book, South America and Mexico are examined separately from the smaller countries of Central America and the Caribbean. These latter countries have traditionally been much more closely integrated into the global economy. In Chapter 4, Tom Klak argues that the close global integration of these small countries provides the key to their historical and present vulnerability and can thus be seen as a colonial and neo-colonial vestige. Meanwhile, South America is characterized by one very large economy (Brazil) and by a large number of medium-sized economies (see Table 3.1); Mexico constitutes the second largest Latin American economy after Brazil. There are, of course, themes which link the smaller to the larger countries of Latin America and the Caribbean and, in turn, connect them both to countries in the global economic core of North America. One theme is that of hemispheric integration, which is set to start off officially in 2005 with the signing of the Free Trade Area of the Americas (FTAA). This is due to link up five major schemes of regional integration: 1 The North American Free Trade Agreement (NAFTA) – started 1993 – Canada, USA, Mexico. 2 The Central American Common Market (CACM) – started 1960 – Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica (see Chapter 4). 3 Caricom (Caribbean Community) – Caricom’s precursor, Carifta, began in 1965 and laid the foundations for Caricom’s establishment in 1973 – members include Barbados, Guyana, Jamaica, Surinam, Trinidad and Tobago and others (see Chapter 4). 4 The Andean Community (formerly the Andean Group) – started 1969 – Venezuela, Colombia, Ecuador, Peru, Bolivia. 5 Common Market of the Southern Cone (Mercosur) – started 1990 – full members are Argentina, Brazil, Paraguay and Uruguay; associate members are Chile and Bolivia. Figure 3.1 shows the schemes of economic integration. 39


CANADA

UNITED STATES

ATLANTIC OCEAN MEXICO

CUBA HAITI DOMINICAN REP.

JAMAICA BELIZE HONDURAS

Caricom

NICARAGUA

GUATEMALA

GUYANA

EL SALVADOR COSTA RICA

VENEZUELA

SURINAM FRENCH GUIANA

PANAMA COLOMBIA ECUADOR

PERU

PACIFIC OCEAN

BRAZIL

BOLIVIA

Trade Areas Central American Common Market

PARAGUAY

Andean Community Mercosur

CHILE

Mercosur associates

ARGENTINA

URUGUAY

North American Free Trade Agreement Caricom Nonmembers 0

km

FALKLAND ISLANDS

2000

Figure 3.1 Schemes of economic integration in Latin America.

40

TABLE 3.1 Population and production in North and South America, 1965–2001 Country

Population (millions)

GDP ($bn) GDP, average annual per cent growth Purchasing power parity of GNI per capita

2001

2001

1965–80

1980–89

1990–2001

2001

USA 284.0 Canada 31.0 Mexico 99.4 North America 414.4

10,171.4 677.2 617.8 11,466.4

2.7 4.8 6.5 4.7*

3.3 3.4 0.7 2.5*

3.5 3.0 3.1 3.2*

34,870 27,870 8,770 23,837*

Brazil 172.6 Argentina 37.5 Venezuela 24.6 Colombia 43.0 Chile 15.4 Peru 26.1 Uruguay 3.4 Ecuador 12.9 Bolivia 8.5 Paraguay 5.6 South America 349.6

502.5 268.8 124.9 83.4 63.5 54.0 18.4 18.0 8.0 6.9 1,148.4

9.0 3.4 3.7 5.7 1.9 3.9 2.4 8.8 4.4 7.0 5.0*

3.0 −0.3 1.0 3.5 2.7 0.4 0.1 1.9 −0.9 2.2 1.4*

2.8 3.7 1.5 2.7 6.4 4.3 2.9 1.7 3.8 2.0 3.2*

7,450 11,690 5,890 5,980 9,420 4,680 8,710 3,070 2,380 4,400 6,367*

Ranked by GDP within each region * unweighted average Source: World Bank (1991; 2002a). 41

Structural reform in South America and Mexico: economic and regional perspectives

NAFTA is the only example so far of a scheme of economic integration involving two advanced economies and one emerging or developing economy.The differences in income and standard of living are substantial; in 2001, purchasing power parity per capita in the USA was four times that in Mexico (see Table 3.1). Such differences have limited the focus of NAFTA very much to trade rather than to deeper forms of economic integration; for example, there are no future provisions for labour mobility within NAFTA (particularly from Mexico to the USA and Canada) – in contrast to the nature of economic integration in the European Union as it has expanded southwards and eastwards. The promised FTAA will replicate in many different ways the Mexican relationship with North America since 1993 for all other countries in the western hemisphere. In 2001, the sheer size of the US economy not only made it 16 times the size of the Mexican economy but virtually nine times the size of all ten South American countries combined (see Table 3.1). Further economic integration in the Americas will inevitably be framed by very strong asymmetries, particularly in trade and flows of capital, technology and people. These asymmetries will be replicated in the relationships between the trade groupings that become part of the FTAA.The combined GDP of NAFTA’s three countries is 13 times greater than that of the four countries of Mercosur and Chile and an emphatic 40 times greater than that of the five countries of the Andean Group; there are even greater differences with the countries of Central America and the Caribbean. However, in terms of population, the relationship between North America and South America looks much more balanced (see Figure 3.2). The population total of North America (excluding Mexico) is in fact lower than that of the ten countries of South America (see Table 3.1). Nevertheless, inequalities in standard of living between those countries are already remarkable, and distinct hierarchies of living standards are being created. In terms of per capita purchasing power parity (see


Canada

USA

Dominican Republic Cuba

Mexico

Haiti Guatemala

Jamaica

Honduras

El Salvador Nicaragua Costa Rica

Puerto Rico

World Bank classification of Economies by Income and Region 2001

ez

ue

Low income Lower middle income

Ve n

Co

lom

bia

la

Panama

Upper middle income Ecuador

High income Brazil

Peru

Countries’ shares of World Population Uruguay Argentina

Chile

Bolivia

Paraguay

1% 0.1%

Figure 3.2 Hemispheric representation according to income and population size (includes all countries with a population of over two million). Source:World Bank (2003)

Table 3.1), the average Chilean had an average income nearly one-quarter that of the average US citizen in 2001, while inhabitants of Bolivia had an average income only one-quarter of those of Chile. Such data hide significant variations in income distribution within countries, but we will return to this issue later in the chapter. In order to contextualize and explore the impacts of neoliberal reform, both in terms of national economies and of economic spaces within those economies, this chapter will be divided into four sections: 42

HISTORICAL CONTEXT The neoliberal paradigm replaced a previous economic paradigm that had been in place in Latin America since the 1930s. The previous paradigm was based more on inward orientation and the greater intervention of the state in economic matters. It is worth briefly reviewing this previous paradigm before analysing the distinctive characteristics of the present one. The origins of inward orientation lie in the continent’s reactions to the crisis of the Great Depression of 1929–33. Before then, Latin American governments had generally supported free trade and close integration with the world economy (Bulmer-Thomas, 1994; Thorp, 1998). Economic growth in Latin America in the nineteenth and early twentieth centuries had been closely linked to the rapid expansion in world trade and to the increasing flow of investment capital from such core economies as Britain. Latin American countries became inserted into an international economy in which they exported raw materials (mineral and agricultural) and imported manufactured goods. The First World War and its aftermath, in which European countries engaged in protectionism, dampened the enthusiasm for outward-oriented policies in Latin America. However, it was not until the Depression and the more than halving of world trade that Latin American governments reacted with dramatic changes in their economic policies. Between 1928 and 1933, the value of Latin American exports declined from about $5 billion to $1.5 billion (Bulmer-Thomas, 1994). This was partly due to a decline in volume. Export volumes declined by 22 per cent in Latin America as a whole between 1928 and 1932, although some countries fared much worse; the volume of Chile’s exports (dominated by copper) fell by nearly 70 per cent. In addition, export prices were in free fall, declining by two-thirds between 1928 and 1932. The severe crisis in the world economy and the high dependency of Latin American countries on that economy suddenly demonstrated the extreme vulnerability of their economies. Through the 1930s and subsequent decades, Latin America tried to restrict interaction with the world economy, particularly in terms of trade, investment and the transfer of technology. Tariffs, quotas and exchange controls provided protection from foreign competitors by making the entry of foreign goods expensive or impossible. Latin American entrepreneurs reacted to the scarcity of goods and the level of protection by producing goods that had previously been imported. As a result, industrial production and employment grew rapidly in most South American countries. Industrialization was seen as a key to future economic development within this inward-oriented framework. Policy leaders argued that all developed countries had industrialized behind high protective tariffs and that it was only after a country had developed a more mature industrial structure that it could become involved in the freer trading of goods (Prebisch, 1950). In order for South American countries to achieve a more mature industrial structure, the political consensus was that governments should actively intervene not only through the elaboration of industrial policy but also through the creation of state-owned development corporations. Governments drew up strategic plans for industrial sectors and facilitated investment in key industries, such as steel, where it was thought that national private investors might be unwilling to venture. The modernization of the state through industrialization became a key theme of the inwardoriented period. In Brazil, for example, the crucial role of industrialization in the rapid accumulation of 43


1 The historical context of the shift to economic reform. 2 The nature of economic policy change, with particular reference to the power of the multilateral institutions, theoretical justifications for neoliberalism and the opening up of Latin America. 3 The impacts and problems of neoliberal reform, particularly in terms of economic growth, investment, employment, income distribution and poverty. 4 The impact of neoliberalism on economic spaces within Latin American countries and on the private sector firms that should be the key actors in the process of economic growth under the market-oriented models.


capital and in improving national technological capabilities, and the pivotal role of the state in facilitating such development, were central tenets of contrasting governments stretching from the 1930s to the 1970s – such as the regimes of Presidents Vargas, Kubitschek and Geisel. Between 1950 and 1978, manufacturing GDP in Brazil expanded ten times in real terms (Gwynne, 1985: 36) – equivalent to an average annual growth rate of 8.5 per cent over the three decades. These rates were unprecedented globally until the growth of East Asian NICs after 1960 and China after 1980. Although Brazil proved the most successful at industrializing, manufacturing GDP also expanded significantly in the other South American countries and Mexico (ibid.: 36–8). It is misleading to characterize the inwardoriented phase as one of low economic growth. Indeed, growth rates in the 1960s were higher than those of the 1990s for many countries in Latin America. Governments also became more actively involved in economic development because of the way in which the world economic crisis had so seriously affected their economies. Governments were forced to make some response to the two pressures that the world crisis inflicted on the economies of their countries. First of all, there was the external imbalance, the collapse of national earnings from exports and the drying-up of capital inflows from international sources. Second, and even more serious for governments, was the internal imbalance – the decline in government revenues due to the critical falls in the volume of export and import taxes. In this sense, state intervention in the economy and the increased rate of import taxes (through tariffs) can be seen as part of governments’ attempts to solve their own huge financial problems. Questionable policies, such as multiple exchange rates and the printing of excess money, can often be attributed to governments reacting to serious financial crises. These policies tended to become embedded in the history of inward orientation. Between 1971 and 1982, Edwards (1995: 83) found that ‘in some countries money creation accounted, on average, for almost one-fourth of government revenues’. This leads us to note the economic problems that came to characterize the paradigm of inward orientation, most notably that of inflation. Inflation can be divided into two categories – high inflation (annual price rises of between 10 and 50 per cent) and hyperinflation (above 50 per cent). Table 3.2 shows that only two countries (Paraguay and Colombia) in South America did not suffer from hyperinflation between 1970 and 1993 in the latter stages of inward orientation. Four countries had recorded annual inflation levels of over 1000 per cent, with two countries (Bolivia and Peru) recording TABLE 3.2 South America and Mexico: peak inflation years between 1970 and 1993 and

inflation average, 1984–93 Country

Peak inflation and year, 1970–93

Inflation average, 1984–93

Bolivia Peru Argentina Brazil

8,170.5 (1985) 7,649.6 (1990) 4,923.6 (1989) 2,500.0 (1993)

1,051.6 1,283.7 1,811.5 1,944.8

Chile Mexico Uruguay Ecuador Venezuela

2,650.0 (1973) 2,159.2 (1987) 2,129.0 (1990) 1,185.7 (1988) 1,181.0 (1989)

1,119.5 1,152.9 1,175.5 1,144.5 1,134.0

Paraguay Colombia

1,144.1 (1990) 1,132.4 (1990)

1,124.5 1,124.8

Sources: Edwards (1995); Gwynne (1976). 44

1 Increasing uncertainty. Uncertainty increased for consumers and producers alike as major shortages of basic products could occur. Producers linked to international markets, such as through component supply, faced problems as national prices rose much faster than international ones. 2 Low investment. Entrepreneurs had to adapt to a chronological pattern of boom and bust in which low investment became a key problem. In boom periods of inflationary growth, there was little incentive for entrepreneurs to make long-term investments in expanding capacity as in the downturn they would be left with spare capacity. Instead, in the boom periods, producers charged high prices (adding to inflation) in order to dampen demand and make high profits. These high profits during the boom period compensated for the poor returns during the downturn when sales declined and prices had to be kept low to encourage demand. 3 Low savings and capital flight. During this period, inflation rates could be higher than interest rates. Individuals therefore saw themselves as effectively losing money if they decided to save as opposed to spend (and even borrow) money. Because of the predilection to spend rather than save, periods of high inflation became associated with very low national savings ratios. There was also the problem of capital flight (Mahon, 1996). This was because the affluent wished to conserve their savings against high rates of national inflation and found ways of sending these savings overseas, preferably to US or offshore dollar bank accounts. By the 1980s, the more affluent Argentines, Mexicans and Venezuelans held dollar deposits and other deposits abroad worth nearly as much as their countries’ debt (ibid.). The legacy of inflation within inward orientation left countries short on national savings and increasingly reliant on external finance. Indeed, the 1970s and early 1980s became a notorious period of what could be termed debt-led (and inflationary) growth in Latin America. The end of this period came in another dramatic crisis for the continent – the debt crisis that started in August 1982 after Mexico declared a moratorium on its debt repayments. The confused and messy aftermath of this crisis was instrumental in causing Latin America as a whole to suffer a decade of stagnation and policy turmoil in the 1980s. The global capital markets that had appeared so benign during the 1970s turned against Latin America in the 1980s. The reliance of Latin American countries on external finance became the Achilles’ heel of their efforts for economic growth in the 1980s. Since the 1930s, Latin American governments had tried to protect their economies from the vagaries of the global trading system and from the economic influence of resource and manufacturing TNCs in their economies. They thought that the dependence of their countries on the global economy would thereby be reduced. However, during the 1970s policies of inward orientation and strict controls on inward investment survived only due to the huge inflow of capital from international banks, recycling the capital surpluses of the oil-rich countries. These flows peaked at nearly $22 billion in 1978, more than ten times larger than at the beginning of the decade. Latin American governments favoured these borrowings as there were no strings attached, such as macro-economic policy recommendations, as normally came with loans from the IMF and other multilateral organizations. In retrospect, the Latin American economies were becoming more closely linked to the global economy – albeit in new ways. Governments did not realize that international bank lending, although not strongly regulated at that time, was intimately linked to business confidence. When business confidence in Latin America collapsed after August 1982, bank lending, the lubricator of Latin American economies for nearly a decade, dried up virtually immediately. International banks tried to drastically reduce their exposure in Latin America, with policies of no new lending, tight renegotiations and even insistence on the socialization of private debt – where Latin American governments were 45


figures around the 8000 per cent mark – when prices increase by over one-fifth each day of the year! It becomes very difficult for both producers and consumers to live through such periods. Speculation takes hold of the economy and savings rapidly become worthless.Very high price rises not only create economic but also political instability. There are three significant areas in which high inflation and hyperinflation cause economic damage:


forced to take responsibility for bad private debts in their country (for which they were not legally bound) as well as the bad public debts for which they were legally answerable (Congdon, 1988). In similar ways to the Great Depression, Latin American governments faced severe imbalances both on the external and internal front. Their external accounts were characterized by large current account deficits, partly because of high interest payments and partly because of the drying up of new funds. Interest payments increased because of high world interest rates in the early 1980s and the fact that most international bank lending in Latin America utilized floating interests rates. In this way the risks of interest-rate movements had been passed on to the Latin American borrower, whether a firm or a government. Internally, Latin American Treasury departments were having to deal not only with big increases in interest payments on their loans and extreme difficulty in finding new funds, but also with the problems of increased expenditure as economic activity declined, state firms declared increasing losses and welfare costs rose. Latin American governments tried to negotiate with the US government for a 1980s’ version of the Marshall Aid Plan, but US government finances in the 1980s were themselves in deficit and weak compared with their huge strength after the Second World War. With opportunities for bilateral loans limited, the only possible way to receive some external financing was through loans from multilateral agencies such as the IMF and the World Bank. However, this came with strings attached; in other words, Latin American governments would have to impose major economic reforms, even if they were only short term, in order to receive external financing from these organizations. Most Latin American countries had little alternative but to impose these economic reforms in return for assistance to alleviate their serious financial dilemmas. However, there was also a general lack of effective regulation and surveillance of foreign finance, which led to greater possibilities for fraud, mismanagement and corruption. These financial dilemmas demonstrated that Latin America still had a dependent relationship with the world economy; no longer was this just in relation to trade but also to foreign finance, where shifts in bank confidence and interest rates could have such a huge impact on the management of national economies. Between 1980 and 1986, net capital flows into the continent declined by around 40 per cent, but private net flows from international banks declined by an astonishing 80 per cent, demonstrating the impact of the change in perception of Latin America of the international banks. Crises often reveal the true nature of economic and social relations. In Latin America, they have revealed that economic performance in Latin America is highly dependent on the relationships of trade and finance with international firms based in the advanced economies. Furthermore, crises have been important in changing the nature of the prevailing economic paradigm. Paradigmatic shifts have not necessarily been guided by ideology. Rather, the aftermath of crises could be represented as Latin American governments deciding (with different chronologies) to respond in highly pragmatic ways to the contingencies of global economic crises.

ECONOMIC POLICY CHANGE By placing the current paradigm of neoliberal economic reform in a historical perspective, it can be argued that the paradigm shift was as much to do with pragmatic considerations of coming to terms with economic crisis and the deficiencies of inward orientation as with the theoretical benefits and ideological justifications of closer integration with the world economy and market-led economics. During the aftermath of the debt crisis in the 1980s, Latin American countries suffered a severe lack of capital, which exacerbated the inherited problems of inward orientation – low domestic savings, reliance on external financing, high inflation, low investment rates and stagnant trade. This section will thus examine the nature of this paradigmatic shift in terms of: 1 the power of the multilateral institutions; 2 theoretical and ideological elements of the new consensus; 3 the opening up of Latin America. 46

Multilateral institutions exerted considerable influence in this search for ways out of the debt crisis. As the IMF and the World Bank became the main source of new funds for the debt-laden countries of Latin America, they had the leverage to release funds on condition that each country implemented basic reforms. These conditions covered highly diverse areas, and sometimes the package included contradictory recommendations. However, the emphasis was on achieving export-led growth (through trade liberalization and exchange rate action), improved domestic capital formation (through tax and financial reforms) and reduction in government intervention in the economy. During the 1980s, many governments resisted the implementation of conditional reforms, but others moved faster than was required by the multilateral agencies (Chile and Mexico, for example). The IMF and the World Bank were thus attempting to coordinate the international response to Latin America’s debt crisis and introduce their own outward-oriented and market-led solutions to the problem. The international banking community endorsed this view and strongly urged for the burden of new financing to be placed on multilateral institutions. Debt-restructuring operations, IMFsponsored programmes, and World Bank structural adjustment loans were the most important elements of this strategy; between 1983 and 1988, Latin American countries engaged in 29 debtrestructuring operations with the private banks. Nevertheless, Latin American countries remained starved of finance as international banks insisted on debt repayments without new money. It was not until 1989 that a breakthrough occurred in the approach to the debt crisis when the international creditors and the multilateral institutions recognized that providing some debt forgiveness could be in everyone’s interest. The outcome was the Brady Plan, which encouraged creditors to enter into voluntary debt agreements with the debtor countries. There were two basic mechanisms for alleviating the debt burden. First, the use of debt-reduction schemes based on secondary market operations was actively encouraged. This technique acquired special momentum after 1988, when, in a number of countries, debt-equity swaps became an important mode for attracting new investment from TNCs and privatizing state-owned enterprises. Second, direct debt-reduction agreements between the international creditor banks and individual countries became more common after the introduction of the Brady Plan. Nevertheless, despite this window of debt restructuring, Latin America has remained heavily weighed down by debt. Total Latin American debt was about US$ 480 billion in 1990 and had risen to US$ 780 billion by 2000, equivalent to nearly 50 per cent of continental GDP. Theoretical and ideological elements of the new consensus Washington-based multilateral organizations such as the World Bank, the IMF and the IDB (InterAmerican Development Bank) were highly influential as both lenders and policy reform advisers in the 1980s and 1990s in Latin America. The so-called Washington consensus had three main ideological thrusts in terms of economic policy: 1 The opening up of Latin American markets to the world economy through trade liberalization (mainly focusing on imports) and easier foreign direct investment. 2 Reduction of direct government intervention in the economy through privatization as well as increasing the technocratic role of economic ministries – through imposing fiscal discipline, balanced budgets and tax reform. 3 Increasing the significance of the market in the allocation of resources and making the private sector the main instrument of economic growth – through deregulation, secure property rights and financial liberalization. Such ideological principles were not too different from those of the liberal economists of the eighteenth and nineteenth centuries, such as Adam Smith and David Ricardo – hence they have also been termed the ‘neoliberal manifesto’ and are associated with conservative political forces.There are, 47


The power of the multilateral institutions


of course, some crucial differences.The liberal economists favoured mobility of all economic factors of production, including labour. Free international movement of labour has not been part of the neoliberal agenda. These first-generation reforms were not adopted in a uniform fashion throughout Latin America. Indeed, Stallings and Peres (2000: 20) identify a set of countries that were ‘aggressive’ reformers (Argentina, Bolivia, Chile, Peru) as opposed to others who were more ‘cautious’ (Brazil, Colombia, Costa Rica, Jamaica and Mexico) on the basis of the speed and scope of the reforms. Some statistical background may be useful here (see Table 3.1). The four ‘aggressive’ reformers had experienced significant crises during the 1980s but then experienced rapid growth (an overall average of 4.6 per cent per annum) between 1990 and 2001. This pattern will have subsequently changed due to Argentina’s severe economic crisis which began at the end of 2001. In contrast, the ‘cautious’ reformers had grown rapidly under inward orientation (average growth rate of 7.1 per cent per annum between 1965 and 1980 for Brazil, Colombia and Mexico) and had recorded significant levels of growth during the debt crisis (see Table 3.1). Their record under neoliberalism between 1990 and 2001 (average annual growth rate of 2.9 per cent) was therefore quite poor in comparison to their previous record. No firm conclusions can be drawn from this comparison between aggressive and cautious reformers. Aggressive reformers were undoubtedly affected by their miserable performance during the debt crisis of the 1980s. Economic growth under neoliberalism was much improved for a decade but grave doubts over the long-term sustainability of growth for this group of countries have arisen since the onset of the Argentine crisis. Overall, the main aim was to achieve macro-economic stability. Neoliberalism became associated with a narrow focus on lowering inflation to the one-digit level. Fiscal policy emphasized shrinking government deficits, mainly by cutting expenditure rather than by raising taxes or other revenues. Monetary policy was geared toward stabilization and characterized by high interest rates (much higher than inflation rates). It should be pointed out that policy agreement did not stretch as far as exchange rate policy. In some countries, the exchange rate was fixed at a high (or over-valued) rate in order to lower inflation. In other countries, it was allowed to float downwards in order to maintain international competitiveness (thereby making exports cheaper) and stimulate economic growth. Stallings and Peres (2000: 24) prophetically noted that ‘the shift from the former to the latter approach usually proved to be traumatic’. The Argentine crisis of 2001 was partly caused by the unsustainability of maintaining an over-valued exchange rate. Although it had reduced inflation in the 1990s, it was severely constraining both export and economic growth by the turn of the century. The Washington consensus did evolve through the 1990s, incorporating social as well as economic policies into its package of reforms.The second-generation of reforms emphasized institutional themes in their economic policy recommendations. The need to build more solid and professional institutions by government was stressed, such as the creation of independent central banks and stronger budget offices. As a reaction to financial crises, the importance of strengthening bank supervision was emphasized. Finally, there was the need to create more competitive economies not only through privatization and deregulation but also through investment in institutions and human resources. Social policy was supposed to be seen as an integral part of the reform process. As government spending in productive activities was reduced, it was argued that this would free up public resources for social expenditure. Improving the central government’s delivery of services in education, health, housing and social security would occur through better facilities, better training of personnel, and so on. Education was seen as a high priority for increased spending as this would develop human resources. It was hoped that increasing social expenditure would not only lead to higher productivity and sustained economic growth but also to increasing equity and mobility in very unequal societies. In reality, social spending has declined or stagnated in recent years in many Latin American countries, mainly because debt payment obligations continue while government receipts increase slowly. 48

The opening up of Latin America Governments in Latin America see trade reform as beneficial for their countries’ economies in a period of rapid globalization. Firms are deemed to become both more efficient and more specialized in terms of production for world markets. Increasing foreign trade (both exports and imports) is seen to offer the engine for national economic growth, with the concomitant advantages of increasing inward investment and improving the technological capability of firms through the import and absorption of new technologies. Trade reform also distinguishes the neoliberal paradigm from that of inward orientation. Throughout Latin America, tariff and non-tariff trade restrictions have been reduced and controls on foreign exchange markets lifted, particularly in the smaller countries. The impact of the debt crisis and its aftermath in the early 1980s provided the catalyst for this fundamental change in policy. Trade reform offered the possibility for exchange rate devaluation, increased exports and higher trade surpluses, the latter providing a valuable source of finance to start balancing the current and capital accounts of the indebted Latin American nations. Practically all Latin American countries under review began significant programmes to liberalize their trade regimes between 1985 and 1991 (see Table 3.3). TABLE 3.3 Chronology of trade liberalization in Latin America, 1985–91 Year

Country

1985 1986 1988 1989 1990 1991

Chile, Mexico Bolivia, Costa Rica Guatemala Argentina, El Salvador, Paraguay, Venezuela Brazil, Ecuador, Honduras, Peru Uruguay, Colombia

Source: IDB (1996). 49


In some countries, there was a focus on the decentralization of social services to municipal, provincial and regional levels of government (Nickson, 1995; Angell et al., 2001). More closely linked theoretically to the neoliberal model, shifts in social policy involved privatizing some aspects of the delivery of social services. Some countries (such as Chile) encouraged the growth of private schools, health care and pension systems for those who could afford to pay (Barrientos, 1998). A two-tier system of social service delivery thus became more marked with private social services for the affluent but with the majority of the population having to rely on the public system. Nevertheless, some dramatic shifts in per capita social expenditure occurred. Between 1990–91 and 1996–97, per capita social expenditure more than doubled in Colombia and rose by 61 per cent in Chile (Stallings and Peres, 2000: 30). In Chile, the shift from authoritarian to democratic rule constituted the key political force. In so doing, Chile became a model for other Latin American countries, initiating what Sheahan (1997: 11) called a ‘competitive-plus-social’ combination of policies. On the economic side, the aim was to build up the capacity of the country’s modern sectors so as to compete better in open international markets. Meanwhile, social programmes aimed at reducing the inequality of opportunities by improving education for the poor; by redistributing educational expenditures to favour primary and secondary education; by providing training to increase job flexibility; and by promoting community projects and leadership.The Chilean model demonstrates that poverty alleviation must involve sustained employment (and wage) growth along with targeted and increasing social expenditure; unfortunately, Chile is not representative of Latin America as a whole in its success at reducing the incidence of poverty.


There was a sharp reduction in the levels of tariff protection on imports. Taking the region as a whole, average tariffs declined from 44.6 per cent in the pre-reform years to 13.1 per cent in 1995 (IDB, 1996: 98). Another important feature of the liberalization process was the gradual adoption of more uniform tariff structures.These provided advantages in terms of administration and transparency, preventing tariff policy from being manipulated by interest groups capable of applying pressure on government policy. Trade reform was often associated with crucial changes in exchange rates. After the debt crisis, many Latin American currencies were devalued, and subsequently many were classified as either effectively valued (value of currency broadly in line with the real market rate) or under-valued (value of currency lower than the real market rate).This change made exports from most Latin American countries much more competitive and was one of the main causes of rapid export growth in many countries.

IMPACTS AND PROBLEMS OF NEOLIBERAL REFORM What have been the impacts of neoliberal reform in Latin America? Have the theoretical arguments that have developed in the past 15 years borne empirical fruit in terms of rapid economic growth and reductions in inequality and poverty? At present, any overall evaluation of impacts is very difficult to formulate. There are a large number of reforms and each has a different effect over time and on potential investors. The chronology of reform can be an important theme, particularly as it relates to the reaction of firms and their decision-makers – who in the neoliberal model become the major economic actors. For this reason, one could see the shift from closed to more open, market-driven economies as a transition process with at least three phases: 1 The initial phase: dominated by negative factors centred on the great uncertainty generated by the reforms themselves, often compounded by macro-economic disequilibria (such as high inflation) and profound economic restructuring. ‘Faced with this uncertainty, investors reacted defensively, rationalizing production processes and introducing disembodied technical change to increase productivity’ (Stallings and Peres, 2000: 35–6). 2 The phase of positive transitory factors: linked to a period when uncertainty declines and necessary investments begin to grow – investments to reduce costs, upgrade products for export, fulfil privatization obligations, or support the entry of TNCs into new markets. 3 Phase where reforms have been consolidated: investment determined by the ‘normal’ factors that characterize all capitalist economies (for example, macro-economic stability, anticipated demand, relative prices, technological upgrading, and so on). Perhaps, only Chile has reached this third phase in which reforms have been consolidated. Thus, all the other countries are still in the transitory phase. As one probes into individual cases, it becomes apparent that the take-up of neoliberal reform in Latin America has been very heterogeneous. The adoption of neoliberal policies has varied greatly in terms of both speed and scope. There have been some countries (most notably Venezuela) that have avoided any intention of adopting such policies. Other countries, as Stallings and Peres (2000) noted, have been cautious (or slow) adopters of reform – Brazil, Colombia and Mexico, according to their analysis. Meanwhile, there have been countries that have adopted much of the neoliberal package aggressively, but avoided addressing certain key elements of reform during the transition – as with Argentina and its problematic exchange rate policy. Other countries have adopted the full range of neoliberal economic policies vigorously but have not addressed the subsequent institutional reform – Peru and Bolivia might be included here. This analysis of impacts will continue by focusing on how key economic and social indicators have performed under neoliberalism. Investment and growth Edwards (1995), the World Bank’s chief economist for Latin America at the time, argued that the package of market-oriented economic reforms introduced in the late 1980s and early 1990s would 50

Trade liberalization According to the econometric and qualitative evidence of the Stallings and Peres (2000: 38) study, one of the two key reforms that were most important for determining investment patterns was that of import liberalization. This reform lowered costs for imported inputs and capital goods and increased competitive pressures. Meanwhile, for export growth to be achieved, a floating exchange rate (that does not become over-valued) is required. It is interesting to note that trade reform did not bring increased rates of export growth in the 1990s (compared with the 1980s) for four countries – Brazil, Colombia, Ecuador and Paraguay (see Table 3.4). Increasing export growth was, however, recorded in the other countries, with Mexico and Chile recording the two highest rates of export growth in the 1990s. Examining the record of these two countries, it could be argued that trade reform, if successful, can bring at least four benefits: 1 A sustained growth in exports. Both countries achieved high growth rates over two decades (see Table 3.4). Export growth in Chile has slowed since the late 1990s. This may show the difficulty of maintaining export growth in countries where resources dominate the export profile. 2 An increasing and more diversified range of exports and less dependence on one or two commodities. Under inward orientation, Mexico and Chile had relied heavily on oil and copper respectively for their export trade. Mexican export growth has been dominated by manufactured products, reducing oil to less than 10 per cent of exports. Meanwhile, in Chile, copper constituted about 80 per cent of Chile’s exports in 1974 – by 2001, this proportion had declined to 37 per cent. Four other specialized areas of export production have developed in Chile – agriculture (mainly fruit), agroindustry (wine, fruit products), fish products and forestry (particularly cellulose). 51


transform Latin America from a continent of economic despair to one of hope. Opening Latin American economies to world markets and allowing more freedom to the private sector would increase investment and productivity, and result in higher growth. However, according to the Stallings and Peres (2000) study of nine Latin American countries, only Bolivia, Chile and Costa Rica were successful in raising their investment rates. Of these three countries, only Chile was able to transfer rising investment into high productivity growth. In contrast, in Latin America’s two largest economies, Mexico and Brazil, investment and productivity growth lagged behind so that investment as a share of GDP is still below 1980 levels. Meanwhile, Chile’s record of investment growth has been impressive. Gross fixed capital formation as a percentage of GDP rose more or less steadily from 17.7 per cent in 1985 to 32.2 per cent in 1998 before falling back to under 27 per cent in 2000 (Banco Central, 2002a: 77). Changes in investment and productivity have been insufficient to achieve the rapid rates of economic growth required for sustained development. ECLAC (2003b) has suggested that a 6 per cent growth rate is needed to tackle the social issues pending in the region (poverty, unemployment, and others). Referring back to Table 3.1, one can see that only Chile met this criteria for the period from 1990 to 2001 and only Peru achieved average growth above 4 per cent a year. Growth rates in the two largest economies of Brazil and Mexico averaged less than 3 per cent, which was still higher than for most other countries of South America. Economic growth, even in the relatively favoured 1990s, was therefore considerably less than that expected by such World Bank economists as Edwards. Economic growth of 6 per cent requires a high investment rate – around 28 per cent of GDP according to Stallings and Peres (2000: 34). In the peak year (1998) of investment in Latin America, an investment rate of only 23 per cent was achieved, and again only Chile was able to achieve the higher level. Thus, Latin America under neoliberalism has not produced either the investment rate or growth rate required to make an impact on Latin America’s social debt – unlike East Asia. Even Chile, which has the best record of investment and productivity growth in Latin America since 1985, falls considerably behind the investment and growth standards set in such East Asian economies as South Korea and Taiwan.


TABLE 3.4 Latin America: export growth during the 1980s and 1990s Country

Average annual export growth rate (%), 1980–89

Average annual export growth (%), 1990–99

Argentina Bolivia Chile Mexico Peru Uruguay Venezuela

3.8 1.0 6.9 7.0 −1.6− 4.3 2.8

8.7 4.9 9.7 14.3 9.0 7.0 5.6

Brazil Colombia Ecuador Paraguay

7.5 7.5 5.4 12.2

4.9 5.2 4.4 5.1

Source: World Bank (2000), pp. 294–5.

3 Increasing and more diversified imports. Import growth should focus on capital goods for investment purposes rather than consumer goods. Economic growth in both Mexico and Chile since 1985 has been based on import growth being dominated by capital goods. 4 Trade with a more diversified range of countries. This applies much more to Chile than Mexico, as Mexican trade has become dominated by one partner, the USA (see Figure 3.3). In the case of Chile, trade was formerly dominated by the USA and the main industrial countries of Western Europe. After trade reform, Chile came to develop additional and significant trading links with other Latin American countries (especially Brazil, Argentina and Mexico) and the industrialized and industrializing countries of East Asia (Japan, Taiwan, South Korea and China). Trade reform, if successful, can therefore bring a more diversified configuration to Latin American countries and their trading relationships with the global economy. Indeed, the international economic downturn at the beginning of the twenty-first century has demonstrated that ‘economies which are heavily dependent on export earnings from just a few products or markets are more vulnerable than economies with more diversified exports’ (ECLAC, 2003b: 12). Trade reform can bring problems that are sometimes overlooked by the many international economists and advisers who actively promote it. Trade liberalization has brought at least three problems to those formerly inward-oriented countries that have enthusiastically adopted it: 1 The transition starts with a severe short-term problem of restructuring in terms of investment, production and employment. The reduction of tariffs and non-tariff barriers has a very negative impact on investment, production and employment in the formerly protected sectors (such as consumer-good manufacturing). Meanwhile, investment, production and employment expand only slowly in those sectors in which national economies have a comparative advantage in world trade. 2 In the smaller countries of Latin America, the growth of diversified or non-traditional exports has tended to be concentrated in primary products. Increased reliance on primary product exports brings problems related to the changing terms of international trade. The twentieth century was characterized by the long-term deterioration of raw material prices. Price data for 24 commodities between 1900 and 2000 showed that the terms of trade for non-oil commodities deteriorated to such an extent that by the beginning of the twenty-first century they represented 52

Mexico

Brazil Latin America 23%

Other 23%

Latin America 3%

Other 4%

Chile

Japan 0% Asia 1%

EU 3%

Other 21%

Latin America 21%

Asia 8%

US 25%

Japan 3% EU 22%

US 89%

Andean Community Latin America 26%

Other 12%

Asia 11%

US 16%

EU 20%

Japan 11%

MERCOSUR (excluding Brazil) Asia 3% Japan 2%

Other 16%

Latin America 47%

Asia 9%

EU 10%

Japan 1%

US 11%

US 47%

EU 16%

Figure 3.3 Latin America: export markets, 2001 (in percentages of total exports in current dollars, 2001) Source: ECLAC (2003b: 5)

53



‘less than a third of their pre-1920 levels’ (ECLAC, 2003b: 38). In addition, there is the problem of high price volatility – raw material prices rising and falling with world economic cycles (Maddison, 2001). 3 The increasing importance of transnational actors in Latin American economies (Clark, 1997), not only in terms of TNCs but also in terms of aid agencies and multilateral organizations. TNCs are becoming increasingly prominent in the marketing of primary product and manufacturing exports, partly because they have the expertise in international marketing, access to capital and relevant technological innovation. This indicates a distinct decline in national control over production in the increasingly crucial export sector. Trade liberalization is certainly not a panacea for the economic problems of Latin America. It has brought greater advantages to the larger, more industrialized middle-income countries of Latin America than to the smaller, less industrialized and lower-income countries of Latin America (see Chapter 4). Reforms and employment The economic reforms were expected to have a positive impact on employment through both faster growth of output and a shift towards export-oriented production based on intensive use of labour. Some countries did achieve significant growth in employment levels during the 1990s (see Table 3.5). All these countries had enjoyed rapid export growth during the 1990s – Mexico, Chile, Peru and Bolivia (see Table 3.4). However, some crucial countries (Brazil, Argentina and Colombia) recorded slow-growing or static employment levels, particularly for wage earners (see Table 3.5). Brazil’s formal sector jobs actually fell in absolute terms during the 1990s (Stallings and Peres, 2000: 46). Employment growth was to be reinforced by labour market reforms. According to Thomas (1996: 86), neoliberal policies targeted labour market distortions by introducing legislation to reduce the power of trade unions and to reduce the level of legislated minimum wages. Later, however, the architects of the Washington consensus viewed the growth of unemployment differently (see Table 3.6) and argued that labour reforms had been generally weak in both formulation and execution (Williamson and Kuczynski, 2003).

TABLE 3.5 Latin America: changes in labour market indicators during the 1990s Country

Occupation level

Unemployment

Wage employment

Real wage

Labour productivity

Chile Argentina Bolivia Brazil Colombia Mexico Peru

+ – + – = + +

+ – + – – – –

+ + – = – = –

+ = + + + + +

+ + – + + = +

+ conditions improved, – they deteriorated, = they remained relatively constant. Occupation level – per cent change in the rate of employment Unemployment – per cent change in unemployment rate Wage employment – growth of wage employment with respect to total employment Real wage – per cent change in real average wages in the formal sector Labour productivity – per cent change in average labour productivity Source: Adapted from Stallings and Peres (2000: 47). 54

Country

1985

1990

1995

2000

Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Paraguay Peru Uruguay Venezuela Weighted Average for Latin America (includes other countries)

6.1 5.7 5.3 17.0 13.8 10.4 4.4 5.1 10.1 13.1 14.3 8.3

7.5 7.2 4.3 7.4 10.5 6.1 2.8 6.6 8.3 9.2 11.0 5.7

17.5 3.6 4.6 6.6 8.8 7.7 6.2 5.3 7.9 10.8 10.3 7.2

15.4 7.5* 7.5 9.2 20.4 14.9 2.3 9.4* 10.3 13.3 14.6 8.9

*1999 data Source: ILO (2000).

Labour markets in Latin America are dominated by the distinction between the formal and informal sectors (see Chapter 11). The International Labour Office (ILO) defines the informal sector as consisting of low-productivity jobs for which workers receive low wages and no benefits. The ILO measures the informal sector by combining jobs of the self-employed, domestic service and microenterprises (less than five workers). According to the ILO, nearly 60 per cent of new jobs during the 1990s in Latin America were created in the informal sector.Table 3.7 fleshes out this trend by country. Only Chile and Argentina recorded a declining informal sector during the 1990s. In all other countries it was on the increase. By 1999, the informal sector was greater than the formal sector in Peru and Ecuador (and most probably Paraguay and Bolivia for which there is no ILO data), and in all other countries outside Chile it employed more than 40 per cent of the workforce. The economic crises of the early twenty-first century have undoubtedly increased the size of the informal sector, most notably in Argentina and Uruguay. Thus, alongside slow employment growth in many countries, there have been increasing problems in job quality. In Latin America’s bi-modal labour market, the growth of employment in the informal sector is associated with the relative fall in the formal sector. Meanwhile, real wages have increased in the formal sector in virtually all countries and been associated in some cases with increases in labour productivity (see Table 3.5). However, this was associated with the decline or stagnation of wage employment in most countries. Slow employment growth raised the unemployment rate in the 1990s in most Latin American countries. Table 3.6 demonstrates the change in the urban unemployment rate from 1985 (the heart of the debt crisis) to 2000 (marking a decade and a half of neoliberal transition).The weighted average of urban unemployment in Latin America did decline between 1985 and 1990 but then started to rise again, so that by the year 2000 its level was higher than that of 1985. Unemployment increased over this period in all countries apart from Chile and Mexico (see Table 3.6). Urban unemployment data does not include under-employment and tends to be based on survey data but, in 2000, six countries had unemployment levels over 10 per cent. Thus, the neoliberal model has not provided the jobs required to reduce unemployment and has not generated the growth in waged employment required as a precondition to reduce inequality and poverty. Explanations for this poor record of employment growth need to focus on firms and government. In the early stage of transition, there was a severe short-term problem of increased 55


TABLE 3.6 Latin America: open urban unemployment, 1985–2000


TABLE 3.7 Latin American labour markets, 1990–99 Country

Chile Mexico Uruguay Brazil Argentina Colombia Venezuela Peru Ecuador Latin America (includes other countries)

Informal sector (%)

Formal sector (%)

1990

1999

1990

1999

37.9 38.4 39.1 40.6 52.0 45.7 38.6 52.7 55.6 42.8

37.5* 40.1 43.1 47.1 48.0* 49.0* 49.1 53.7* 58.6* 46.4

62.1 61.6 60.9 59.4 48.0 54.3 61.4 47.3 44.4 57.2

62.5* 59.9 56.9 52.9 52.0* 51.0* 50.9 46.3* 41.4* 53.6

*1998 Source: ILO (2000).

unemployment due to the massive restructuring of the economy that the neoliberal reform created. The formal sector was considerably restructured as the economy opened up to overseas markets and foreign competition.Those companies used to producing for protected national markets normally had to dramatically reduce employment levels. Furthermore, after decades of inward orientation, national entrepreneurs were not used to the demands of highly competitive world markets and were wary of governments’ long-term commitment to outward orientation. Thus, as employment declined substantially in formerly protected sectors, it rose only slowly in more export-oriented firms. When Thomas (1996: 89) focused on labour market restructuring in the early phase of neoliberalism between 1980 and 1992, he noted that the main increases in employment were in small firms and own-account workers and that employment in large firms stayed broadly similar. A second explanation concerns government employment which has declined under the new economic model, both through the privatization of state firms and the reductions in the number of public employees. This changed the historic pattern of the state becoming more and more significant as a direct employer. During inward orientation, the state had often been the most important generator of formal jobs in the country (Roberts, 1995: 115). Between 1990 and 1999, the percentage of the urban workforce in the formal public sector declined from 15.5 to 13.0 per cent in Latin America as a whole (ILO, 2000). Income distribution and poverty Poverty and inequality have long been distinctive features of Latin American economies. Decades of government intervention, inward orientation and protected markets did little to reduce inequality. Latin America was the only region in the world where the share of income going to the poorest 20 per cent of the population consistently declined between 1950 and the late 1970s (Sheahan, 1987). In the late 1970s, the percentage of income (2.9 per cent) received by the poorest 20 per cent was lower in Latin America than in any other part of the developing world and much lower than that in East Asia (6.2 per cent). Edwards (1995) argues that liberalization programmes and their effects on poverty and income distribution must be placed in this context. Nevertheless, he emphasizes that ‘only to the extent that poverty is reduced and living conditions of the poor are improved will the structural reforms implemented during the last decade be sustained’ (Edwards, 1995: 252). What has been the record of the neoliberal period in terms of reducing poverty 56

NEOLIBERALISM AND ECONOMIC SPACES The second half of this book seeks to examine how neoliberalism has affected the livelihoods of individuals and households in very local spaces. However, there is another route to the analysis of how changes in macro-economic policies can affect spaces within Latin American countries.That is through the vehicle of evaluating how firms and enterprises react to and are affected by such shifts to marketbased and outward-oriented economics; and then how changing firm behaviour impacts upon economic spaces on a variety of scales. Firm responses to neoliberalism Although the neoliberal reforms did not aim at promoting specific firms, neither were they meant to be neutral. For example, export-oriented firms were supposed to perform better than those geared to domestic markets. Firms within certain sectors were also favoured by much greater investment in 57


and inequality? The evolution of labour markets has an important impact on income distribution (Sheahan, 1997). However, we have already noted that the neoliberal model did not generate a good balance between the demand for labour and the growth of the labour force. Put simply, the nature of economic production under neoliberalism has not been sufficiently labour-intensive (outside certain regional spaces – see below). Another link between the labour market and income distribution is the wage differential. Stallings and Peres (2000: 48–9) demonstrate that this differential increased in the 1990s.Their data pointed to a widening gap in wages based on skill level. The wage gap between university graduates and those with 7–9 years of education rose from virtually three to four times during the 1990s in Latin America as a whole. The neoliberal model was rewarding those with longer and more specialized education and acquired skills. Within the context of the great inequality already characteristic of Latin America, changes in income distribution during the 1990s took three forms according to Stallings and Peres (2000: 51–2). First, in Brazil, Colombia and Mexico, inequality continued to increase. Second, there was a pattern of decline in inequality in the early phase of the neoliberal model (attributed to conquering inflation) followed by the reassertion of rising inequality; Argentina, Bolivia and Peru fitted broadly into this pattern. A sustained pattern of declining inequality was found only in Chile. For those who have investigated the Chilean model more closely, the evidence points to significant reductions in poverty rather than in inequality. The work of Larranaga and Sanhueza (1994) investigated the transmission mechanisms between economic growth (based on the neoliberal model) and poverty incidence. They used data from national household surveys in order to decompose the change in the poverty headcount ratio between 1987 and 1992 into a growth and distributive component. According to their analysis, about 80 per cent of the reduction in poverty from 1987 to 1992 was accounted for by the effect of economic growth. Scott (1996: 175) thus suggested that in Chile, ‘trickle-down’ was the major source of poverty alleviation over the period with a tightened labour market acting as the most likely transmission mechanism. Reductions in rural poverty were more impressive than that of urban poverty in Chile due to the effects of exportoriented agriculture (Scott, 1996: 171). Finally, one should consider the role of government social expenditure, which increased in the 1990s in comparison with the previous decade. This helped to lower the very high levels of inequality in the region (Stallings and Peres, 2000: 56). The principal instrument was the provision of so-called basic services, especially primary education and health as a high proportion of these services go to poor families. Social expenditure thus had a positive impact on income distribution, reducing the huge gap between the income of the highest and lowest income quintiles. However, due to fiscal constraints, increases in social expenditure have been severely constrained in most Latin American countries and have become more so in the early twenty-first century.


the post-reform period. Thus, in all Latin American countries firms within the telecommunications sector needed to invest massively in order to modernize during the neoliberal period. Investment by firms in capital-intensive manufacturing sectors also tended to be dynamic – for example in firms specializing in cement, steel, petrochemicals and chemicals. This was particularly the case in Argentina, Brazil, Chile, Colombia and Mexico (Stallings and Peres, 2000: 60). Investment by firms in electricity and transportation was more variable. Before neoliberal reform, the process of industrial expansion in Latin America had been engineered through a distinctive institutional structure of firms, often known as the triple alliance (Gwynne, 1985). This was because key firms involved in industrialization could be divided into three – state firms, national private companies and transnational corporations (TNCs). Neoliberal reform was to have a significant impact on this framework. First of all, widespread privatization was to massively reduce the number of state firms in most countries – particularly those involved in feedstock industries, such as steel and petrochemicals. Many strategic oil and mining companies would still remain in state hands after reform, such as the copper-producing CODELCO in Chile or the oil-producing PEMEX in Mexico. Furthermore, among large private firms, TNC subsidiaries gained ground in relation to large domestic corporations. TNC subsidiaries were responsible for much of the investment growth, not only in the more dynamic areas of manufacturing, but also in mining and telecommunications. One example is that of the Spanish firm, Telefonica, which by 2003 had invested 32.7 billion euros in telecommunication systems in Latin America, most notably in Brazil and Argentina (El País, 2003). Privatizations, the liberalization of regulations that prevented foreign firms from investing in many sectors, and the globalization of important industries combined to strengthen the position of TNCs after neoliberal reform. Productivity gains were evenly spread across enterprises in agriculture, manufacturing and services. However, heterogeneity increased within subsectors, such as the contrasts between commercial and family farming enterprises. Labour productivity in manufacturing gained ground in certain key countries during the 1990s, such as in Argentina and Brazil (Stallings and Peres, 2000: 62). However, in other countries productivity declined. As a result, Latin American labour productivity in manufacturing firms was much lower than for equivalent firms in the United States in 1996 – ranging from as low as 15 per cent of US levels in Peru to as high as 67 per cent in Argentina. Within some Latin American countries, the gap between the productivity of large firms and that of small- and medium-sized enterprises narrowed, but performance between countries continued to be extremely dissimilar. Rapid technological advance occurred mainly among larger firms.The importance of external factors in the incorporation of new technologies increased in tandem with the investment process. ‘The growing significance of imported capital goods, the substitution for domestic inputs, and the construction of technologically advanced plants by foreign firms all resulted in a greater presence of foreign components in the region’s sectoral innovation systems’ (Stallings and Peres, 2000: 61–2). In line with the neoliberal model, the state reduced its involvement in improving technological capability at the national level and local private enterprises have not always stepped in to fill the void (Pietrobelli, 1998). Reforms did not solve, and quite probably increased, two problems associated with the nature of firms in Latin America. First, investment continued to be concentrated among large enterprises that have not shown the capacity to develop backward and forward linkages with smaller firms. This has made the development of localized clusters of technologically dynamic firms (so important in peripheral economic spaces in Europe) much more difficult to achieve (Casaburi, 1999). Second, supplier chains were destroyed by the quest for competitiveness through increasing imported inputs. Agroindustry may be an exception here (Casaburi, 1999) but it was characteristic of firms in other export-oriented industries, particularly in the north Mexican border area (Kenney and Florida, 1994; Vellinga, 2000). Although these processes have led to greater localized specialization and higher efficiency, they have not become vehicles for deepening local economic growth and thus have led to the persistence of the external constraint on manufacturing growth. 58

TABLE 3.8 Contribution to total manufacturing employment by size of firm, 1990s Country (period)

Wage earners Microenterprises

Argentina (1991–97) Bolivia (1989–96) Brazil (1993–96) Chile (1990–96) Mexico (1991–97)

1.1 11.6 106.1 27.6 26.4

Other

Total

–26.2 65.0 32.1 16.3 28.4

–100.0 100.0 –100.0 100.0 100.0

Small Medium-size Unspecified enterprises and large enterprises 8.1 13.8 53.6 122.8 6.7

–11.6 9.6 –265.0 –67.8 42.2

–71.4 n.a. –17.7 1.1 –3.7

Micro-enterprises contain up to 5 workers Small enterprises contain 10 or under in Brazil, 49 or under in Chile, and 50 or under in Argentina, Mexico and Peru. Source: Stallings and Peres (2000: 64).

However, employment growth under neoliberalism has occurred mainly in service rather than manufacturing or agricultural enterprises (see Table 3.9). Service firms had a heterogeneous performance. High quality jobs were created in telecommunications firms, banks and finance companies, but the bulk of employment growth was in low-skill enterprises. Micro-enterprises offered the greatest number of jobs, with most of them operating on an informal basis (Stallings and Peres, 2000: 66). The low rate of job creation by large, modern service firms that offered higher wages led to a widening wage gap between service firms. Changes to economic spaces With the consolidation of the neoliberal model in much of Latin America, localities and regions within countries have become more and more integrated into global (rather than just national) markets. The shift from inward to outward orientation has meant that spaces within Latin American countries have begun to specialize in producing goods and services in which they have comparative advantages at the global scale. The decisions of individual firms and enterprises become crucial in terms of the nature of the insertion of these economic spaces into the wider global economy. Outward orientation in Latin America along with decisions of firms to invest have led to at least two different patterns of export growth in the larger Latin American countries in the 1990s: 1 Firms investing in renewable resources for subsequent export (and occasionally adding extra value) in the smaller countries of South America. 59


This lack of links between large enterprises and small local firms in export-oriented activities has not only led to limited cooperation and information exchange between firms at the local level but has also produced negative impacts on local employment growth, given that small firms and microenterprises have accounted for more than 100 per cent of net job creation in most Latin American countries during the 1990s (see Table 3.8). It is interesting to note the contrast between Mexico and Chile. In Mexico, the growth in TNC assembly firms in the northern border area meant that it provided the exception in that medium and large enterprises were the main providers of manufacturing employment. In contrast, in Chile, where agroindustry and fish products have been two key exportoriented sectors (and in which small-scale suppliers have been important), small enterprises provided the huge contribution to employment growth.


TABLE 3.9 Latin America: employment growth by sector, 1990–97 Sector

Agriculture Manufacturing industry Construction Commerce, restaurants and hotels Electricity, gas and water, transportation, storage and communications Financial services, insurance, real estate and business services Social, communal and personal services Other TOTAL

Employment growth

Contribution to total

–0.9 1.2 2.8 3.5 4.9 6.8 2.8 –3.2

–11.1 9.0 8.4 30.9 12.0 14.0 40.3 –3.5

2.0

100.0

Source: Stallings and Peres (2000: 67).

2 Firms investing in export-oriented manufacturing. One key example is that of the north Mexican border area. Here, TNCs have invested in order to take advantage of closer integration with the huge North American market. It should be pointed out that the Brazilian model does not really fit into either of these categories. Here investing firms are still strongly geared to the large Brazilian market but there are nevertheless significant exports coming from both manufacturing and resource-based firms. Economic spaces and resource exports The shift to outward orientation in the smaller countries of Latin America has normally been associated with the growth of non-traditional exports. These are distinguished from traditional exports that were able to be traded internationally under the inward-oriented model. These traditional exports were normally raw materials that were traded on world markets despite suffering from overvalued exchange rates in their country of origin. They tended to be non-renewable resources (oil and minerals in particular) whose international price reflected the global balance of supply and demand in the commodity rather than the costs of production. In contrast, the growth of non-traditional exports is very much influenced by the costs of production of potential exports. The growth of non-traditional exports in both manufacturing and primary product sectors has benefited from trade liberalization and the shift to more effectively-valued exchange rates. Quality and reliability of the export product are important considerations as well, but the relative cost of production has been the crucial factor behind firms deciding to invest in the production and export of what are often renewable resources. Renewable resources include such sectors as agriculture (Gwynne, 1993b), fishing (if extraction rates are controlled), aquaculture and plantation forestry (Clapp, 1995; Gwynne, 1996b). With the shift to neoliberal policies, these exports have become particularly important for the smaller countries of Latin America (Barham et al., 1992; Gwynne, 1993a). Carter et al. (1996) point out that from their early phases, non-traditional agricultural exports grew very rapidly in such countries as Chile, Guatemala and Costa Rica. However, export growth in these sectors is still ultimately controlled by TNCs (such as fruit TNCs or large corporate retailers from the core economies). As their product supply is organized through contracts with large numbers of locally-based farming enterprises, TNCs can have huge impacts on how local land and labour markets evolve (Gwynne, 1999; 2003). The importance of primary resource exports in smaller countries is partly because these countries have generally been unsuccessful in promoting manufacturing exports (Gwynne, 1985). For smaller 60

Economic spaces and manufacturing exports The shift to neoliberal policies has also boosted manufacturing exports from the larger countries of Latin America, particularly Mexico and Brazil. In these two countries, the inward-oriented phase of development was much more successful in creating manufacturing sectors that came close to international levels of competitiveness. In the shift to outward orientation, many firms have been unable to compete in international markets and have closed down plants. Other firms, however, have been able to restructure successfully and achieve international levels of competitiveness. Such firms have required access to capital, new technology, best-practice in management and a range of labour skills. However, the key factor in the international competitiveness of these firms has been low labour costs. Wage levels in Mexican industrial plants have been as low as one-tenth of those in equivalent plants north of the border in the United States (Shaiken, 1994). Such labour cost differentials have attracted much investment from foreign firms, particularly since the signing of NAFTA in 1993 and the privileged access of Mexico to the US market; labour markets, the gender division of labour and social relations have dramatically changed in Mexico’s northern border towns as a result (Kopinak, 1997).

BOX 3.1: ‘New’ economic spaces on the Mexican border The north Mexican border is probably the largest export processing zone in the world. On the Mexican side, there are at least 11 towns directly adjacent to the border, from Tijuana in the far Pacific west to Matamoros in the east (see Figure 3.4). Each has a direct partner town on the US side of the border, which provides many of the high-order services. Mexican border towns have had a special status ever since 1965 and the establishment of the Border Industrialization Programme. Within these border towns assembly production has predominated in assembly plants known as maquilas. Since the decisions of the Mexican government to shift to outward orientation in the mid1970s and join NAFTA in 1993, this border region has been one of the fastest-growing economic spaces in Latin America. Between 1990 and 2000 the population on the Mexican side grew by more than 50 per cent and GDP growth (for the border states on both sides) averaged between 5 and 7 per cent a year (The Economist, 2001b: 27). Ciudad Juarez now has a population of over one million inhabitants. Employment growth in the assembly industry was very high during the 1990s (see Figure 3.4), more than trebling in Tijuana and Mexicali and more than doubling in Reynosa, Ciudad Acuna, Ciudad Juarez and Nogales. However, this ‘new’ economic space probably provides a special case, unlikely to be copied elsewhere in Latin America. Virtually all its exports are sent to the US market. Manufacturing investment in the border towns comes largely from TNCs rather than Mexican or local firms. The industrial mix is a combination of export processing and component supply (Gereffi, 1996). In export-processing firms, plants are labour-intensive and the majority of workers are female and in unskilled jobs (Kopinak, 1997). Component supply firms are more capital-intensive, can use high technology and require more skilled labour. Both types of industry are, however, controlled by TNCs, mainly US but with significant numbers from Japan and South Korea. Furthermore, trade unions have much less power than in central Mexico as company-based unions negotiating flexible contracts prevail (Kopinak, 1997). 61


countries the previous inward-oriented phase based on manufacturing had been characterized by high-cost and small-scale industrial plants that were weak in terms of industrial competitiveness on a world scale. Firms found it difficult to lift their horizons from domestic to international markets.

Latin America Transformed 62

CALIFORNIA ARIZONA

Los Angeles

Albuquerque NEW MEXICO

San Diego Tijuana 218.2

Calexico

Yuma Mexicali San Luis R.C. 209.9 n.a. Douglas Nogales Agua Prieta 13.2 SONORA

100.3

BA JA

CA

Hermosillo

LIF NI A Mexican border towns Growth in 1000s of jobs in assembly industry in each Mexican border town, 1990–2000. US border towns Other towns

Figure 3.4 Assembly industry and the Mexican border towns

TEXAS

El Paso Ciudad Juarez 109.2

Austin Ciudad ~ Acuna

CHIHUAHUA Chihuahua

OR

209.9

Dallas

Phoenix

Del Rio

Houston

San Antonio

126.0

Eagle Pass Piedras Negras 81.3 Corpus Christi Laredo Nuevo COAHUILA Laredo McAllen 37.5 Brownsville NUEVO Reynosa Matamoros LEON Monterrey 175.6 72.5 Saltillo TAMAULIPAS

CONCLUSION The history of neoliberal reform in Latin America has been both heterogeneous and volatile. Some countries have undoubtedly benefited, most notably Chile, others have done to a much lesser extent and some not at all. Meanwhile, the history of repeated but different crises and of varying significance in the key countries of Mexico, Brazil and Argentina makes overall generalizations difficult to make. Meanwhile, the policy-makers call for the second-generation of institutional reforms to be implemented in which the state takes a more professional and regulatory role in economic development (Willamson and Kuczynski, 2003); these authors argue that the way forward is to 63


In broad terms, the outward-oriented nature of economic growth has had an impact on peripheral regions according to the ability of producers in those regions to export successfully to international markets. In those regions where producers have made the shift from supplying domestic to international markets (normally with the assistance of international intermediaries), significant increases in regional investment and labour productivity have often followed. However, in regions where producers remain geared to the domestic market, no such transformation has normally occurred. Thus, in countries that have experienced outward-oriented growth, uneven development has been the consequence – although without unduly affecting the inherited core–periphery relationship (Scott, 1996; Uribe-Echevarria, 1996). Neoliberal reform has tended to accentuate the economic importance of the core region or main city of each country. According to de Mattos (1996), foreign investment in Chile (outside mining) has been heavily concentrated in the metropolitan region of Santiago during the period of neoliberal reform, and particularly during the late 1980s and 1990s. Between 1974 and 1993, nearly two-thirds of foreign investment in manufacturing and services was concentrated in the Santiago region, causing that region to receive the largest benefits in terms of regional economic growth, employment, construction and labour productivity. Figure 3.5 shows that in resource-rich countries such as Chile, the economic effects of export-oriented resource growth are not necessarily concentrated in the producing region. The GDP of the metropolitan region of Santiago completely overshadows the GDP of other regions, including those with large mineral exports. The primate city and its immediate environs can enjoy the highest rates of regional economic growth within export-oriented resource development. There are some logical explanations as to why a wide range of firms are attracted to locate in the primate city. The primate city offers firms economies of scale in a range of services – finance, manufacturing supply, business services, retailing, production of knowledge – and constitutes the nexus of communications between resource production in the regions and the demands of firms in the wider world economy. Technologies of time–space compression favour these large cities, such as access to international airports or hotels offering video-conferencing. For example, Santiago is emerging as a second-tier global city for advanced producer services and other elements of economic globalization (Sassen, 2000). Away from the core metropolitan areas, a complex patchwork of regions and sub-regions has evolved, reflecting the comparative advantage and factor endowments of regions in world markets. Prosperity has been linked to an area’s ability to attract investment and produce for export markets. In regions that did well under the inward-oriented model but found it difficult to attract export-led capital and restructure production for global markets, economic stagnation and decline relative to other regions have occurred, particularly in terms of labour productivity. The old reliance on supplying domestic markets became more difficult as regional producers had to face competition from imported goods. Thus, it is often at the regional and local scales of analysis that the impacts of neoliberal reform can best be seen in terms of changing social relations – for example, through changing labour and land markets (Gwynne, 2003). However, one then has the methodological problem of generalizing from the particular impacts of policy reform at one locality to that at other localities.


REGION 1

Regional GDP as percentage o f n a t u r a l G D P, 1 9 9 8

3.2%

REGION 2

5.4%

REGION 3

2.1% 2.1%

REGION 4

10.2% REGION 5 METROPOLITAN REGION

41.5% REGION 6 REGION 7 REGION 8 REGION 9

5.9%

REGION 10

4.0% 9.7% 3.2% REGION 11

4.7% 0.5% 2.8%

REGION 12

Figure 3.5 The economic power of Chile’s regions. 64

FURTHER READING Bulmer-Thomas, V. 1994 The economic history of Latin America since independence. Cambridge University Press, Cambridge. Provides a very detailed survey of the evolution of Latin American economies from the early nineteenth century and is particularly useful on the role of resources in Latin American development. Casaburi, G. C. 1999 Dynamic agroindustrial clusters: the political economy of competitive sectors in Argentina and Chile. Macmillan, Basingstoke. Uses a commodity chain approach to study the regional development of agroindustry in the Chilean Central Valley and Santa Fe region of Argentina. One of the few studies to explore the links between resource growth and local development in Latin America. Edwards, S. 1995 Crisis and reform in Latin America: from despair to hope. Oxford University Press, Oxford. A World Bank insider from Chile (and former Chief Economist for Latin America) analyses economic transformations in Latin America in an optimistic but also critical way. Edwards clearly expresses the reasoning behind policy changes and decisions and, unlike many economists, seems aware of the political backdrop to economic crises and attempts to resolve them. Less ideological than other writers from within the Washington consensus. Gereffi, G., Spener, D. and Bair, J. 2002 Free trade and uneven development: the North American apparel industry after NAFTA. Temple University Press, Philadelphia. Uses the commodity chain approach (itself derived from dependency theory) to explore the evolving relationships between the United States, Mexico, Central America and the Caribbean after the greater economic integration between the USA and Mexico in the past decade. Targets the clothing industry and provides a useful 65


‘complete, correct, and complement the reforms of a decade ago’ and not to reverse them. However, references to selective capital controls, a greater role for the state, and income distribution point to the reform agenda moving towards the centre of the political spectrum and away from the application of free-market economics (The Economist, 2003b: 52). In terms of activating economic growth at the local level, new government policies are needed to assist firms, particularly small firms. Small firms need special support to be able to access factor markets (technology, skilled labour and capital). While the costs of accessing international markets are relevant for all kinds of firms, they are particularly heavy in relative terms for the smallest companies. Reducing these costs for small firms is most efficient when the firms are clustered in particular regions (Perez-Aleman, 2000). As we saw in the case of North Mexico, much investment is concentrated among large TNCs that have not shown the capacity to develop backward and forward linkages with small local firms. Instead they prefer to link into global supply chains linked to corporate control rather than develop local supplier networks. Thus, changing inter-firm relations and the promotion of more locally-based and cooperative clusters of firms will be difficult to achieve. However, if some shifts do not occur in this direction, economic spaces in Latin America will be increasingly at the mercy of decisions taken by TNCs. These will have the priority of furthering corporate profitability rather than local development (Gwynne, 2003).This applies as much to the ‘new’ economic spaces specializing in the development of renewable resources as to those characterized by product and component manufacturing oriented to core economy markets. Overall, the patterns of uneven spatial development, so characteristic of previous economic phases (Morris, 1981), has continued and seems set to continue under neoliberalism. Peripheral regions within Latin America have become ‘new’ economic spaces in the sense of generating new export-oriented activities. However, they have not become ‘new’ in the sense of developing new forms of locally-based enterprise and related organizations that can compete effectively with transnational capital.


spatial approach by focusing on how the changing commodity chain impacts (both positively and negatively) on different producing regions. Useful source for Chapter 4 as well. Stiglitz, J. 2002 Globalization and its discontents. Allen Lane, London. A former Chief Economist of the World Bank who is now very critical of the role of the IMF and the World Bank in Latin America and other developing regions. Points to some of the key contradictions of contemporary capitalism and argues that globalization is not working for many of the world’s poor. Thorp, R. 1998 Progress, poverty and exclusion: an economic history of Latin America in the 20th Century. Johns Hopkins Press, Baltimore, MD. An excellent resource for those wishing to explore the economic evolution of Latin American capitalism during the past century. Manages to successfully link themes of political economy, economic theory, country studies and even livelihoods in a readable, data-rich and illuminating form.

WEBSITES Inter American Development Bank, www.iadb.org, less comprehensive economic coverage than the ECLAC website but there is more material on issues of poverty, inequality and social policy, such as related to education or pension systems. International Monetary Fund, www.imf.org, provides data and IMF analysis (through speeches and reports of IMF economists) on Latin American economic conditions. Useful to know the thinking behind the decisions of this very powerful multilateral economic organization. United Nations’ Economic Commission for Latin America and the Caribbean, www.eclac.org, a good source for contemporary economic data on Latin America, and some contemporary studies on development issues can be accessed. World Bank, www.worldbank.org, a source of data on individual countries (and groups of countries) as well as providing links to many relevant topics (such as aid and globalization). World Forum, www.worldforum.org, provides a critical perspective on the arguments provided by the multilateral institutions.

66

4 Globalization, neoliberalism and economic change in Central America and the Caribbean Thomas Klak

Central America and the Caribbean (CA/C) is a region of small, economically vulnerable, and tradedependent countries surrounded by larger and more industrialized and economically diversified countries (Figure 4.1). This chapter surveys the ramifications of neoliberalism’s outward-oriented strategies that contrast with the approaches common in the decades prior to the 1980s’ debt crisis that were relatively inward-looking. Central America and the Caribbean each have their own scholarly literatures, and it is uncommon to unite and compare them as in this chapter (for a historical comparison, see Grugel, 1995). Analysing Central America and the Caribbean as a single region is increasingly appropriate, however, as events unfold around it. NAFTA’s designation of Mexico as part of North America, South America’s organization into Mercosur and the Andean Group (see Chapter 3), and Reagan’s Caribbean Basin Initiative (a trade policy for designated ‘friendly’ countries) have all increased the usefulness of analysing Central America and the Caribbean as a region (Figure 4.1). Unfortunately it is a region anxious about, and reacting somewhat defensively to, hemispheric movements towards trade alliances and increased capital flows to its north and south. Spurred on by the international climate favouring regional trading blocs, the region has recently formed the Association of Caribbean States, but beyond several regional summits, has taken no firm steps towards region-wide economic integration (ACS, 2003). Much of what was said in Chapter 3 about economic policies and problems during the twentieth century in South America and Mexico applies to a considerable extent to these smaller countries.The decades prior to 1980 witnessed in this region the emergence of an array of state economic interventions, including the promotion of domestic manufacturing of consumer goods. In that era of import substitution industrialization (ISI), a notion gaining widespread acceptance was that the state should control the ‘commanding heights’ of Caribbean economies, and that the private sector should slot in under the state’s guidelines for development. For both the Caribbean and Central America, the version of ISI adopted, to a large extent involved US transnational corporations (TNCs) relocating production facilities within the region to serve customers there, rather than a dramatic expansion of domestically owned industries. In Central America and the Caribbean, as in South America, the 1980s’ debt crisis ushered in a new development paradigm associated with representatives of the multilateral aid agencies, who have frequently visited regional capitals to move the neoliberal transition slowly but irreversibly along (Hey and Klak, 1999). Since the 1980s policy-makers have placed great emphasis on attracting foreign investors to produce for export. The state’s role has shifted away from direct ownership, production and the provision of social services, towards subsidizing export-oriented investors. While the state’s new role under neoliberalism is often portrayed as one of downsizing, it is more accurately viewed as a qualitatively different relation between the state, investors and workers. For some 67


90 O

75O

80O

85O

65O

70O

55O

60O

50 O

FLORIDA

GULF OF MEXICO

25 O

30 O 65 O BERMUDA THE BAHAMAS

A T L A N T I C O C E A N

TURKS AND CAICOS ISLANDS

CUBA

20 O MEXICO

DOMINICAN REPUBLIC

CAYMAN ISLANDS

U.S./BRITISH VIRGIN ISLANDS

HAITI

JAMAICA

PUERTO RICO

BELIZE

ST. KITTS NEVIS MONTSERRAT

GUATEMALA

ANTIGUA GUADELOUPE

15 O

DOMINICA

HONDURAS

C A R I B B E A N

MARTINIQUE

S E A ST. LUCIA

BARBADOS

ST.VINCENT EL SALVADOR

NICARAGUA

ARUBA

CURACAO BONAIRE

GRENADA TOBAGO

10 O

TRINIDAD COSTA RICA

PANAMA

VENEZUELA

5O

GUYANA

200 Km

COLOMBIA

200 Mi.

Figure 4.1 The small countries of Central America and the Caribbean

SURINAME

FRENCH GUIANA

A REGION OF SMALL AND DEPENDENT STATES Central America and the Caribbean is a region of small states (Table 4.1), but by international standards, what is meant by small? These countries are certainly tiny compared with the regional giants of Brazil, Colombia, Argentina and Mexico. The population of Central America and of the Caribbean in 2002 was 38 and 39 million, respectively, when combined only three-quarters that of Mexico. But our perception of the region’s size and significance is tainted by the emphasis in the media and in scholarship on huge countries. Note that when size is measured by population, the mean for all of world’s countries (33.6 million people) is much larger than the median (6.7 million people). This is because the mean population is positively skewed by a few huge countries such as the United States, Brazil and Mexico. In fact, one out of every four countries in the world is smaller than Jamaica. By world population standards, El Salvador (6.4 million people) and Haiti (7.1 million people) are actually average-sized. Similar conclusions would be reached if size were measured by area rather than population. Comparisons of this sort suggest the importance of examining unexceptional countries such as those of Central America and the Caribbean if we are to grasp the possibilities for and obstacles to development throughout the Third World (Table 4.1). Central America and the Caribbean is also a region of economically vulnerable countries. The first column of data in Table 4.2 expresses trade dependence as a ratio of exports and imports divided by GDP. The lower the value, the greater the share of a country’s economic activity that involves domestic suppliers, producers and consumers. In other words, lower values mean more economic autonomy. The data indicate that, by and large, Central America and the Caribbean countries are considerably more trade-dependent than the larger and more industrialized countries represented in Table 4.2. Values of well over 100 for three of the countries indicate extreme trade dependence. Note the exceptions to the above generalization. Guatemala is the least trade-dependent of the Central America and the Caribbean countries with a value similar to that of Chile, the most tradedependent of the South American countries shown. Indeed, Chile’s pronounced primary productbased export-orientation has been the subject of considerable attention and debate in scholarly and policy circles (see Chapter 3). But Chile distinguishes itself from Guatemala regarding the diversity of trading partners. Chile is not only considerably less dependent on imports from and exports to the United States, but its exports there are now surpassed by those going to the EU (and to Japan). The patterns just described for trade dependency in Central America and the Caribbean are extended by the data for imports to and exports from the USA in Table 4.2. For virtually every country shown, the United States is both the largest importer and exporter. At the same time, note that the USA is the least trade-dependent country in Table 4.2. This is testimony to the profound economic power of the USA in the American hemisphere.The only exception to the rule of US trade dependency in the region is St. Lucia, whose banana shipments to a guaranteed UK (and now EU) market dominate its exports. Dominica and St.Vincent display similar trade patterns. Unfortunately for these eastern Caribbean islands, their lack of trade dependency on the United States has only created a bigger problem. The USA has successfully argued to the World Trade Organization that the guaranteed market in the EU is illegal and must be terminated (this issue is discussed further below). 69

Globalization, neoliberalism and economic change in Central America and the Caribbean

neoliberal activities, such as promoting exports and competing to attract investment, the state’s role has actually considerably expanded (Klak, 1996; 1998). This chapter relies on Chapter 3 for an extended discussion of the evolution of macro-economic policies in Latin America and the Caribbean, and aims primarily to note ways in which the experience in the smaller countries differs from that of the larger countries. Because it can build on the previous chapter’s economic policy groundwork, this chapter is able to devote considerable attention to the social, political and sectoral dimensions of development in Central America and the Caribbean. Its focus on the forces behind and impacts of macro-level development policy is complemented by the chapters in Part 3 that are pitched at the ground level of people’s creative struggles to adapt to adversity, make ends meet, organize themselves and defend their interests.


TABLE 4.1 Basic indicators for Central American and Caribbean countries and territories

Country and territory

Area (square miles)

Population 2002 (PPP)

Infant mortality rate, 2002

External debt (most recent year)

Per capita GDP, (PPP US$) (most recent year)

Human development Index, 2000**

Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama

51,100 21,040 108,890 112,090 129,494 78,200

3,835 6,354 13,314 6,651 5,024 2,882

11 28 45 30 33 20

4,600 (01) 4,900 (01) 4,500 (01) 5,600 (01) 6,100 (01) 7,600 (01)

8,500 (01) 4,600 (01) 3,700 (01) 2,600 (01) 2,500 (01) 5,900 (01)

43 104 120 116 118 57

The Caribbean Anguilla Antigua and Barbuda Aruba Bahamas Barbados Belize British Virgin Islands Cayman Islands Cuba

, 35 ,171 , 75 5,382 ,166 8,867 , 59 ,102 42,804

, 12 , 66 , 70 , 300 , 276 , 262 , 21 , 36 11,224

24 21 6 17 12 24 20 10 7

8,600 (01) 10,000 (01) 28,000 (01) 16,000 (00) 14,500 (01) 3,250 (01) 16,000 (01) 30,000 (99) 2,300 (01)

na 52 na 41 31 58 na na 55

Dominica Dominican Republic French Guiana

,290 18,704 33,399

, 70 8,721 , 182

16 33 13

, 9 (98) ,231 (99) ,285 (99) ,382 (00) ,425 (00) ,500 (00) , 36 (97) , 70 (96) 11,000 (00) *20,000 (01)1 ,150 (00) , 5 (01) 1,200 (88)

3,700 (98) 5,800 (01) 6,000 (98)

61 94 na

Country and territory

Grenada Guadeloupe Guyana Haiti Jamaica Martinique Monserrat Netherlands Antilles Puerto Rico St. Kitts and Nevis St. Lucia St. Vincent and the Grenadines Suriname Trinidad and Tobago Turks and Caicos Islands US Virgin Islands

Area (square miles)

Population 2002

Infant mortality rate, 2002

External Debt (most recent year)

Per Capita GDP, (PPP US$) (most recent year)

Human Development Index, 2000**

,133 ,687 83,000 10,597 4,244 ,421 , 40 ,308 3,515 ,104 ,238 ,150 63,251 1,978 ,193 ,136

, 89 , 436 , 698 7,064 2,680 , 422 , 8 , 214 3,958 , 39 , 160 , 116 , 436 1,164 , 19 , 123

15 9 38 93 14 8 8 11 9 16 15 16 23 24 17 9

,196 (00) na 1,100 (00) 1,200 (99) 5,200 (01) ,180 (94) , 9 (97) 1,350 (96) na ,140 (00) ,214 (00) ,167 (00) ,512 (00) 2,200 (00) na na

4,750 (01) 9,000 (97) 3,600 (99) 1,700 (01) 3,700 (01) 11,000 (97) 2,400 (99) 11,400 (00) 11,200 (01) 8,700 (01) 4,400 (01) 2,900 (01) 3,500 (00) 9,000 (01) 7,300 (99) 15,000 (00)

83 na 103 146 86 na na na na 44 66 91 74 50 na na

Population figures are in thousands; IMR is an estimate of the infant mortality rate; external debt is measured in millions of US dollars; GDP per capita is measured in purchasing power parity. * Russian Debt ** Rank out of 173 Countries, lower being better Sources: The Human Development Report, http://hdr.undp.org/reports/global/2002/en/pdf/backone.pdf The World Factbook 2002, http://www.cia.gov/cia.gov/cia/publications/factbook/countrylisting.html

71



TABLE 4.2 Trade dependency: selected Central American and Caribbean countries in comparative perspective Region

Exports + imports/ GDP

Exports to US (%)

Imports from US (%)

130 117 48 35 59 82 77 166 96

51 13 48 30 53 47 39 22* 48

55 36 60 44 50 54 40 34 48

South America and Mexico Argentina Brazil Chile Colombia Mexico

20 15 38 28 22

9 17* 15* 39 85

21 23 25 36 69

Industrialized countries United States United Kingdom

13 48

NA 13*

NA 12*

Central America and the Caribbean Bahamas Barbados Dominican Republic Guatemala Honduras Jamaica Panama St. Lucia Trinidad and Tobago

* The US is the largest export outlet and import source for all countries listed except those marked with asterisk. For St. Lucia, 56 percent of exports go to the UK; for Brazil, 28 percent of exports go to the EU; for Chile, 25 percent of exports go to the EU; for the UK, 13 percent of exports go to Germany and 15 percent of imports come from Germany. Sources: For exports, imports, GDP: Baumol and Wolff (1996: 877); data are for 1950–90 with slight differences for Bahamas, Barbados, and Jamaica; Exports to and imports from the US: The World Factbook http://www.cia.gov/cia/ publications/factbook/; data are for 1993, 1994, or 1995 depending on the country.

Trade dependence is a key economic characteristic of all of Central America and the Caribbean, but countries differ in terms of level (Table 4.2). The smaller islands of the Eastern Caribbean are more trade-dependent than the larger islands and mainland countries. Regional diversity is also suggested by the ranks of CA/C countries on the Human Development Index (HDI), a combined measure of life expectancy, literacy, access to education, and per capita purchasing power. As Table 4.1 shows, Central America and the Caribbean countries are distributed among the top two-thirds of the world’s countries on the HDI index (i.e. ranking 117 or lower out of 174 countries). Only Haiti, Guatemala and Nicaragua fall in the bottom third of the distribution along with most of sub-Saharan Africa. More troubling, however, is that if we gauge social development progress by the simple measure of whether the region has moved up or down on the HDI ranking since 1993, we find more descenders (13) than gainers (7), with two staying the same. All of Central America except El Salvador fell in rank. Despite the variations noted above, there is much regional commonality. On average, CA/C is more dependent on trade, and is less industrialized, than South America and Mexico. The region’s economic dependence on the United States is also an important element of regional commonality, as distinct from the situation in South America. Central America’s and the Caribbean’s relatively high levels of 72

DEVELOPMENT POLICIES PRIOR TO NEOLIBERALISM The Caribbean was, from the outset of European colonialism, wholly outwardly oriented and economically dependent on a few primary product exports. In Central America, on the other hand, the haciendas which historically dominated were never as thoroughly focused on serving export markets as the plantations of the Caribbean (West and Augelli, 1989). The legacy of this historical difference is somewhat more agricultural diversity in Central America than the Caribbean, laid on top of the greater amount of arable land in the much larger mainland territories (Table 4.1). However, both regions have inherited highly unequal distributions of agricultural land. Rural peasants and small farmers have been unable to significantly expand production and income levels because the colonial or post-independence state has been unable or unwilling to implement serious land reform accompanied by appropriate infrastructure and extension services (de Janvry, 1981; Barry, 1987; Mandle, 1996). Since the Second World War, Caribbean states and large landowners have tried to reinvigorate the profitability of the monocrop plantation systems and associated export sectors by replacing an outmoded crop with another that appeared to have more promise. For example, various Caribbean countries substituted bananas for sugar, arrowroot, or cocoa, coffee for cocoa, or citrus for sugar. However, such limited adjustments to the countries’ agrarian production did not bring back the profitability of the colonial economies (Conway, 1998). Compared with the islands, there has been somewhat more diversity to Central America’s agrarian exports, of which the five most important are coffee, bananas, cotton, sugar, and meat. Still, these commodities have suffered since the early 1970s from deteriorating terms of trade. Further, they do little to support the basic needs of the vast majority of Central Americans who are not large landowners. Local protein consumption has actually fallen with the increase in land devoted to the production of meat for export (Barry, 1987). The region’s development policy experiments since the 1950s divide geopolitically into two camps – socialist and dependent capitalist – each with distinctive risks (Klak, 1998). The first set of policies pursued development through socialist routes and emphasized redistribution, equity, social welfare and prioritization of workers’ needs. This route purposefully attempted to turn away from dependence on the United States, which emerged as the region’s political and economic hegemon around 1900 with the taking of Cuba and Puerto Rico from Spain and the Panama Canal Zone from Colombia. As the regional hegemon, the United States interpreted the socialist experiments as threats and confronted them. Thanks in large part to pressure by the USA and its allies, the list of CA/C countries that failed in their attempts to construct alternatives to mainstream capitalist development 73


trade dependency distinguish how neoliberalism is applied there compared to most of South America. Neoliberalism puts pressure on an already highly trade-dependent CA/C to export more.The region’s relatively low levels of output and industrialization also contribute to its peripheral status in the world system (Gwynne et al. 2003). The economic power of the United States in the region also allows it to express its geopolitical power. Within the last few decades, direct or covert intervention by the United States throughout the region (e.g. in Guatemala, Cuba, Guyana, the Dominican Republic, Nicaragua, El Salvador, Panama, Grenada and Haiti) attests to the importance the superpower places on pursuing and maintaining its interests in the region (Blum, 1986; Dupuy, 1997; Walker, 1997). The US economic embargo against Cuba is now four decades old and was only strengthened with the passage of the Helms-Burton Amendment in 1996 (LeoGrande and Thomas, 2002). Central America’s and the Caribbean’s economic and geopolitical dependency on the United States is a constant factor weighing on the region’s development policies, in contrast with the relative decision-making autonomy enjoyed by South American countries, especially the larger ones. CA/C countries must always take account of how the United States will react to their policy proposals. For Cuba’s socialist regime, US animosity has been a constant preoccupation since the 1959 revolution.


reads like an epitaph to Third World socialism: Guatemala 1945–54 under Juan Jose Arevalo and Jacobo Arbenz, Guyana 1961–64 under Cheddi Jagan, Jamaica 1972–80 under Michael Manley, Grenada 1979–83 under Maurice Bishop, and Nicaragua 1979–90 under Daniel Ortega. Enemies from within and outside (mainly the USA) worked to capitalize on any of the inevitable errors in leadership, and to sabotage these experiments before their developmental capabilities could be ascertained (Blum, 1986; Booth and Walker, 1993). Only Cuba retains elements of socialism, but even Cuba is following the rest of the Caribbean region by relying on international tourism as its economic mainstay (Pattullo, 1996), and by courting foreign capital with special labour codes and incentives, as discussed further below. The essential challenge for the region’s socialist regimes has been to harness an under-industrialized and highly unequal peripheral economy and to rapidly expand the productive forces and redistribute resources more fairly. This is in itself a tall order, made more difficult because it runs against the tide of global capitalism and US hegemony. Such departures raise broad questions such as, How can a country in Central America or the Caribbean, in the US ‘backyard,’ pursue a noncapitalist path without the trade, capital, and blessing of the United States and the rest of the largely capitalist world? or How can internal resources be progressively redistributed when there are few to go around, and when societies are poor and unequal and therefore prone to internal divisions, unrealizable pent-up popular expectations, and patronage systems? The challenges are many and the successes, not surprisingly, are few. A second, contrary and far more common development policy has reinforced and extended ties with the North Atlantic region. It is represented by Puerto Rico’s Operation Bootstrap industrialization commencing in the 1950s, by Europe’s Banana Protocols dating back to 1957 with the granting of special market access to 12 former colonies, including eight in the Caribbean, by Reagan’s Caribbean Basin Initiative (CBI) of the 1980s, and by the present neoliberal transformation. The Caribbean Basin Initiative As an economic development policy, CBI has two main components (it was initially a disguised US military aid policy against leftists in Central America). CBI primarily involved a further opening of the region’s markets to US products, and a relocation of US garment factories there to take advantage of cheap labour and subsidized factory space (Deere et al., 1990).The United States now has a large and growing export surplus with the CA/C region which, along with the rest of Latin America, is the only part of the world with which the USA has a trade surplus. CBI should therefore be seen as a vanguard policy for a reconstituted US regional hegemony under neoliberalism. In general, CA/C’s dependent capitalist paths to development avoid US hostility and instead aim to exploit opportunities availed by strong trade and policy ties to advanced capitalist countries. The risk is that the results will replicate history whereby the region has gained relatively little in subordinate relationships with core countries. Operation Bootstrap This has long been viewed by political leaders in the region as an industrial development model, although upon closer inspection it can be seen as non-replicable and domestically exclusive. Puerto Rican industrialization derives from its unique Commonwealth relationship with the United States. Operation Bootstrap began in 1947 when US tax law amendments gave corporations multi-year tax exemptions on any net income deposited in banks on the island. For their part, Puerto Rican officials promised industrial infrastructure and low-wage, non-union and, by Caribbean standards, skilled labour (Thomas, 1988; Cordero-Guzman, 1993). First to relocate to Puerto Rico were light industries such as clothing, shoes and glassware, then came the heavier and more environmentally damaging industries of petroleum refining, petrochemicals and pharmaceuticals. They contributed to impressive annual economic growth rates of 6 per cent in the 1950s, 5 per cent in the 1960s, and 4 per cent in the 1970s. In total, Puerto Rico’s real GDP growth rate between 1950 and 1990 was the eighth highest of the 74 countries world-wide for which data are available, and the highest in the hemisphere (Baumol 74

Europe’s Banana Protocols These began in 1957 and were followed in 1975 by a succession of four Lomé Conventions.They have provided special market access to more than 70 Third World nation–states that were once European colonies and which are now called the Africa-Caribbean-Pacific (ACP) countries. The special market access applies mainly to primary sector commodities such as coffee, sugar and bananas. Only 12 of the ACP countries export bananas to Europe through Lomé, and eight of these are members of CARICOM (Figure 4.2). Measured by volume traded, bananas are the world’s most important fruit or vegetable, the EU is the banana’s largest market, and the EU’s banana subsidies have been estimated to be worth $2 billion annually (Wiley, 1998). Like Puerto Rico’s Operation Bootstrap, banana farming

Figure 4.2 The weekly banana shipment from Dominica to Britain.The World Trade Organization has ruled that the Eastern Caribbean’s preferential market access is illegal and must be eliminated. Photograph by James Wiley 75


and Wolff, 1996). In 1979 Puerto Rico had the world’s highest per capita level of US imports, modern transportation facilities, and 34 per cent of all US foreign direct investment.The 22 US drug companies manufacturing in Puerto Rico during the 1980s saved $8.5 billion in income tax exemptions (Freudenheim, 1992). The subsidies from the various sources described above from the US mainland to Puerto Rico have amounted to around $9 billion annually, almost as much as all of the US aid to the rest of the world combined (de Blij and Muller, 1998). The geopolitical price of Operation Bootstrap is great dependency on US subsidies, capital and trade. Few local manufacturers have emerged or have networked with those from the mainland. In 1996 the US Congress began a ten-year phase-out of Puerto Rico’s corporate tax exemption, leaving the island entrenched in a bankrupt model of dependent industrialization (Pantojas-García, 1990). Puerto Rican people have made the most of their special political status by migrating to and circulating back from the US mainland in great numbers, and by relying on the federally mandated social welfare net (Conway, 1998). The human face of Puerto Rico’s industrial expansion includes the fact that real per capita income has not grown relative to that of the mainland USA during Operation Bootstrap, and that unemployment has often been in excess of 20 per cent since the 1970s (Cordero-Guzman, 1993; Grugel, 1995).


in the Eastern Caribbean provides an example of the double-edged sword of growth/prosperity and dependency/vulnerability associated with relying on special trade preferences from the core capitalist countries. In the 1950s British public authorities and private shipping firms encouraged its Caribbean colonies to shift from sugar cane to bananas. Britain offered a guaranteed market and good prices for all the bananas that these islands could grow. Farmers in St. Lucia, Dominica, St.Vincent, and to a lesser extent Grenada and elsewhere in the Caribbean, responded wholeheartedly, digging up or abandoning many other crops to specialize in bananas (Welch, 1994; Wiley, 1998). In St. Lucia, for example, the growing reliance on bananas continued through to the late 1980s as thousands of additional acres were converted or deforested to grow them (Barrow, 1992). As a result, Dominica, St. Lucia and St. Vincent have each earned more than half of all their foreign exchange from bananas, which has placed them among the countries of the world most dependent on the export of a single cash-crop. Dependence on a guaranteed overseas market for a single cash-crop has had its positive side. It fuelled a growth of prosperity on the islands and especially for their many small family farmers, whose prominence and vitality are unusual in a region dominated by large land holdings (Barrow, 1992). Banana exports helped Dominica, St. Vincent and St. Lucia climb to the top half of countries ranked by the Human Development Index (Table 4.1). Additionally, only the smaller Caribbean territories with special access to European markets, primarily for bananas, were able to avoid the fluctuations and decline in the region’s traditional agricultural exports during the 1980s (Schoepfle and Pérez-López, 1992). EU rulings in recent years, however, began a gradual phase-out of the ACP countries’ special market access (de Cordoba, 1993). A 1997 World Trade Organization decision completed the phase-out for bananas by ruling that the preferential access to the British market was illegal. The United States brought the case to court after extensive lobbying by Chiquita’s CEO Carl Linder who exports bananas from Central America and wanted a larger share of the EU market. The EU’s preferential banana market is being phased out and many banana farmers will be forced to find new sources of income (Herbert, 1996; CBEA, 2003). Bananas grown on small family farms in the Eastern Caribbean cannot compete with the volume, size, and price of bananas from Ecuador and Central America grown on mechanized plantations where wages are 50–75 per cent lower and unions are repressed (Barry, 1987; The Economist, 1998). As The Economist (1998) drew the comparison: ‘If islands like St. Lucia are the corner stores of the banana business – chaotic, friendly, and unreliable – the Latin American plantations are the Wal-Mart at the edge of town.’ The future is clearly with the mainland banana, but the fruit has become too central to and entrenched in the rural societies of the Eastern Caribbean for farmers to replace it with another crop. In St. Lucia, for example, more than two-thirds of agricultural land was still devoted to bananas in 1997. Public policy devoted to the promotion of non-traditional exports has therefore needed to concentrate on the industrial and tourism sectors, while continuing to work towards diversifying agriculture (Pattullo, 1996; Klak, 1998). The monumental task for the Eastern Caribbean, and for CA/C more broadly, is to replace traditional sources of income with revenue from sources suitable to the present era of more open trade relationships, and to avoid the vulnerability associated with relying on a single product and the North Atlantic market.

THE DEBT CRISIS AND THE NEOLIBERAL REMEDY Latin America [had no] desire to flaunt free trade, but . . . was forced to do so. [In this period,] most of Latin America followed the liberal doctrine of free trade. Advocates of protection in Latin America found little favor in government circles which were beholden both literally and intellectually to creditors in the developed world. (Skidmore, 1995: 228) This profile could well apply to Latin America from the 1980s to the present when in fact it was written to characterize the period 1880–1914.The point to stress is that now is not the first time that 76

THE MEANING AND IMPACTS OF GLOBALIZATION Over recent years, globalization has become one of the most commonly used terms in corporate, political and academic discussions. Despite its ubiquity, it is unusual to find a clear definition of globalization, and even rarer to see it interrogated against evidence. Some writers on the political left disparagingly dismiss globalization as a corporate takeover scheme (Rieff, 1993), but many other influential commentators are more optimistic about its impacts (Reich, 1991; World Bank, 2002b). Of particular concern here are some of the positive spins given to globalization trends that suggest that there are many new opportunities for peripheral countries such as those of CA/C. Many (but not all) of these positive interpretations of globalization in the academic literature fall under the umbrella notion of a ‘global village’. Global village ideas suggest that in various ways the world is coming together and balancing out. Such global village ideas are misleading, however, when 77


Latin America has been lectured on the benefits of free trade. Within Latin America, CA/C countries have over time remained especially vulnerable owing to their distorted, under-developed, and peripheral economies. As the example of bananas illustrated, they have over-emphasized a few export-oriented primary products, particularly agricultural. They have also relied on imported industrial and commercial goods and on foreign capital and expertise to feed people, service industry, and finance internal capital expansion (Grugel, 1995). Even Trinidad, the region’s wealthiest country owing to its petroleum deposits, has made only modest progress towards indigenous industrial diversification while at the same time it has accumulated $2.2 billion in foreign debt (Mandle, 1996; Klak, 1998). The current development policies in Central America and the Caribbean focus on attracting foreign investors to generate new exports, and date back to the debt crisis of the 1980s. The foreign debt situation for CA/C countries parallels that of the hemisphere’s larger countries, as outlined in Chapter 3. In the 1970s international banks were awash with deposits and therefore eager to make loans to public and private interests in Latin America and the Caribbean (Corbridge, 1993). When interest rates rose in 1980–81, the world economy sank into recession and the vulnerable primary product and tourism sectors of CA/C lost many of their customers. Economic decline was precipitous regionwide. By the end of 1983, the economies of Barbados, the Dominican Republic, Guyana, Haiti, Jamaica, and Trinidad and Tobago had shrunk an average of 17 per cent in real terms compared to 1980 (Conway, 1998). The interest rate hike also contributed to making the foreign debts of most CA/C countries unserviceable. In sum, an array of related factors, from poor agricultural yields and prices, to wasted windfall loans and political thinking that seeks industrialization through TNC investment, led to governmental insolvency by the 1980s (Mandle, 1996). The many interrelated problems outlined above have provided strong motivation for governments across the region to approach the international development agencies seeking debt rescheduling, additional loans, and in the words of its leaders, the IMF’s ‘blessing’ (McBain, 1990; Killick and Malik, 1992). Central America and the Caribbean governments one after another, conservative and socialist alike, have had to sign up for a series of austerity agreements with the IMF and World Bank in exchange for financial bailout. The international agencies’ demands of fiscal conservatism, privatization, economic opening, and aggressive promotion of TNC investment have the effect of homogenizing government policies across CA/C so that distinctive development strategies are history.They are likely to continue along the homogeneous neoliberal track in the future, in part because of the on-going constraints of foreign debt. Measured against population size or various economic indicators, the foreign debts of Jamaica, Guyana, Honduras and Nicaragua are the hemisphere’s worst. The World Bank (2003a) classifies all of these countries except Jamaica among the world’s 42 most indebted poor countries. The newcomer to this group is Honduras which, along with Nicaragua, suffered 11,000 deaths and $5.3 billion in damage from Hurricane Mitch in October 1998.


considered in light of the history and contemporary situation in CA/C; the regional situation is unfortunately less balanced and promising than global village ideas suggest. Further, current political and economic transformations, impacts and responses must be specified at the local level, rather than subsumed by overgeneralized notions of globalization (a point Bebbington discusses in Chapter 9). There are six components of the global village concept that are worth addressing with respect to contemporary trends in CA/C. First, it is claimed that the world is ‘shrinking’ as a result of greater international connectivity (Giddens, 1990: 64; World Bank, 1995a; Watts, 1996: 64–5). Central America and the Caribbean, however, have long been heavily integrated into the global economy. The Caribbean is historically perhaps the most globalized of world regions. Since the 1500s it has been controlled by outside powers, based economically on imported labour, cleared to create monocrop landscapes of sugarcane or bananas, and reliant on the import of virtually everything else needed to sustain local populations (Richardson, 1992; Mandle, 1996). In Central America, export-oriented production of sugar, bananas, beef, and other agricultural commodities has been dominant since before the twentieth century. So for Central America and the Caribbean, current ‘globalizing’ trends represent another round of powerful external influences for a region historically shaped by exogenous decisions and events. Second, traditional distinctions between core and peripheral regions of the world are said to be blurring (McMichael, 1996). Kearney (1995: 548) claims that ‘globalization implies a decay in [the] distinction’ between core and periphery. This structure of inequality is still highly relevant to an understanding of US–CA/C relations, however (Klak, 1998).The fact that production (of certain items) is more geographically dispersed across nation–states does not indicate an accompanying fundamental redistribution of control over and benefits from production. The constraints imposed on Central American and Caribbean workers by their own capitalist classes and states, and the constraints imposed on Caribbean countries by core states, especially the regional hegemon, the United States, produce vast international gaps in income and living standards. Third, it is said that foreign investment, trade, and opportunities for development are more widely distributed across world regions and nation–states (Qureshi, 1996). However, global economic integration is highly selective in favour of developed countries and a few developing countries, none of which are in Central America and the Caribbean. Fully 80 per cent of all world trade is within the core triad, although it comprises less than 20 per cent of world population (Hirst and Thompson, 1999; Dicken, 1998). Of the world stock of direct foreign investment, 81 per cent was located in the European Union, North America, and Japan as of 1991, up from 69 per cent in 1967 (Koechlin, 1995: 98). There has been an increase in the share of direct foreign investment flows to certain developing countries, but none of the major recipients (headed by China, Mexico, and Brazil) are in CA/C (Gwynne et al., 2003). There is indeed a global integration apace with regard to the basic ideas about development and neoliberal policy, and there are pressures and incentives to increase trade, but the material rewards are enormously unequal. Fourth, it is claimed that there is now a convergence into one world economy, to which all places and people can, and generally do, find export market niches (McMichael, 1996). But for peripheral regions such as Central America and the Caribbean, market niches are narrow, highly competitive, and fraught with obstacles. They are largely outlets for selling non-traditional goods and services, i.e. fruits, vegetables, flowers, garments, electronic products, processed data and tourism, to wealthy Western consumers (Figure 4.3;Thrupp, 1995). However, CA/C as a whole has thus far had only limited success in filling new export market niches (Klak, 1998). Fifth, media and cultural influences are supposedly more widespread and multilateral (Patterson, 1994; Kearney, 1995). It is a stretch, however, to compare the northward influence of such artifacts as reggae music, Mayan handicrafts, or merengue music to the multitude of cultural impacts in the opposite direction. US affluence and opportunity, often romanticized, are especially well known, deeply ingrained and alluring to Central America and Caribbean people. They are prone to set their living 78

political stability and environmental quality, Costa Rica has been the most successful CA/C country at attracting foreign investment in an array of export sectors paying reasonable wages. Photograph by Thomas Klak

standard goals in accordance with what the US media ascribe to the United States. And the imbalance in media flows is increasing with CA/C’s economic crisis and neoliberalism, as local media have been slashed. And the imbalance in the flows of influence between the USA and CA/C is greater for economic and geopolitical issues than for cultural ones. Finally, people themselves are said to be more integrated through immigration and communications. However, the increasing international flows of people and information should not obscure the regionand class-specific motives for and access to emigration and communication. In pursuit of opportunities for economic development and also for social and cultural expression, Caribbean people have engaged in more twentieth-century emigration than those of any other region. Central Americans have also emigrated in vast numbers in recent decades, especially to flee civil war, oppression and the associated lack of opportunities.The societal porousness and citizens’ coping strategies are not a global phenomena, but are particular to the historical and geographical context of the region and its inhabitants (Simmons and Guengant, 1992). The massive scale of contemporary emigration and remittances results from the growing marginalization and pessimism about the economic prospects back home. Most of Central America and the Caribbean is economically stagnant, and current globalization trends present its people with few promising options. The main point of these critical comments on globalization is to suggest that current economic and political trends are not really globalized, but rather highly uneven geographically, in terms of both impacts and control (Dicken et al., 1997). Peripheral regions are certainly shaped now, in the era of globalization, as they have been under previous phases of capitalism, by the ideas and actions of outside investors and political leaders. Currently, CA/C governments are under pressure to create incentives that will attract investors in order to export a greater quantity and range of products (Klak, 1998). The following sections look more closely at these exogenously originating political and economic transformations in the region. 79


Figure 4.3 Electronics assembly in Costa Rica. Owing to its international reputation for educational attainment,


THE NEOLIBERAL DEVELOPMENT MODEL At the level of people, the system isn’t working. (World Bank President James Wolfensohn, 1999, quoted in Faux 2001) Because the economies of Central America and the Caribbean are smaller, less diverse, and less industrialized than their South American counterparts, the reform period since the 1980s has been especially painful for its working people, and the new outward orientation has much less to build on. While Latin America has long held the unfortunate distinction as the world’s most socially unequal region, things have only worsened since the debt crisis and the neoliberal bailout. For Latin America and the Caribbean as a whole, the share of population living in poverty increased from a historical low of around 22 per cent in 1982 to over 30 per cent in the 1990s. With the exception of Costa Rica, Central America is more unequal than the average Latin American country, helping to explain why Central America’s poverty rate is almost 60 per cent (IDB, 1997: 41; Latin America Press, 1997). The exception to Central America’s relatively high rates of inequality and poverty is Costa Rica, but even there, a range of public service reductions have forced people to spend more for services from the private sector or do without health care and other basic needs (see Chapter 9). Caribbean countries, with the exception of Haiti (see Box 4.1), are more socially equal than both Central American and Latin American averages. This helps to account for the Caribbean’s lower poverty rates and relatively good standing on social welfare indicators (Table 4.1). However, the Caribbean’s relative equity is canceled out by its relative economic weakness (Table 4.2). Small size, limited industry, and a historical lack of international competitiveness leave the Caribbean in a precarious position during the neoliberal transition.

BOX 4.1: World Bank recommendations for Haiti Haiti has for many years been the poorest country in Latin America (Table 4.1). The vast majority of the Haitian population must endure a high infant mortality rate, low life expectancy, low birth weights, high maternal deaths, inadequate caloric intake, squalid housing conditions, and a lack of basic services such as potable water and sewer lines. The country is also economically dependent, importing around 70 per cent of all that it consumes. It is in this context that the World Bank in 1985 offered advice to the Haitian government in a report intended to have restricted distribution, but which became public. The report, entitled ‘Haiti: Policy Proposals for Growth’, suggests the following reorientation of national priorities: The development strategy must be export-oriented . . . [Domestic] consumption . . . will have to be markedly restrained in order to shift the required share of output increases to exports . . . More emphasis will have to be put on development projects that support the expansion of private enterprises in agriculture, industry and services. Private projects with high economic returns should be strongly supported with accordingly less relative emphasis on public expenditures in the social services. (quoted in Wilentz, 1989: 272–3) Given how reliant Haiti is on foreign assistance and investment, World Bank recommendations such as these carry a lot of weight in government circles.

The international development agencies (chief among them, the World Bank the IMF and USAID) are encouraging CA/C governments to promote production for export rather than domestic markets, and to reduce social welfare spending. In most cases domestic production and social welfare spending were already inadequate prior to the cuts. A comparative study of the public sector reforms 80

BOX 4.2 Nicaragua’s Sandinistas and their successors (source: Walker, 1997) In the 1970s, mounting society-wide disenchantment with the ‘mafiacracy’ of Anastacio Somoza helped the Sandinista rebel army depose him by the end of the decade. Over the next several years the ruling leftist junta was able to demonstrate effective leadership. Accomplishments included effective social policies such as a literacy campaign and agrarian reform, a mixed economy which grew at 7 per cent annually per capita, and a clear electoral victory in 1984. For the remainder of the 1980s, however, Ronald Reagan sought to make the Sandinistas ‘cry uncle’ (as he put it) by orchestrating a cut-off of its international loans and the Contra war. The latter’s many costs included more than half of Nicaragua’s public resources that were needed for defence, the devastation of rural schools and clinics that the Contras viewed as targets, and 30,000 Nicaraguan lives. In 1990 Nicaragua’s war-weary voters rejected the Sandinistas in favour of the US preferred candidate, Violeta Chamorro. The country reversed policy direction and began what William Robinson characterized as ‘a close U.S. tutelage in the process of reinsertion into the global system’. Nicaragua’s USAID programme leapt to become the world’s largest, and included funds to replace Sandinista textbooks with ones beginning with the Ten Commandments that AID’s director believed would help ‘reestablish the civics and morals lacking in the last eleven years’. By the late 1990s, more than half of all Nicaraguan workers were un- or under-employed. And the half billion dollars worth of international aid keeping the Nicaraguan economy afloat made President Arnoldo Alemán subordinate to the wishes of core capitalist countries. Despite Nicaragua’s ‘economic straitjacket’, it has managed to retain some meaningful vestiges of the Sandinista period. These include vibrant grassroots activism, politically-aware citizens, gender equality laws, and autonomy laws protecting its culturally distinct Atlantic Coast people.

Central American and Caribbean governments are aggressively promoting and subsidizing nontraditional exports (Klak, 1996; 1998). These efforts can be likened to a ‘shatter-shot’ approach to searching out export market niches. Even in the smallest countries, policy-makers are actively promoting investment in a host of non-traditional activities. In tiny Dominica, for example, these range from tourism, assembly operations, and data processing, to vegetables, fruits, seafood and cut flowers (Figure 4.4; Wiley, 1998). Such experimentation raises the essential question of whether product niches with considerable promise can be secured or whether they are replacing monocrop and single market dependence with a new form of vulnerability. In other words, are exporters trying to do many things at once while not doing any of them well? 81


under neoliberalism in three countries (Costa Rica, Nicaragua, and Jamaica) echoed these observations (Evans et al., 1995: 44–5). The study identified two important commonalities in the new role of the state in these countries. Internationally, the relationships of these countries are increasingly neocolonial in nature. As the authors put it, ‘The countries themselves are able to exercise less control over their economic policy than was the case in many former colonial regimes.’ Domestically, policies have turned noticeably more hostile to the interests of the working class. This has occurred directly through policies that have dramatically cut public services, employment and wages, and indirectly through increased unemployment. In addition, governments have weakened trade unions through repression and division. In particular, the abject dependency of emasculated Nicaragua stands in acute contrast to the widespread hope in the early 1980s among most of its people for a socially just society (see Box 4.2).

Latin America Transformed Figure 4.4 Dominica’s non-traditional industrial exports, on display at the Dominica Export Import Agency (DEXIA). Is the Caribbean successfully filling a neoliberal export niche or undergoing a new round of dependency? Photograph by James Wiley

During the 1990s, the non-traditional export activity that employed most people and was most widespread was the assembly factories. Virtually every state created export processing zones (also known as free zones) and took loans to build and service their factory shells. Garments were by far the most common product because of their low entry requirements, although electronics, plastic goods, and shoes were also represented. Tens of thousands of mainly young females are employed in such factories in Jamaica, Haiti, and each Central American country. Most of the Eastern Caribbean countries had more than a thousand workers each. The Dominican Republic attracted the most assembly activity and had over 160,000 factory workers. But even there, the assembly plants were low-wage economic enclaves with minimal positive impact on the local economy (Willmore, 1994; Kaplinsky, 1995). And although it is widely claimed that the assembly plants are net economic gains for the host country, that assertion would need to be validated through a thorough cost accounting which, to my knowledge, has never been undertaken. The gross income from low factory wages and subsidized rents and utilities would need to be weighed against the public costs of promoting the country as an investment site, building, operating, and maintaining the factories and related infrastructure, and training workers (Klak, 1996; 1998).The main beneficiaries of the low cost products made in the assembly plants are the corporate brand names they carry, the department stores where they are sold, and US consumers who buy the low-priced products (Ross, 1997a). NAFTA shifted the growth in Free Zone employment and exports to Mexico where employment reached over 1.5 million in 2000 (see Box 3.1 for a discussion of the Mexican assembly industry). Meanwhile, many garment producers have left the Caribbean, leaving tens of thousands of square feet of vacant publicly owned factory shells. Governments have had to admit that ‘The move to diversify the economy to include export-oriented services (and increasing tourism), as well as non-traditional exports such as apparel manufacturing has not yielded the economic development gains expected’ (Government of Jamaica, 2002: 18). 82

• markets are highly competitive, require connections to complex international commodity chains (Gereffi and Korzeniewicz, 1994), continually draw new entries from countries world-wide, and risk saturation; • products are highly perishable, require expensive transportation, are subject to wide-ranging price fluctuations, and entail risk for producers; • the vast majority of NTAEs are native to temperate rather than tropical climates; this disadvantages Caribbean farmers whose knowledge is of local crops; • crops are usually planted continuously and intensively in monocultures, and buyers demand perfect-looking produce; • the above features often lead to the problem of a ‘pesticide treadmill’, and related problems of human and ecological health and unsustainability, and residues on crops entering the United States (Conroy et al., 1996); • the above features, combined with the need for large capital investments, contribute to dominance by large foreign firms, for which local people mainly serve as low-wage labour. These factors have meant that small-scale farmers have generally not been competitive (Thrupp, 1995). The NTAE sector is characterized by the dominance of firms from the USA and elsewhere in the core triad, inadequate state support to develop the sector, shaky performance and low to no growth for small-scale local producers, and poor working conditions for the employees. In essence, core–periphery relations are maintained despite shifts in economic sectors. Neoliberalism’s market niche strategy may have its conceptual appeal, but the region’s experience with it shows that it is fraught with difficulties, as the data processing sector further illustrates. The development prospect of this sector entails incorporating local labour and nurturing local firms to take advantage of expanding opportunities in the global data processing industry that earns $1 trillion yearly, of which information processing services is a component. Mullings (1995; 1998) draws on a detailed analysis of the rise and fall of information services in Jamaica to explain why this industry, which has real potential for growth in employment, wages, managerial expertise, and backward 83


Before examining the prospects for non-traditional agriculture, it is worth noting the continued significance of traditional primary product exports. While the region’s traditional exports such as sugar, bananas, coffee, cotton and bauxite have lost value in recent years, it is premature to deem them irrelevant to the region’s role in the global economy. In 1990, primary products (mostly traditional ones but including a steadily growing share of non-traditional exports) were still 46.5 percent of the exports sent to the United States by CBI countries. By then, manufactured products had surpassed primary products as a share of the total, but this reversal is attributable more to primary export decline than to manufacturing growth (Deere and Melendez, 1992). As noted above, new exports were mainly from the assembly plants. As those close down, the region’s trade deficit increases. The export of fruits, vegetables, and flowers, labeled NTAEs (non-traditional agricultural exports), by definition have high value by volume and area under cultivation. Central America has been more successful than the Caribbean in meeting the demand for NTAEs in the US and other northern markets. By 1991 Central America’s NTAE earnings exceeded $175 million, while those of the Caribbean were under $90 million (Thrupp, 1995). The Caribbean’s limited success is especially notable given its more desperate need for new sources of foreign exchange. One indicator of this need is that Caribbean earnings from traditional agricultural exports have fallen faster than those of Central America. A more general problem with NTAEs is that the neoliberal image of a small-scale farmer/entrepreneur rising up to meet new export market niches – perhaps substituting snow peas or strawberries for bananas – does not match the reality. Although the experience varies across contexts and products (and therefore leaves hope for greater small-scale sustainable production), the following general characteristics of NTAEs in Central America and the Caribbean restrict benefits to smaller-scale farmers:


linkages into the local economy, has stagnated on all these criteria. She identifies the problem in terms of inadequate state support for local firms; continued policy steering and dampening by a traditional and complacent private elite; investment fear on the part of foreigners; and an extremely narrow role allotted to Jamaican firms and workers by US outsourcing firms. Rather than propelling Jamaica to a heightened position in the international division of labour as the neoliberal model predicts, the information services sector has slumped and entrenched the gender, class and international inequalities that have long characterized this peripheral capitalist country. Another relatively new and globally oriented economic activity that Caribbean political leaders have eagerly pursued by offering investment incentives is offshore finance. The islands that are winners and losers in the casino capitalism associated with the quest for highly mobile international finance capital have their own set of pre-existing attributes and consequent problems. Islands that have been most successful at attracting offshore banking and related activities are relatively small territories, even by Caribbean standards, that continue to fly the Union Jack: the Cayman Islands, the British Virgin Islands, the Turks and Caicos Islands and, until volcanoes made two-thirds of the island uninhabitable in 1997, Montserrat. The British dependencies confer the highest level of political stability and investor confidence. Besides the British dependencies, the Netherlands Antilles and the Bahamas (which is closely tied to the US economy; see Table 4.2) are also notable for their ability to attract financial holdings from thousands of foreign firms. In some places such as the Caymans and the British Virgin Islands, offshore finance has become such a major economic component that real estate prices have skyrocketed while other economic sectors have atrophied (Hampton and Christensen, 2002). But most islands have seen relatively little of the sought-after mobile capital or, in fact, capital of any kind. In fact, an island’s ability to attract furtive capital into an offshore finance sector is negatively correlated with its need for new sources of foreign exchange earnings. Most islands are now independent countries with many features viewed as unattractive to finance capital, including weak and unstable economies, poverty, high unemployment, and social tensions. Since 9/11, the US government, in concert with the OECD, has sought and achieved greater regulatory oversight of offshore financial centres. It is probable that a longer-term result will be a reduction of capital flows through, and therefore revenues going to, the offshore centres, particularly the smaller, poorer and less regulated ones (Klak, 2002).

CUBA: ISLAND SOCIALISM AMID GLOBAL CAPITALISM The above examples of non-traditional sources of foreign exchange earnings indicate that neoliberalism is wholly based on the hegemony of global capitalism and the associated international system of states. But even socialist Cuba has needed to turn to a development policy that offers incentives to foreign investors. Cuba’s crisis is not unrelated to that of the capitalist countries of the region. Since the nineteenth century Cuba has essentially had a one-crop (sugar cane) exporting economy with the concomitant vulnerabilities of output and price fluctuations and deteriorating terms of trade. In part, Cuba’s crisis is unique to its experience in CMEA (Council for Mutual Economic Assistance), the now defunct trade alliance among state socialist countries led by the USSR. Rather than embarking on a major post-revolutionary economic diversification effort from the 1960s through the 1980s, Moscow encouraged Cuba to specialize primarily in sugar exports and to import most other requirements from other CMEA members. A one-for-one trading deal with Russia, sugar in exchange for petroleum, encouraged Cuba’s specialization and yielded a $5 billion annual subsidy compared to open market prices (note, however, that little sugar actually trades on the open market). The USSR also offered Cuba a generous line of credit that has grown to an outstanding debt of $20 billion in addition to the island’s $11 billion of debt to western and Japanese creditors (Table 4.1). Cuba’s CMEA trade relationship delivered a reasonable assortment of industrial inputs and consumer goods until the unexpected events of the late 1980s. The collapse of the Soviet bloc in 1989–91 meant that Cuba lost 75 per cent of its trade flows and imports, and aid worth 22 per cent of national income (Marshall, 1998). Cuban imports fell from $8.1 billion dollars in 1989 to only $2 84

10 9 8 7 6 5 4 3 2

PERCENTAGE

1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1985

86

87

88

89

90

91

92

93 94 YEARS

95

96

97

98

9 9 2000 20012002

Figure 4.5 Cuban economic growth rates, 1985–2002 85


billion in 1993. Cuba’s economy went into a free fall (Figure 4.5). Independent of a country’s politicaleconomic organization, it is hard to imagine any nation enduring such vast economic losses and weathering through the necessary transitions without a major internal upheaval. Castro coined the euphemism ‘The Special Period in the Time of Peace’ to describe the post-Soviet era of massive shortages, daily hardships, and new policies that encourage private initiative and court foreign investors. Domestic policies now include farmers’ markets selling directly to consumers, parallel (black) market activity for many consumer goods, legalized use of the US dollar, and a process of converting the entire currency to a dollar equivalent. Production policies include encouraging foreign investment by allowing (at least partial) foreign ownership of enterprises in Cuba, promoting tourism, reorienting state investment to enhance product development for global markets, and reconfiguring large state farms into autonomous and productive cooperatives (LeoGrande and Thomas, 2002). Obtaining food and other daily necessities now preoccupies many citizens, especially Habaneros who are most isolated from rural food production. Urbanites who considered kerbside gardening or bicycling beneath their sophisticated lifestyles grudgingly adapted to necessity. Faced with a crisis of shortages of basic needs, theft of state resources, and black marketeering, Cuban officials have been forced to legalize a range of capitalistic practices. In a rare public opinion poll, most Cubans pointed to the farmers’ markets legalized in 1994 as the most important post-Soviet reform, well ahead of selfemployment and legalization of the dollar (Marshall, 1998: 287).To compensate for the agricultural bias against the capital city, farmers’ market vendors in Havana are taxed at a rate of 5 per cent of the value of their goods, while everywhere else the rate is 15 per cent (Marshall, 1998). The farmers’ markets have expanded to offer prepared food, and many Habaneros have made their homes into informal restaurants, called paladares. Further, the foreign tourism sector has acted like a vacuum drawing Cubans of all stripes away from skilled professions and toward the dollar-earning possibilities. A highly trained professional earns much more driving a taxi cab for tourists (Segre et al., 2002). Besides turning to tourists as a source of income, Cubans have needed to become very imaginative in order to obtain enough income or in-kind transfers to make ends meet (Box 4.3).


BOX 4.3 How people survive during economic crises: a comparison of Cuba and Jamaica Cuba’s economic difficulties have forced its citizens to resort to survival tactics, adding new meaning to the verbs ‘to invent’ and ‘to resolve’. Cubans regularly use the phrase ‘hay que inventar’, or ‘one has to invent’, to explain their alternative ways to sustain themselves. In most cases ‘inventar’ involves stealing or committing a crime against the state, as in the following example. One young man in the colonial city of Trinidad in south-central Cuba describes his own creative adaptation this way: To resolve my economic difficulties, I’ve begun to collect used packages of Popular, a state brandname for cigarettes. My friend [‘socio’], who works at the tobacco farm, sells me tobacco and paper. With a handmade rolling machine, I roll cigarettes and repackage them for sale on the black market. That is what ‘hay que inventar’ means to me. Using the tobacco and paper that his friend steals from the farm, this man is able to sell his handrolled version of a pack of Populares, which sell for 10–11 pesos in state stores, for 5 pesos. Those purchasing the black market cigarettes are well aware of their illegal origins and accept them as part of the current survival strategies. Cuban authorities admit that nearly 30 per cent of all tobacco is stolen for illegal sale. (Source: Brandon J. Cabezas, Latin American Studies Programme, Ohio University, based on field work in August, 1997; and Chauvin (1998: 5).) In Jamaica, the great majority of adult residents of poor communities in Kingston and other cities are unemployed. They need to come up with many different strategies to earn money in order to meet their basic needs. These strategies range from legal ones, such as temporary employment, to illegal ones, such as robbery or selling drugs, and include many others in the grey area in-between, as in this example: In the gray area, residents developed innovative income-raising strategies, often centered on ‘hustling’ (ad hoc buying and selling, using begged or borrowed money). A sophisticated hustling system had grown up around the nearby prison, with women buying food for the prisoners, arranging for visitors’ food parcels to get to the prisoners, buying goods from prison warders to sell outside, and begging/’negotiating’ for money from prison guards on the paydays in exchange for sex. (Source: Moser and Holland, 1997: 24)

The Cuban economy bottomed out in 1993 and has since haltingly recovered, although in the classic Caribbean fashion of booms and busts (Figure 4.2). Food and other basic necessities are now more available than in the early 1990s when the average Cuba is said to have lost 30 pounds. About 60 per cent of the population regularly have access to dollars from income or remittances from relatives in the USA which are estimated to have reached $1 billion, second only to tourism in foreign exchange value (LeoGrande and Thomas, 2002). Sugar, without the benefit of Soviet fertilizer and other inputs, has fallen to third place. Recent harvests were below 1960 levels. Cuba has joined the Caribbean Tourism Association and tourist receipts reached $1.97 billion in 2000, eight times higher than in 1990. While the United States continues to try to isolate Cuba, other countries such as Canada, Mexico, and Spain and China are taking advantage of the profitable opportunities in tourism, as well as in mining, utilities, and consumer goods availed by the lack of competition from US firms.The falling growth rates since 2000 stem from falling sugar and nickel prices, the global recession which began before 9/11, and stagnation in tourism after 9/11. As of late 2003, tourism seems to be rebounding, boosting hope for an upturn in economic growth. 86

Prolonged crises and hardship have required that Central American and Caribbean people be very creative both at home and abroad. In reaction to neoliberalism, a growing number of people have tried to emigrate to the USA, where over 2.5 million Caribbean islanders (more than 8 per cent of the population) have gone since 1965 (Potter et al., 2003). Emigration to Europe and Canada considerably expands those numbers. Central Americans migrants have been fewer but have also increased in recent decades. In recent years, the enticing messages from relatives, friends, and the ubiquitous mass media from the north have conveyed that there is a better life abroad.The resulting diaspora is indeed large.To cite an extreme example, for every five people born in St. Kitts and Nevis and alive today, two of them now reside in the USA. For Jamaica, a more typical Caribbean case, the ratio is 6 to 1. In total, Jamaica sent 480,600 legal immigrants to the USA between 1970 and 1996, while Cuba and the Dominican Republic sent 547,300 and 668,700 each (de Souza, 1998). A poll conducted in the Dominican Republic found that half the population now has relatives in the United States, and more than two-thirds would emigrate if given the chance (Klak, 1998). Not all people leave for good, however. Many see opportunities for employment and education in North Atlantic countries as part of a multidimensional international strategy to make ends meet and advance economically. Many send remittances home to immediate family members. How much is sent home varies greatly per household and over time. Macro-economic statistics for remittances understate their significance because they principally record bank transfers, leaving unrecorded money and goods sent through the mail or with travelling relatives and acquaintances. Nonetheless, official data on remittances reveal they contribute between 5 and 7 per cent to the GDPs of Jamaica, the Dominican Republic, Haiti, and Belize (Latin America Press, 1997). Earnings from the north are used back home to meet basic needs, acquire a plot of land, build a home, finance the children’s education, or start a small business (Chevannes and Ricketts, 1996; Portes and Guarnizo, 1991). For Mexico and Central America, the positive impacts of ‘migradollars’ on living standards, investments, and overall economic conditions are clear (Durand et al., 1996). Male garment factory workers from the Dominican Republic have been notably successful in transferring skills acquired on the job in the New York metropolitan area back to ownership and management positions on the island (Portes and Guarnizo, 1991). Jamaicans now refer commonly to a local phenomenon called ‘barrel children’, the parents of whom work in North America and who largely survive on the contents of the overstuffed containers that regularly turn up at customs.The combined effect of these growing trends towards emigration, remittances, and circulation is a ‘deterritorialization’ of the region’s societies (Olwig, 1993: 206).

REGIONAL TRADING BLOCS It is said that Central America and the Caribbean ‘belong to two different cultural universes’ (Grugel, 1995: 155). It follows that they have had negligible economic ties historically and have developed their own regional trading blocs recently. The Central American Common Market (CACM) consists of five countries with a long history of linkages: Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica. For centuries Spain administered them as one colony, and for 15 years after independence in 1823 they were a united republic. The obvious Central American outlier from this group is Panama, which was a province of Colombia until its independence in 1903 (Barton, 1997a). Panama now participates in Central American presidential summits without commitment to implementing CACM’s common external tariff, an important component of any trading bloc. The Caribbean region is less economically united than Central America, a reflection of the islands’ greater physical fragmentation (Figure 4.1), and greater historical fragmentation by European colonial powers (Richardson, 1992). Because most Caribbean countries are now English-speaking, they dominate the region’s trading bloc created in 1973 and called CARICOM (the Caribbean Common Market). The 15 full members of CARICOM as of 2003 are 12 English-speaking countries of the 87


MIGRATION AND TRANSNATIONALISM


Caribbean region, one British colony (Montserrat), Surinam, and most recently Haiti. CARICOM accepted Haiti’s membership in 1997 contingent on it moving more aggressively in the neoliberal direction, i.e. privatization, public spending reduction, and promotion of foreign investment; it passed these stipulations in 2002. Haiti had already undergone many neoliberal reforms. For example, it reduced tariffs on imported rice from 50 to 3 per cent in 10 years, causing the local market to be flooded with US rice and local production to fall by almost 50 per cent (CPT, 1998). The Caribbean trading bloc reinforces the IMF/World Bank/USAID dictates; CARICOM views these neoliberal reforms as necessary prerequisites for all of its members if the bloc is be globally competitive and eventually enter the FTAA (Free Trade Agreement of the Americas). The Bahamas is the only other English-speaking Caribbean country choosing not to belong to CARICOM, although it does participate in the Caribbean Community. In this regard, the Bahamas’ position is similar to Panama’s relative to the CACM; it participates in regional summits of Heads of State but not in Trade or Finance Ministers’ meetings, and is not committed to CARICOM’s plan for a common external tariff and economic integration. In the 1990s the Netherlands Antilles and several of the region’s Spanish-speaking countries have attained observer status in CARICOM. CACM and CARICOM countries, together with Mexico, Colombia, Venezuela, Panama, the Dominican Republic and France, have recently united under the Association of Caribbean States (ACS). The first ACS summit was held in 1995. Thus far ACS has not functioned as a trading bloc, but rather as a forum for discussion of common economic concerns and possible future linkages for trade, transport and tourism (Demas, 1997). The five-member CACM took effect in 1960 two years after the establishment of the original sixmember European Economic Community. The parallel and precocious origins of CACM and the EEC in a world economy led observers to wonder if they would develop and strengthen in tandem. CACM got off to a brisk start during its first decade when intraregional exports grew from 7 to 26 per cent of the total (Table 4.3). Central America’s policies that emphasized economic opening, fiscal conservatism and regional trade integration generated economic growth rates of around 5 per cent between 1965 and 1975. Since then the CACM has faltered. Intra-CACM trade has levelled out at about 22 per cent of total exports (Table 4.3). Why did CACM show such early promise and then stagnate? The core of CACM’s impressive growth in the 1960s was the states’ successful cultivation of ISI firms, which to a large extent involved TNCs from the United States establishing factories in the region and exporting within the CACM (Grugel, 1995). The internal market for these industrial goods was TABLE 4.3 Central American and Caribbean trading blocs: intraregional exports as a percentage of total exports, selected years Year

CACM

CARICOM

1960 1970 1980 1985 1990 1992 1994 1996 2001

7.0 26.0 24.2 15.5 15.2 23.2 22.7 21.5 21.8

na* na* 8.9 13.0 12.3 11.8 15.6 na 15.9

*CARICOM was created in 1973. Source: Demas (1997); Bulmer-Thomas (1998); ACS (2003). 88

89


quickly saturated, however, given that a large share of the region’s 11 million people at that time lived in poverty. While economic growth and regional trade statistics looked impressive, the disruption of peasant economies and the inequities of state policies were fomenting guerilla wars in three of the five countries – Nicaragua, Guatemala, and El Salvador (Walker, 1997). Trade also proved to be highly imbalanced across CACM countries. On the one hand, the mutual geographical accessibility of the main urban-economic regions of El Salvador and Guatemala helps to explain why their trade has dominated the CACM. On the other hand, Honduras, the least developed member country, accumulated a large trade deficit in the 1960s.This, along with its infamous ‘soccer war’ with El Salvador in 1969, led to Honduras’ withdrawal from the CACM in 1970. Regional relations worsened in the 1970s from the region’s civil wars, and then in the 1980s from Reagan’s efforts to isolate the Sandinista government of Nicaragua. World recession and the debt crisis in the 1980s further dampened CACM’s trading prospects. The neoliberal bailout offered by the World Bank and the IMF since then has discouraged ISI and intraregional trade, while it has emphasized extraregional exports of nontraditional agricultural and manufactured goods (Bulmer-Thomas, 1998). As a result, the five CACM countries sustained annual export growth rates of between 11 and 31 per cent from 1992 to 1995 (Colburn, 1998). The CACM rebounded in the 1990s, although not to its peak trade level of around 1970 (Table 4.3). Many of the early shortcomings have again surfaced. Honduras rejoined the group in 1990 but has once again accumulated large trade deficits. Trade between CACM countries continues to be predominantly stand-alone industrial products, rather than components of an integrated commodity chain or agricultural products. The lack of the former suggests the shallow development of regional trade and economic integration. The latter were legally restricted until the 1990s. Even since their inclusion, however, agricultural exports have not diversified, and comprised only about 4 per cent of intra-CACM trade in the late 1990s (Rueda-Junquera, 1998). Throughout CACM’s existence, trade restrictions have diverted more imports from third countries away from the region than they have increased production within the region. In economists’ parlance, CACM has caused more trade diversion than trade creation (Nicholls, 1998) – when more expensive products from within the trade bloc replace cheaper ones from outside. Finally, while capital and products now move more freely across Central American borders, political leaders have been unwilling to consider facilitating labour mobility in the same way (Bulmer-Thomas, 1998). In comparison, CARICOM has never approached CACM’s regional trade levels, suggesting the former’s lower levels of commitment to trade integration and its limited economic complementarity. Intra-CARICOM trade as a share of total exports has fluctuated between 8 and 16 per cent since 1980 (Table 4.3). Further, whereas intra-CARICOM exports were worth $5.9 billion in 1980, they fell to $4 billion in 1994 and only $1.3 billion in 2001 (Demas, 1997; ACS, 2003). CARICOM’s market is also more limited. Whereas CACM’s population is 35 million, CARICOM’s is just 6.3 million plus Haiti’s 7.1 million people (mostly impoverished rural peasants). By the end of 2002, CARICOM had not yet implemented a common external tariff, while internal economic integration had been ‘placed on the back burner’ (Gibbings, 2002). Skilled labour has been able to move within CARICOM but not unskilled labour (Demas, 1997; CARICOM, 2003). CARICOM recently eliminated the visa (but not the passport) requirement for travel among member countries, although North Americans or Europeans have long been able to enter member countries with only a driver’s licence. As has typically been the case historically, exogenous factors have overwhelmed the region’s progress toward regional economic development. Both CACM and Caricom have suffered as regional integration involving outside countries has become a higher priority. For example, in 1994 Costa Rica entered a bi-lateral trade agreement with Mexico, a move that impedes further progress toward a common external tariff for CACM because it blurs the distinction between countries that are internal and external to the trading bloc. CARICOM has similarly signed free trade agreements with Colombia and Venezuela (Demas, 1997). NAFTA and potentially a future FTAA create even larger obstacles, as Bulmer-Thomas has suggested. His critical observation on how CACM countries’ attention has been


diverted toward NAFTA applies equally well to CARICOM countries: ‘Unrestricted access to the US market, however implausible, has been seen as more desirable then the less exciting, but more realistic, goal of regional integration’ (Bulmer-Thomas, 1998: 320). More broadly, NAFTA has decreased Central America and the Caribbean’s economic importance in the global economy and has relocated manufacturing investment to Mexico. Mexico’s foreign investment and exports have grown relative to the region’s small countries since 1994. Policy-makers have seen Mexico as a major threat to their efforts to develop by attracting foreign investment into assembly operations. CACM and CARICOM have been pressing the United States for trade concessions. The most urgent aim is parity with Mexico within NAFTA, so that the region will no longer be comparatively disadvantaged as an export platform. Caribbean and Central American countries seek NAFTA membership despite their competitiveness vis-à-vis the USA for little beyond low wage labour. Unfortunately, the economic marginality of CA/C described above breeds political marginality. As Demas (1997: 20) laments for CARICOM, ‘We have already conceded far too much, far too quickly, by way of trade liberalisation.’ But the US government has offered CA/C little more than rhetoric on the subject of deeper economic ties and regional cooperation toward mutual and complementary development. The region’s developmental concerns have been an especially low priority for the Bush Administration since 2001 (Griffith, 2003). It is difficult not to conclude that Washington’s policy toward the region – if such scattered actions and mostly inactions deserves to be called ‘policy’ – is self-serving, narrow and short-sighted.

THE GROWING DRUG ECONOMY With so few opportunities for growth through neoliberalism materializing, the production, and especially the transhipment of drugs through Central America and the Caribbean, have become widespread. Individuals have taken to growing and exporting marijuana and to trafficking cocaine and increasingly heroin from the Andean region on the way to the world’s largest market in the United States. They seek even a small share of the vast transnational income: Colombian cocaine, heroin and marijuana alone have an estimated retail value of $46 billion (NACLA, 2002). The growing number of tourists moving in and out of the region facilitates the movement of drugs to US by air and by boat. A Guatemalan researcher Edgar Celada characterizes Central America’s increased drug trafficking as ‘geographic fatalism’ – the region is sandwiched between South American producers and North American consumers. The same study found Central America expanding its drug activities beyond trafficking to production and consumption (Jeffrey, 1998). Problems are similar in the Caribbean. Puerto Rico had the highest per capita murder rate in the USA in 1995, with two-thirds of the deaths associated with drugs. A growing number of Caribbean people are being deported from the USA, and the most common cause is drug activity. At the same time Caribbean jails are already overcrowded and have been judged to be unsafe and unhealthy (Griffith, 1997). Expansion of drug activity in Central America and the Caribbean is also occurring with respect to social classes. The ‘democratization’ of drug activity now includes growing numbers of politicians, judges, businesspeople, and ordinary citizens. Military personnel are involved in both drug running and enforcement. Following the conclusion of Central America’s civil wars and peace accords, there is now a remilitarization of the region through US funding for antidrug efforts. Neoliberalism’s open economies and non-traditional exports are also entangled with the drug trade. Another Guatemalan researcher, Mario Maldonado, laments the growing number of local ‘businessmen who earn their wealth hiding cocaine in shipments of broccoli and cut flowers’ (Jeffrey, 1998). Guatemala joins other countries in the region where residents now assume, often quite accurately, that sudden increases of expenditure among locals on gold jewellery or a new car, home or restaurant are attributable to drug trafficking. The exception is Cuba which, according to US authorities, plays little role in the hemisphere’s drug trade (NACLA, 2002). 90

Central America and the Caribbean have traditionally been studied separately. Today, the homogenizing impacts of US regional hegemony, economic globalization and neoliberalism suggest the fruitfulness of analysing them together. Over recent decades the region has learned that US dominance and intervention make developing local interpretations of ‘democracy’ and ‘development’ extremely difficult. The region’s hurried experiments with various democratic socialist paths to development are history. Instead, Central America and the Caribbean have converged on a set of policies that pursues dependent capitalist development under the tutelage of the United States. The current global political economy presents these small, under-industrialized, and tradedependent countries with many risks of further vulnerability and marginality, but also some narrow options and opportunities. The greater economic openness associated with neoliberalism is exposing domestic firms to competition from larger and more competitive ones from abroad. Such competition has been fierce for both old and new producers. The few survivors from the region have been able to fill the market niches that neoliberalism trumpets, although too often such competitiveness is attained primarily at the expense of labour and the environment. However, international economic integration can potentially have other positive impacts if it helps to expose and dislodge internal obstacles to development and human rights. Economic exposure brings pressure to confront internal problems such as economic stagnation under the weight of local mercantilist capital, and inefficient local production methods from which only a few have benefitted. Global integration and openness can also help to expose government mismanagement, graft and nepotism that have long plagued much of the region. Non-traditional export production means that there are now more external interests connected to the region that can expose (but also potentially benefit from) illegal or inhumane practices. Issues of human rights can be brought to international attention through greater global connections. For example, the international campaigns in recent years against Nike, Reebok, Kathie Lee Gifford apparel, and Disney (and their subcontractors) for their Third World employment practices demonstrate these trends (Ross, 1997a). The campaigns are making internationally known employment and living conditions that have long been sequestered by distance, undemocratic states, foreign cultures and closed societies. In some cases such campaigns helped to create openings for workers to mobilize and struggle for better wages, benefits, and conditions. Economic globalization is primarily a top-down, elite-driven, and externally-based process shaping the lives of Central America and the Caribbean people. However, globalization has many dimensions, and it can also open opportunities for progressive transnational networking and for confronting conditions of domination, exclusion, and exploitation, as later chapters explore.

FURTHER READING Hirst, P. and Thompson, G. 1999 Globalization in question: the international economy and the possibilities of governance. Polity, Cambridge, second edition. This is the most thorough and careful interrogation of the ideas and evidence behind economic globalization to date. It refutes many truisms about globalization and offers empirical evidence to document the extent and the precise ways in which global economic integration is actually occurring. Klak, T. (ed.) 1998 Globalization and neoliberalism: the Caribbean context. Rowman and Littlefield, Lanham, MD. Through the analytical lens of political economy, the book examines the impacts, adjustments, and coping strategies found in the Caribbean as it undergoes a rapid and profound transformation. Issues addressed include development policies, non-traditional exports, external relations, the environment, tourism, class and gender relations, and human migration. Potter, R., Barker, D., Conway, D. and Klak, T. 2003 The contemporary Caribbean. AddisonWesley Longman and Prentice Hall, Harlow. Broad, geographical overview of the Caribbean region, including its environmental, economic, political, and social issues. 91


CONCLUSION


Thomas, C. Y. 1988 The poor and the powerless: economic policy and change in the Caribbean. Monthly Review Press, New York. The most thorough and insightful account of the various models of state-promoted noncapitalist paths toward development of Caribbean countries since World War II.

WEBSITES Association of Caribbean States (ACS), http://www.acs-aec.org, the only Pan-Caribbean Basin political organization that includes island, Central American and South American countries, devoted to fostering regional unity, coordinating development policies and negotiating from a position of unified strength. Campaign for Labor Rights, http://campaignforlaborrights.org, mobilizes and informs sweatshop workers, consumers and advocates to promote worker rights in assembly plants and export processing zones anywhere in the world. CARICOM, http://www.caricom.org, the website for the Caribbean’s free trade organization; note that the Central American Common Market had no website as of January 2003. CIA, http://www.cia.gov/cia/publications/factbook, the CIA’s excellent and up-to-date collection of facts and figures for all of the world’s countries. World Development Movement, http://www.wdm.org.uk, a website for a British organization focused on confronting global poverty and reporting on resistance in all corners of the world to top-down globalization.

92

5 The urban revolution Alan Gilbert

Urbanization affected Latin America profoundly during the twentieth century. Less than one person in ten lived in towns and cities in 1900, compared with three-quarters at the turn of the millennium. An urban population of perhaps 10 million in 1900 had grown to around 375 million by 2000. Urbanization constituted much more than a numerical shift; it transformed people’s lives. It changed the locus of work from the fields to offices, shops, factories and urban streets. It changed the form of their housing from unserviced, rustic shacks to semi-serviced tenements and self-help properties. It helped modify the way they thought about religion and about society. Politics was gradually transformed from a matter dictated by rural landlords to one where urban people not infrequently voted and sometimes even influenced major decisions. In the cities, the power calculus gradually changed, shifting from populism, through military rule to something vaguely approximating to democracy. In this sense, urbanization was arguably the most revolutionary change to have occurred in Latin American life during the twentieth century. It was surely far more important than political revolution, real cases of which were very rare, or land reform, which was neither frequent nor often very effective, or globalization, the effects of which are usually greatly exaggerated. Given such a fundamental change in economic and social organization, it might be assumed that academia would respond by placing urbanization at the centre of their research agendas. In practice, rather few did so. A glance at most of the great historical tomes of twentieth-century Latin America reveals an almost eerie silence about towns and cities; Hardoy (1975), Morse (1958; 1971), Davis (1994) and Scobie (1964; 1974) are among the relatively few exceptions. Economics as a discipline was even more silent on the issue, although Currie (1971) must be exempted from this criticism. Of course, much has been written but outside the disciplines of anthropology, geography, planning and sociology, the city was sadly neglected. When urbanization did emerge as a theme, it was frequently discussed in an over-generalized way. Of course, there were many similarities between Latin American cities but, apart from the growth of shanty towns, informal employment, social segregation and motorized transport, do Barranquilla, Belém, Brasília and Buenos Aires really have that much in common? Research also tended to focus on the largest cities, even though most Latin Americans still live in other urban places. At least capital citycum-large city bias is understandable in the sense that twentieth-century Latin America was incubating some of the largest cities in the world and those cities tended to dominate national life. Neglecting cities with less than 100,000 or so people was not all that surprising, but what about those with more than a million people? Very few books have ever been written about Belo Horizonte, Barranquilla, Guayaquil or Manaus. If the process of urbanization has too often been neglected, or studied selectively, some of its elements have been given too much importance. The fear that the cities would suffer from some kind of social breakdown has been a recurrent theme for decades. The economic failure of Latin America’s cities to provide enough work or adequate housing has been another. 93


This chapter argues that during the twentieth century the growth of the city constitutes one of the essential elements in understanding the nature of life of most people in Latin America. And, despite the very real problems associated with the process, urbanization should be regarded as a major success story. Despite the widespread poverty, people live longer and fuller lives than they did when there were so many fewer of them. This could not have been achieved without urbanization. The chapter also discusses the relationship between urbanization and globalization. However, it does not confine the term to discussing events since 1980 because, whatever that ill-defined concept actually means, life in Latin America has always been affected by the outside world and Latin Americans have always sought to play a part in the world economy. In Latin America, the process of globalization goes back at least to the arrival of Christopher Columbus in the fifteenth century. Are not Catholicism, the ubiquity of the Spanish and Portuguese languages, slavery, the urban settlement pattern, and bull-fighting adequate testimony that globalization in Latin America is less than recent? Even that cultural obsession, soccer, had arrived from England and was well established in the Southern Cone by the beginning of the twentieth century. When the World Bank, one of the leading supporters of world economic integration, recognizes that significant globalization occurred in Latin America between 1870 and 1914, when foreign investment and immigration in the Southern Cone was relatively far more important than it has ever been since, it is welcome recognition that Latin America did not start to ‘globalize’ in 1980. In discussing globalization, both in the past and in the present, it is vital to understand how different parts of Latin America have always inter-reacted with the outside world in highly variable ways (Palma, 1978; Cardoso and Faletto, 1979). Certain cities and regions have always been closely linked to the world’s ‘metropoles’ (Frank, 1966), whereas the ebb and flow of international trade passed around and beyond the vast majority. Even in the past 20 years, when ‘globalization has triumphed’ (ILO, 1995: 68), many cities have been touched only lightly by whatever it is that constitutes globalization. The obvious exceptions, most notably the cities of northern Mexico and the larger national capitals, are to be regarded as just that, exceptions. The impact of globalization on most people in urban Latin America has been highly variable. Social class, location of the city and the level of development are the keys to understanding how globalization has impacted on ordinary lives. Perhaps that geographical rallying call, ‘place matters’, forms another of the essential arguments of this chapter.

URBAN GROWTH DURING THE TWENTIETH CENTURY Urbanization in the Americas did not begin with Christopher Columbus’ accidental landing on Hispaniola. The Aztec, Inca and Mayan civilizations had already established great cities before the Iberian Conquest (Hardoy, 1975). In that sense urban life is a very old phenomenon, at least in certain parts of Latin America. Of course, the Spanish quickly dismantled the pre-Columbian civilization and established a new urban tradition in its place. The Spanish and Portuguese used urbanization as a major weapon in the conquest of the Americas (Morse, 1971; Cardoso, 1975). They founded most of the cities in existence today. With the exception of Brasília, Ciudad Guayana, Belo Horizonte, Goías and a few others, most cities had been founded before 1700 and well before independence. The phase of globalization that began in 1492 brought a new form of urban civilisation. Iberian squares, churches and rectilinear street patterns were established through administrative diktat in areas where they had never been before. Latin American urbanization therefore is centuries old. It is also, in a very important sense, very recent. Indeed, it might almost be argued that in most of the region urban growth is really a phenomenon of the past 70 years (Table 5.1). In the Latin America of 1930, five out of every six people lived in the countryside; in 2000 three-quarters were urbanites. In 1900, only one city, Buenos Aires, had anywhere near one million inhabitants. In 1950, the number of million cities had reached seven. By 1990, there were 40 (UNECLAC/UNCHS, 2000: table 12). 94

The urban revolution

TABLE 5.1 Latin America: urban share of population in selected countries, 1930–2000 Country

1930

1950

1970

1990

2000

Argentina Bolivia Brazil Chile Colombia Ecuador Guatemala Mexico Peru Venezuela

38 14 14 32 10 14 na 14 11 14

63 34 37 61 43 29 25 43 35 54

79 42 56 75 59 41 36 59 60 77

87 58 78 84 71 55 35 71 70 84

90 62 81 86 74 65 40 74 73 87

Source: UNECLAC/UNCHS (2000: Table 4); Cunha (2002: Table 1).

The extent and speed of urban growth in Latin America during the twentieth century have been impressive and, for many governments, profoundly worrying. During the 1950s, most major cities were growing annually at over 4 per cent per annum and many were expanding much faster: Lima, Mexico City and São Paulo at over 5 per cent, Caracas at over 6 per cent and Bogotá at more than 7 per cent. Such rates of growth quickly turned relatively small cities into what were often described as urban monsters. Today, Mexico City and São Paulo both contain around 18 million inhabitants, Buenos Aires almost 13 million, Rio 11 million and Lima more than 8 million (CEPAL, 2001b). Urbanization deeply influenced the lives of Latin Americans. However, it did not change Latin America uniformly, affecting particular areas in very distinctive ways and at different times. For example, Argentina, Uruguay and Southern Brazil experienced rapid urbanization in the late nineteenth century. Successful export production generated economic growth and attracted migrants to the region from southern Europe. In the process, Argentina became a nation of immigrants and its capital the region’s first ‘million city’. But in most of the region, urbanization came much later. By 1940, when two-thirds of the Argentine population was living in urban areas, less than one in three Brazilians, Colombians or Venezuelans lived in towns or cities (Wilkie et al., 1994: 141). In Central America, the supposed tranquillity of rural life remained largely undisturbed. Over the century, urbanization transformed the nature of life. Despite the frequent chaos, urban living generally enhanced the quality of most rural migrants’ lives, especially as the quality of public services and sometimes the housing gradually improved. Certainly, urbanization never brought the disaster that was so often predicted and sparked few social revolutions, unfortunately nor has it managed to remove poverty. Indeed, experience in the past two decades suggests that poverty in Latin America became both entrenched and increasingly urbanized. The continued arrival of rural people, the debt crisis and the nature of the neoliberal economic development model have established poverty as a permanent feature of urban life.

EXPLANATIONS FOR URBAN GROWTH Urbanization in the Southern Cone was initiated by economic expansion. The growth of the coffee economy in Rio de Janeiro and São Paulo and the boom in meat, wool and cereal exports in Argentina and Uruguay created a measure of affluence and generated a huge demand for labour (Morse, 1958; Scobie, 1974). People crossed the Atlantic from Spain, Portugal and Italy, and many stayed in the ports where they landed. Over three million people migrated to Brazil between 1872 and 1940 and 3.4 million 95


moved to Argentina in the half century after 1881. Cuba also benefited from a wave of immigrants in the years following independence. Between 1902 and 1930, 1.2 million foreigners arrived, mostly from Spain. In most of the region, however, foreign migrants either came much later or never came at all. Economic growth was insignificant in most of Latin America until industrialization began in the 1940s. In 1950, the degree of urbanization was closely linked to the level of economic development: relatively affluent Argentina, Chile and Uruguay had a majority of their populations living in urban areas; relatively poor Ecuador, Guatemala and Honduras less than one-third. Economic growth, however, was not the only ingredient in urban development. By the 1940s another fundamental factor had emerged – national population growth. During the 1930s and 1940s, most Latin American countries had begun to enter the second phase of the demographic transition, death rates fell while fertility rates remained high. Table 5.2 shows how population growth began to accelerate in some of the largest countries of the region during the 1930s. With the exception of Argentina, which had already passed onto a later stage of the demographic transition, every country was setting new records for natural increase. Falling death rates combined with high birth rates had a double impact on urban areas. First, their own populations began to grow more quickly and, second, there were potentially many more urban migrants. Given the inequality in land holding and the poverty of most rural people, life in the countryside was increasingly problematic. Migration offered an escape valve that was welcome, especially when economic development created new opportunities for a better life in the cities. The period 1950–80 is the climax of urban growth in most Latin American countries. Young people flooded to the cities, set up home and produced urban offspring. Later, the pace of urban growth slowed. Migration continued to be an important source of growth in many places but increasingly the seeds of urban growth lay in the cities. After 1960, urban growth was fuelled mainly by natural increase (Merrick, 1986). By 1980, national populations were growing much more slowly. From 1950 until 1980, Latin America’s population increased annually by 2.8 per cent; from 1980 until 1995, the annual growth rate had fallen to 1.8 per cent. Fertility decline was a significant factor in that change. After 1970, most women in the region bore fewer children. In 1970, the average Nicaraguan woman gave birth to 7.2 children during her lifetime, in 2000 the figure had fallen to 3.7 (UNDP, 1997; table 22; World Bank, 2000: 286–7). Over the same period, the gross fertility of Mexican women fell from 6.5 to 2.8. The decline in fertility helped greatly to slow the pace of urban growth. In places, emigration also reduced national population growth. The combination of local poverty and proximity to the Great Society encouraged millions to move to the United States. By 2000, the Hispanic population in the USA numbered 35.3 million (Logan, 2002: 1). That year, approximately

TABLE 5.2 Latin America: annual population growth, 1900–95 Country

1900–30

1930–50

1950–70

1970–95

Argentina Brazil Chile Colombia Guatemala Mexico Peru Venezuela

3.1 2.1 1.3 2.2 2.3 0.8 1.0 0.9

1.8 2.4 1.7 2.0 2.4 2.4 1.6 2.2

1.7 3.0 2.3 3.1 3.2 3.1 2.5 3.8

1.5 2.1 1.6 2.5 2.7 3.1 2.6 2.9

Source: Thorp (1998: 23). 96

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19 per cent of all Mexicans, 16 per cent of all Salvadoreans, and 11 per cent of all Cubans and Dominicans were living in the United States. Of course, this underestimates the impact in the sending countries because so many migrants are undocumented and because increasing numbers are now migrating to Europe and other international destinations (Jokisch and Pribilisky, 2002; Gilbert, 2002). The exodus had a major impact on urbanization in Latin America. Had the emigrants not moved abroad, most cities in their home countries would have grown much faster. If the 1980s heralded a decline in the pace of urbanization, the decade was seared into Latin American memories for another reason – the debt crisis. Between 1981 and 1989, per capita incomes in Latin America declined by approximately 8 per cent. With the exception of Cuba, and to some extent Chile and Colombia, every country was affected badly by economic recession. But if most countries suffered during the ‘lost decade’, the brunt of the crisis was borne by those living in the cities. For the first time in generations, poverty in the cities increased faster than that in the countryside. While the absolute number of rural poor increased by 8 per cent between 1980 and 1990, the number of urban poor virtually doubled (see Tables 5.5 and 5.6). Of course, the urban sector had gained most of the benefits from the old model so it was not unreasonable that it reaped the withered crops from the ill-invested seeds. The only problem with that interpretation is that those who gained most during the prosperous years did not suffer greatly during the urban debt crisis. Most of the burden was thrust upon the poor and even the middle class; the rich had already converted their funds into dollars and often invested abroad (Portes, 1989; Gilbert, 1992; Tardanico and Menjívar-Larín, 1997). The debt crisis hit the urban areas hard for several reasons. First, the debt crisis unleashed an unholy combination of economic recession, rapid inflation and balance of payments deficits. To help reestablish some degree of economic normality, stabilization programmes were introduced in virtually every country. Some claim that IMF loans were made conditional on governments accepting the Washington consensus view of economic management, although many Latin American economics ministers, very often themselves graduates of US economics faculties, argue that they devised the policies for themselves – there was no alternative. Whatever the cause, the medicine of opening up the economy, controlling government expenditure, increasing taxation and privatizing as many government-owned companies as possible was taken in many countries. The early 1980s, and in some places the later 1980s as well, saw a necessary slowing in the inflation rate but far too little in the way of faster economic growth. Second, stabilization programmes made unemployment and under-employment worse. Economic recession and cheap imports from the United States and the Far East forced many Latin America manufacturers out of business. New labour reforms encouraged those that remained to shed workers. Many of those who lost their jobs sought refuge in the informal sector; some in the better paid parts, like taxi driving, many in the worst paid, like peddling goods on the street. In addition, the poorest families were forced to put more people into the labour force (Escobar and González de la Rocha, 1995). Older children left school both to save expenditure on books and uniforms and to earn something from casual employment. The Latin American labour force in the 1980s increased in size at the same time as unemployment and informal sector rose. Needless to say, the average real wage fell in most countries. Third, the New Economic Model (NEM), based on encouraging exports, displaced the old import substituting industrialization (ISI) template (Edwards, 1995). In theory, the old industries could redirect their production toward export markets, something that would be helped by another key element of structural adjustment, devaluation. In practice, few manufacturing companies were sufficiently competitive to do so. With some exceptions, notably Mexico, Argentina and Brazil, most of the new exports actually came from the countryside. In certain areas, devaluation encouraged agricultural production because for the first time in years farmers could make a profit on their export sales (but see Chapter 4). In terms of urban growth, devaluation effectively shifted the terms of trade against the city. In areas of export expansion, agricultural incomes sometimes rose.


Fourth, cuts in government budgets impacted heavily on social expenditure and particularly on heavily subsidized urban sectors like transport, water and electricity. Newly privatized utilities started to charge the commercial rate for the service and the higher tariffs cut into the wage packets of even those who had retained their jobs. As most subsidies had previously only reached the cities, the debt crisis hit the urban poor particularly hard. The impoverished in the countryside were protected in the sense that they had never received much in the first place. Structural adjustment in the 1980s was meant to have improved the macro-economic structures of Latin American countries and the benefits would be felt in the 1990s. Table 5.3 shows there is some justification for that view but also demonstrates that the results were not all that impressive.Things did not improve greatly during the early years of the new millennium when the region’s economy declined and countries like Argentina, Uruguay and Venezuela faced real crises. Whatever the promise held up by the combination of globalization, free trade and structural reform, Table 5.3 suggests that Latin America has so far reaped few of the benefits. The growth record of the 1990s was far worse than in the much-derided days of ISI (see Chapter 3). The slow pace of economic growth continues to have an effect on urban development and, particularly on the urbanization of poverty (see below). TABLE 5.3 Economic growth in selected Latin American countries since 1950 (annual growth in GDP) Country Argentina Brazil Chile Colombia Guatemala Mexico Peru Venezuela Latin America

1950–59

1960–69

1970–79

1980–89

1990–99

2000–2

2.4 6.5 3.8 4.7 4.0 5.9 4.9 8.3 4.9

4.4 6.2 4.5 5.0 5.2 7.1 5.6 5.4 5.7

3.0 8.6 2.0 5.7 5.9 6.5 4.0 3.2 5.6

–0.6 2.9 3.2 3.7 0.9 2.1 –0.2 –0.8 1.7

4.9 2.9 7.2 3.3 4.2 2.7 5.4 1.7 3.4

–5.5 2.4 3.1 1.8 2.6 2.5 2.6 –0.2 1.2

Source: ECLAC (1998), World Bank (2000), CEPAL (2003).

RURAL–URBAN MIGRATION For centuries Latin Americans have migrated to find work. The Spanish forced many to move to mining areas to produce silver and gold. Slave ships brought millions of Africans across the Atlantic. For generations, rural labour moved seasonally in search of work on the plantations of Brazil and Peru, to harvest the coffee in Brazil and the northern Andes and to pick bananas in Central America (Arizpe, 1982; Skeldon, 1990; Chant, 1992; Radcliffe, 1992; Bailey and Hane, 1995). In this sense the rural to urban movement that increased so markedly after the 1930s was merely a variation on a longestablished theme of labour mobility. In another sense, however, it was a revolutionary change. It was different from earlier patterns of seasonal migration because most migrants began to stay permanently in the cities. In this respect Latin Americans were unlike the majority of Africans who tended to retain their homes and rights to land in the countryside and to move only for short periods (Gilbert and Gugler, 1992). In Latin America, whole families gradually gave up rural life to seek their fortunes, or at least a better chance of survival, in the cities. Urban migration was also different from most kinds of rural migration insofar as it directly involved women. Indeed, more women tended to move to the cities than men (de Oliveira, 1991; Chant, 1992; Radcliffe, 1992; Gilbert, 1998). Permanent migration meant that cities increasingly became the central focus of Latin American life. 98

99


People moved to the cities because urban conditions, for all of their horrors, were better than those in the rural areas. Access to public services like electricity and drinking water was problematic in the cities but infinitely superior to that in the countryside. In Colombia, 97 per cent of urban households had access to electricity in 1993 compared to 35 per cent of rural families. Surprisingly, even malnutrition was less severe in the cities; in the late 1970s, for example, 62 per cent of rural families in Latin America were malnourished compared to 26 per cent of urban families (Pfeffermann and Griffin, 1989). If conditions were better in most cities than in most rural areas, most migrants were presumably making a sensible choice in moving. However, many contemporary observers thought that the migrants were choosing an erroneous path and had been tempted to move by a hopelessly optimistic view of the city. The migrants believed that the streets of the city were ‘paved with gold’, when urban life actually offered them little in the way of work or housing. Many city folk even regarded the new migrants as figures of fun, particularly when they wore ponchos and spoke Indian languages. How could these uneducated and unsophisticated natives possibly cope in the city? Occasionally, the negative stereotype of the migrant was correct. Rural conflict and violence sometimes forced people to move to the cities in search of safety. Although they might wish to return, they could not because their fields had been damaged or stolen. Natural disasters might also make rural flight inevitable. Hurricanes, drought, earthquakes and floods regularly hit many areas of the region and forced many families to leave their homes. At certain times, such ‘refugees’ could well constitute a majority of migrants although in most countries they were normally a minority. When serious studies of the migration process began to be conducted in the 1960s, reality was shown to be very different from the stereotype (Mangin, 1970; Portes, 1972; Peattie, 1974; Cornelius, 1975; Perlman, 1976). Most migrants were not ill adapted to urban life. And, when country folk had time to make up their own minds and to calculate their life chances, they seemed to make rather sensible choices. The decision to migrate was often taken not by an individual but by the whole family. Migration was considered to form part of the household’s survival strategy. How could the movement of one or several individuals help the household survive in difficult circumstances? Was it sensible for the whole household to move to the city or for one person to move, set up home and act as the base for others to move later? Remittances from those in the city might even be the way in which the rest of the family could survive in the countryside. Migration to the city was generally rational, people moved from poorer to more prosperous places and tended to move short distances to the nearest city. Critically, the migration process was selective. Those who moved were not the poorest of the poor but those with a decent chance of making their way in the city. It was those aged between 15 and 35 years of age who were most likely to move, those who could read and write, and those with suitable skills. Women were more likely to move than men because their labour was less in demand in the fields but they stood a better chance of getting employment in the city, as maids, cleaners, shop assistants or even as sex workers. Moving to the city was a real challenge but one to which most Latin Americans responded very well. The ‘natives’ of the Andes, Central America and Mexico, had a much harder task but adapted nonetheless. Many studies reported that the migrants were so anxious to adapt to their new lives in the city that they changed their life styles, their dress, and even their language (Andrews and Phillips, 1970; Doughty, 1970; Roberts, 1973; Lomnitz, 1977). Of course, because most migrants have been rational, the nature of migration has changed over the years in response to changes in the socio-economic environment. After all, large-scale urbanward migration has now been occurring for at least 60 years and so migration now takes place in circumstances very different from those of the early years. For example, most rural people today have friends and relations in the city. It no longer constitutes much of a risk to move because they have someone with whom to stay and who can help them survive. Improvements in transportation mean that they have already been to the city on visits. One consequence is that more people without the


ability to cope in the city on their own have been able to move. The old and the infirm can come to the city knowing that they will be cared for. Parents will bring their young to benefit from the superior education facilities of the city. In short, the migration process has probably become less selective over the years. The process of migration has also changed in the sense that the stark differences in living standards between urban and rural areas have become much less obvious since 1980. When the debt crisis hit the cities, Latin Americans soon realized that the normal route out of poverty was no longer available. The slow pace of urban growth in the 1980s suggests that potential migrants picked up the message very quickly; continued residence in the countryside was now a more sensible option. With structural adjustment and agricultural modernization, the rural–urban calculus changed. For those living in areas of export agriculture, new opportunities were being created. Pay rates might be desperately low, but rising unemployment and falling living standards in the cities offered nothing better. Improving transport and communications systems were also changing the rural–urban balance. Better roads, faster buses and lorries, and the spread of telephones allowed rural people to sell goods in the city and return home. Better transport encouraged some urban people to work in the countryside; the boías frias (cold lunches) of São Paulo and the agricultural workers of Santiago are well-known examples (see Chapter 12). Similarly, many of the women who work in the cut-flower business on the fringes of Bogotá, live in the city. As Roberts (1995: 112) puts it: the legacy of past movements and the commercialisation of most rural areas mean that the distinction between rural and urban is often not a great one. Economic enterprise spans rural and urban locations. The patterns of consumption of the village may be different in scale to those of the town, but they are not different in kind. In many places the city has absorbed the countryside (Gilbert, 1998). As Latin America has become increasingly and predominantly urban, the nature of migration and of the migrant has changed. Questions like ‘Who moves and why?’ and, ‘Where do they move from and to?’ have always been determined by local circumstances but now urban and rural conditions in the region have become more diverse. As such, it is much harder to generalize usefully about the process of migration. One other change is also critical, the way that migration has increasingly become an international phenomenon. Rural workers from Mexico and Central America have long moved to rural jobs in California but they now move in huge numbers to US cities as well. Half a million Mexicans now live in Chicago and many more in other cities of the Mid-West (The Economist, 2003a). Who moves, to or from where, is often difficult to predict; for example, why do Colombian migrants to London come predominantly from three departments of the country rather than from the other 29 (Gilbert and Koser, 2002)? What is certain is that international migration increases during periods of national economic decline (Cornelius, 1991; Roberts, 1995; Gledhill, 1995). Current crises in Argentina, Colombia and Ecuador are producing increasing flows of migrants not only to the United States but to Spain and Italy as well (Jokisch and Pribilsky, 2002). Increasingly, the money sent back by those living abroad are sufficient to keep the family alive at home and even to build a decent house (Durand and Massey, 1992; Jokisch, 2002). In 2001, Salvadorans sent US$2 billion dollars back home, a contribution equivalent to 16 per cent of the country’s GDP (BID, 2002). All that we can say about migration today is that it is still motivated principally by economic realities and that most migrants continue to make sensible decisions about where to live and work (see Chapter 9). The only real exceptions come when people have little or no choice. Current experience in Colombia where more than two million people have been displaced by rural violence, suggests that some people do not have the luxury of choosing who in the household should move (Rojas, 2001). Perhaps only in such circumstances does that highly simplistic explanation of migration, ‘push and pull’, really prove helpful. When people in the countryside are being threatened with death, they are most certainly being pushed to the cities. 100

During the days of import substituting industrialization some broad generalizations could be made about its impact on the geography of urban growth (Gilbert, 1974; Gwynne, 1990). Since ISI aimed to replace imports, and most of the market was concentrated in major cities, manufacturing companies favoured the larger cities. When those cities also happened to be national capitals or ports, the advantages of locating there multiplied. The choice facing industrialists in Argentina in 1960, when 56 per cent of the urban population lived in Buenos Aires, or in Peru when 57 per cent lived in Lima was seemingly obvious (Fox, 1975: 20–6). Between 1940 and 1961, Lima’s share of industrial employment in Peru increased from 14 per cent to 38 per cent (Gilbert, 1974: 61). Of course, some provincial cities also prospered, for example, Medellín, Cali and Guadalajara, but even these cities tended to lose out relative to the national capitals. Important though manufacturing industry was under ISI, most of the gross domestic product was generated by commerce, finance and services. Here the largest cities, and particularly the capital cities, had the greatest advantage. With the economy oriented towards the domestic market, the cities with the greatest concentrations of higher-income people tended to do best. Table 5.4 shows that during the 1950s and 1960s, the populations of the largest cities in each of the major countries, bar Argentina, grew more quickly than the total urban population. During the 1970s, population growth slowed in some of the largest cities as a result of further falls in the birth rate and because of ‘economic de-concentration’. With land prices and, sometimes, labour costs in the major cities rising rapidly, with transport systems becoming increasingly congested and with environmental controls beginning to bite, industrial managers began to rethink their location strategy. Many decided to postpone expansion in the major cities and locate new facilities somewhere else. Not infrequently, this meant establishing a new plant in a small city relatively close to the existing facilities. Any town or city with good communications to the major market and within 200 kilometres of the existing plant was a likely candidate for selection. Around Mexico City, Puebla and Toluca were major beneficiaries (Gilbert, 1993; Aguilar, 1999). In the state of São Paulo, the main metropolitan area

TABLE 5.4 Urban growth in major cities and countries of Latin America, 1950–2000 (annual rates) Country/city Argentina Buenos Aires Brazil São Paulo Chile Santiago Colombia Bogotá Mexico Mexico City Peru Lima Venezuela Caracas

1950–60

1960–70

1970–80

1980–90

1990–2000

3.0 2.9 5.0 5.3 3.9 4.3 4.4 7.2 4.8 5.0 3.6 5.0 6.1 6.6

2.2 2.0 5.1 6.7 3.0 3.2 4.3 5.9 4.7 5.6 4.9 5.3 4.6 4.5

2.3 1.6 4.3 4.4 2.8 2.8 2.7 3.0 4.5 4.2 3.5 3.7 3.9 2.0

1.9 1.1 2.7 2.0 1.8 1.9 2.8 3.3 2.7 0.9 2.8 2.8 2.5 1.4

1.7 1.2 2.2 1.7 1.8 1.6 2.5 2.5 2.0 1.6 2.3 2.6 2.5 na

Source: 1950–90, UNECLAC/UNCHS (2000); 1990–2000 are mainly estimates from UN Population Division (2001). 101


THE GEOGRAPHY OF URBAN GROWTH UNDER THE NEW ECONOMIC MODEL


lost industrial plants to nearby cities like Campinas, Guarulhos, Santo André and Osasco during the 1970s and 1980s (Townroe and Keen, 1984; Diniz, 1994; Bähr and Wehrhahn, 1997). But it was the debt crisis that really slowed the pace of growth in the major cities. As mentioned above, manufacturing industry suffered badly under the dual impact of domestic recession and rising competition from imports. The largest cities lost their favoured status and economic restructuring created new opportunities for other places to attract manufacturing investment. The New Economic Model aimed to stimulate manufacturing exports. Insofar as these exports were linked to natural resources, for example, the production of cellulose or wine, this gave an opportunity to regions where the raw material was produced. Export orientation also favoured cities that were close to ports or major communication routes. Whereas ISI favoured the major cities, in places the New Economic Model changed the balance of regional advantage. In Mexico, industrial production in the northern states boomed (see below) and, in Chile, some of the cities in natural resource areas did well. Of course, some of the major cities suffered little from the change in strategy because they were also in an excellent position to produce manufactured exports. But, in general, the New Economic Model gave much more opportunity for certain provincial cities to industrialize than previously. Table 5.4 shows that most of the large cities lost out badly after 1982. As unemployment rose and living conditions deteriorated, the word went back to potential migrants in the countryside and small towns that now was not a good time to move. Indeed, the fact that Mexico City was growing more slowly than the Mexican population generally strongly suggests that more people were actually leaving than were arriving. For the first time in decades, the growth rates of most of the largest cities were lower than the respective national urban growth rates. By the 1990s, the worst of the economic pain had seemingly passed and Latin America’s largest cities seemed poised to expand once again. But conditions in the 1990s were different from those in the 1960s or 1970s. Structural adjustment had opened up the region to the brave new world of global competition. Dependent on how they performed, cities could flourish or suffer (Friedmann and Wolff, 1982; Dornbusch and Edwards, 1991; Sassen, 1991; Iglesias, 1992; Green, 1995; World Bank, 1995b; Gilbert, 1998). Furthermore, location in a successful country did not mean that every city would benefit. In the new world order, every city was in competition with every other. Some cities did well and others badly as the case studies below demonstrate.

THE URBANIZATION OF POVERTY According to modernization theory, economic growth was supposed to rid Latin America, and indeed the world, of poverty (Rostow, 1960; Kuznets, 1966). At the very least, economic growth was supposed to reduce levels of inequality and to reduce the relative numbers of people living in poverty. Arguably, it managed to do this in Latin America under ISI. Of course, the process was interrupted by the debt crisis, but once the lost decade was over, economic growth would continue to reduce poverty and make the region more equal. There is limited evidence to suggest that this is what happened during the 1990s. While there are signs that the incidence of poverty declined in countries, like Chile and Mexico, where economic growth was more rapid, the population in countries like Argentina and Venezuela experienced growing economic hardship. Indeed, for every country where there has been a fall in the incidence of poverty, there is another where it has increased (Table 5.5). In many, the absolute numbers of people living in poverty have actually increased. Table 5.5 provides even less evidence to support the idea that economic growth has brought greater equality. Indeed, many argue that the New Economic Model is highly flawed in this regard. Although the World Bank (2002b: 1) recognizes that globalization ‘produces winners and losers’ and that growing integration does not usually heighten inequality within countries (ibid.: 5), Latin America is a major exception. ‘In Latin America, due to prior extreme inequalities in educational attainment, global integration has further widened wage inequalities.’ 102


TABLE 5.5 Poverty and inequality in Latin America during the 1990s Country

Year

Gini coefficient

% persons below 50% of mean per capita income Total

Urban

Rural

Brazil

1990 1999

.501 .542

39 44

52 54

46 47

Chile

1990 2000

.554 .559

54 55

45 46

48 39

Colombia

1994 1999

.601 .572

49 46

48 46

46 40

Costa Rica

1990 1999

.438 .473

32 36

30 35

28 33

Guatemala

1989 1998

.582 .582

48 50

46 43

38 44

Mexico

1989 2000

.536 .542

44 44

43 39

34 46

Venezuela

1990 1999

.471 .498

36 39

34

31

Argentina, Bolivia and Ecuador have been excluded because data are only available for urban areas, Peru because data are only available for 1997 and 1999. Source: CEPAL (2003: Table 24).

How has this general worsening of inequality and the increase of poverty in certain Latin American countries affected poverty in urban and rural areas? Table 5.5 suggests that in many the urban areas have seen a major rise in poverty. Insofar as several Latin American countries are predominantly urban, this is hardly surprising. In Argentina or Uruguay, where 90 per cent live in urban areas, it is inevitable that rising levels of poverty nationally will badly affect conditions in the cities. But, even in the less urbanized countries, it seems as though urban poverty may well have increased, at least on the measure used in Table 5.5. Table 5.6 presents data computed on a different basis; poverty measured in terms of the proportion of the population living below a poverty line. According to Table 5.6, the last decade of ISI saw some increase in the numbers of people living in poverty although the incidence of poverty hardly changed. With rural people continuing to move to the urban areas, urban poverty rose while that in the rural areas declined. Migration was equalizing per capita income, as classical economic theory would suggest it should, but making urban poverty worse in the process. However, the debt crisis created millions more poor people in both the cities and the countryside. And because the debt crisis impacted far more severely on the cities than on the countryside, the incidence of poverty rose by 11 percentage points in urban areas compared with five in the rural areas. Indeed, the number of urban poor more or less doubled during the lost decade. Since 1990, the incidence of poverty in Latin America has fallen but the absolute number of people living in poverty has continued to increase, albeit at a much slower pace. What is interesting is that all 103


TABLE 5.6 The incidence of poverty in Latin America, 1970–99 Total

1970 1980 1990 1994 1997 1999

Urban

Rural

Millions

(%)

Millions

(%)

Millions

(%)

116 136 200 202 204 211

40 41 48 46 44 44

41 63 122 126 126 134

25 30 41 39 37 37

75 73 79 76 78 77

62 60 65 65 63 64

Source: UNDIESA (1989: 39), Altimir (1994: 11) and CEPAL (2001b).

of the increase has been concentrated in the cities and the number of rural poor has diminished slightly. The new model of development, therefore, is not only failing to cut poverty in the region in any significant way but is tending to ‘urbanize’ poverty. In part, this is because people continue to move to the cities from the more impoverished rural areas. But it is also because rising rates of unemployment and burgeoning casual employment are creating new forms of poverty in the urban areas.

DIFFERENTIAL PATTERNS OF URBAN CHANGE The 1990s have thrust Latin America into a highly competitive market situation and some places have fared much better than others. For this reason the following section considers the experiences of urban growth in three different countries. Mexico represents the classic case of a country that grew rapidly under ISI, suffered very badly during the debt crisis, and then introduced IMF-approved forms of stabilization and adjustment. All seemed to be going well until 1994 when a major economic and political crisis hit the country just as it entered the North American Free Trade Area (NAFTA). Mexico exemplifies both the strengths and the weaknesses of the new approach to development. Chile, by contrast, is the darling of neoliberal thinking. After the traumas of three years of democratic socialist government and its overthrow by a military junta in 1973, the government of Augusto Pinochet anticipated IMF policies by some years and reformed the Chilean economy along neoliberal lines. Despite many criticisms of the social record, many argue that Chile represents the best face of the new form of capitalism and note that it has now graduated into the category of high-income countries in the World Bank league table (World Bank, 2002a). Colombia presents a much more complicated picture. The country has opened up its formal economy successfully, but there is a more covert side to economic opening. Arguably, the latter is the principal cause of the country’s current political and social crisis. Without drugs, Colombia would not now be suffering from civil war. Arguably, Colombia represents the worst-case scenario – of neoliberalism gone wrong. All three countries managed to attract foreign investment during the 1990s and did better than Latin America as a whole (Table 5.7). However, the data for 2001 are a necessary antidote to excessive optimism, and the figures for 2002 seem still worse. One of the problems with economic integration is that investment flows fluctuate considerably (Fernández-Arias and Hausmann, 1999). Improved export production is one of the new criteria for judging economic performance (Table 5.8). On this criterion, Chile and Mexico have done much better than Colombia, although only Chile has increased its share of exports since 1990. 104


TABLE 5.7 Foreign direct investment: Chile, Colombia and Mexico, 1990–2001 Country

% of gross domestic product 1990

1997

2001

0.8 0.5 1.0 0.8

7.0 6.2 3.1 1.4

4.5 2.9 4.6 na

Chile Colombia Mexico Latin America and Caribbean

Source: World Bank (1999: Table 5.1); CEPAL (2003). TABLE 5.8 Chile, Colombia and Mexico: export performance, 1965–2001 Country/region

Chile Colombia Mexico Latin America

Exports as % of GDP 1965

1980

1983

1990

2001

14 11 8 9

23 16 11 13

24 10 20 na

26 15 31 15

28 15 26 18

Source: World Bank, World Development Report, various years.

Mexico has outperformed the other two markedly in terms of growth in manufactured exports (Table 5.9). On this particular indicator, the Chilean economy has done rather poorly and continued to rely mainly on agricultural and mineral exports. Colombia is not dissimilar, with coffee, oil, and other primary products constituting the majority of its export revenues. One of the less desirable, and less publicized, aspects of restructuring in Latin America has been its effect on the manufacturing sector. Whereas manufacturing’s share of GDP generally increased under ISI (Table 5.10), the debt crisis and neoliberal reform have cut it. During the 1980s and 1990s, both Chile and Colombia experienced a major relative decline in manufacturing production and Mexico only avoided this problem because of the growth of export plants along the northern border. Since 1980, the overall economic performance of each country differs considerably (Table 5.11). While all struggled during the 1980s, the 1990s saw Chile surge ahead. Both Colombia and Mexico TABLE 5.9 Chile, Colombia and Mexico: development of manufacturing exports, 1965–2001 Manufactures as % of total merchandise exports

Chile Colombia Mexico Latin America

1965

1980

1990

2001

4 7 16 8

10 20 12 20

11 25 43 34

16 34 83 48

Source: World Bank, World Development Report, various years. 105


TABLE 5.10 Chile, Colombia and Mexico: manufacturing value added, 1950–99 (% GDP) Country

1950

1960

1970

1980

1990

1999

Chile Colombia Mexico

23 13 19

26 16 20

28 18 23

20 21 20

21 20 21

16 12 21

Source: Adapted from Thorp (1998: 162) and World Bank (2001c: 296–7). TABLE 5.11 Chile, Colombia and Mexico: economic growth by decade since 1980 (annual growth in GDP) Country Chile Colombia Mexico Latin America

1980–89

1990–1999

2000–2

3.2 3.7 2.1 1.7

7.2 3.3 2.7 3.4

3.1 1.8 2.5 1.2

Source: Inter-American Development Bank (2003).

have struggled. The first three years of the new millennium show that, along with most of the region, all three countries face a complicated future. The urban consequences Mexico Mexico is almost a classic case of how ISI and subsequent restructuring should affect the urban system. During the years of ISI, the populations of the three largest cities, Mexico City, Guadalajara and Monterrey, grew rapidly and only cities on the northern border, like Tijuana, Mexicali, and Matamoros, and major tourist centres, like Acapulco, grew faster (Table 5.12). The big three received the bulk of the increase in industrial and commercial investment. The pace of urban expansion slowed in the 1970s, but the real change in their fortunes came with the debt crisis. All three grew more slowly than the country’s urban population as a whole and Mexico City was affected particularly badly. It is possible that the slowdown was exaggerated by the 1990 census, which was much criticized in Mexico City at the time. Nevertheless, there is no doubt that the growth rate of Mexico City was very much slower than in earlier years. Mexico City lost some 6,000 companies and one-quarter of a million manufacturing jobs between 1981 and 1988 (Rowland and Gordon, 1996; Garza, 1999). Economic restructuring favoured the cities along the US-Mexico border as regular devaluations of the peso made them increasingly attractive to foreign investors. Their growth was also stimulated by migration across the international border and the series of agreements made with the United States, beginning with the bracero programme in 1942, continuing with the establishment of the Border Industrialization Programme in 1965, and culminating in Mexico’s entry into NAFTA in 1994 (PerlóCohen, 1987; South, 1990; Sklair, 1992; Kopinak, 1996). Starting from humble beginnings, the border cities boomed in the 1940s and 1950s before growing at more reasonable rates during the period after 1970. However, unlike Mexico City, Guadalajara and Monterrey, the border cities continued to grow rapidly during the debt crisis. Devaluation of the peso made Mexican labour very cheap and proved very attractive to US and Japanese companies (see Table 5.13). By 1999, maquiladoras accounted for 27 per cent of all manufacturing employment in Mexico. After 2000, NAFTA rules 106


TABLE 5.12 Mexico: population growth rates in the major cities, 1950–2000 1950–60

1960–70

1970–80

1980–90

1990–2000

5.0 6.4 6.3 2.3 5.0 2.2 7.2 9.3 3.1 1.8 5.5 5.7 4.8 3.0

5.2 5.5 5.7 5.5 5.0 3.8 5.0 7.7 1.4 2.2 5.6 13.1 4.9 3.3

4.2 4.0 4.6 4.3 4.3 4.5 2.8 2.6 4.5 6.1 3.9 5.3 4.3 3.2

0.4 2.6 2.5 2.5 2.9 3.4 3.8 5.0 2.8 2.7 3.0 5.3 2.8 2.0

1.6 2.5 2.2 2.6 2.7 2.6 4.4 5.7 3.1 3.0 2.7 3.4 2.0 1.8

Mexico City Guadalajara Monterrey Puebla León San Luís Potosí Ciudad Juárez Tijuana Torreón Mérida Chihuahua Acapulco Urban population Total population

Source: CEPAL (2002), INEGI (2002) and Demographia (2001). TABLE 5.13 Mexico: growth of the maquiladoras, 1966–2002 Year

Companies

Employees (000s)

Foreign exchange earnings (US$m)

1966 1975 1980 1985 1987 1991 1994 1997 2000 2002*

1,157 1,454 1,620 1,760 1,125 1,914 2,085 2,661 3,590 na

1,114 1,167 1,120 1,212 1,305 1,467 1,583 1,888 1,285 1,066

na 11,454 11,773 1,450 1,598 4,134 5,803 7,593 13,523 na

*January–April Source: Gilbert (2002: 221).

removed customs duties so the advantages of the maquilas have been less marked and employment fell between 2000 and 2002 (see Box 3.1). Other cities also benefited under the New Economic Model. Tourist centres prospered during the 1980s and 1990s as the cost of travel for North Americans became progressively cheaper. Acapulco grew rapidly along with newer tourist cities like Cancún and Puerto Vallarta. The downside of restructuring is that many areas did not find much of a niche in the world economy. Areas in the south of the country and in parts of northern central Mexico were hit particularly badly, for example, the states of Chiapas, Oaxaca and Zacatecas. Far from the US border, and unlike Yucatán, not even close to Florida, these areas attracted little in the way of foreign investment. As they also produced agricultural or mining products with little economic potential, cities in these states declined relative to most other parts of the country. 107


The unequal outcome of restructuring is reflected in the available figures on per income by state. For while the gap in terms of per capita income between the richest state, the Federal District, and poorest, Oaxaca, increased from 19.4 to 29.5 between 1980 and 1999, some states in north and central Mexico improved their relative position (Hernández-Laos, 2000; Arroyo, 2001; Tamayo-Flores, 2001). What is more worrying is that the partial reduction in regional disparities has led to very little reduction in poverty (Table 5.14). In 1999, two out of five Mexicans were still living in poverty. The debt crisis increased poverty, which was partially redressed by the restructuring between 1988 and 1994. However, the Tequila crisis of 1994 hit the poor very hard and subsequent improvements have only put the incidence of poverty back to the level it was before the debt crisis hit. The improvements since 1995 are welcome, but whether they are wholly the outcome of restructuring is doubtful. More important, perhaps, is that millions of Mexicans have left the country for the United States. Poverty in Mexico has been reduced both by their physical departure and by their remittances. In 1995, Mexican migrants sent back US$4 billion of their earnings to their families in Mexico (Castro and Tuirán, 2000) and in 2001, a staggering US$9.2 billion (The Economist, 2003a). TABLE 5.14 Mexico: poverty and inequality, 1963–2001 Year

1963 1977 1984 1989 1994 1996 1998 2000 2001

Gini coefficient

.536 .539

.542

% population below poverty line 45.1 (77.5) 45.1 (58.0) 45.1 (58.5) 47.8 (59.0*) 45.1 (73.7) 52.1 (79.5) 46.9 (79.5) 41.1 (79.5) 42.3 (79.5)

% urban population below poverty line

% rural population below poverty line

42.1 36.8 45.1 38.9 32.3

57.0 56.5 62.5 58.5 54.7

* 1988 Source: CEPAL (2002: Tables 14 and 26); bracketed figures are from Hernández-Laos (2000: 871).

Insofar as there has been any reduction in poverty levels since 1989, it seems to have favoured urban Mexico.The incidence of poverty in the rural areas is not much better today than it was in 1989. Despite the continued departure of people to the cities and even across the northern border, few rural areas have benefited from restructuring or from growing integration with the United States and Canada. The rural states of the far south have certainly gained little and it was the fears of farmers in the southern state of Chiapas about the effects of NAFTA that was one of the factors behind the Zapatista rebellion (see Chapter 12). The more urbanized states have done relatively better and all the northern states increased their per capita GDP between 1980 and 1999 (Arroyo, 2001). However, this has done little to improve living conditions along the border ‘where between 60 and 75 percent of the population lives in poverty’ (Kelly, 2002: 6). It could be argued that life in the border cities is the best illustration possible of the urbanization of poverty under the New Economic Model. But, what of Mexico City? For years, the capital dominated the Mexican economy but since 1982 that dominance has been under threat. The city’s share of national manufacturing employment plummeted from 49.5 per cent in 1980 to a mere 23.5 per cent in 1998; despite the latter figure including every industrial centre in the State of Mexico (INEGI, 2001). It has lost public sector jobs, the number of public servants declining by 28,000 between 1987 and 1995. Surprisingly, too, it has even 108

Chile During the 1950s ISI helped both Santiago and Concepción, although its impact was less marked during the 1960s. The city that benefited most from industrialization during the 1960s was Arica, mainly because it was given special import tax status in 1958. And, when a bizarre political decision banned car production in Santiago and virtually forced vehicle manufacturers to locate in the country’s northernmost port, the city’s population exploded (Gilbert, 1974; Gwynne, 1978). None of the major cities grew very quickly after 1970 because Chile’s population was increasing rather slowly and most Chileans already lived in urban areas. But the liberalization strategy of the new military government meant that during the 1970s, the most dynamic cities were those that were linked to export production. Antofagasta, Arica,Talca, La Serena-Coquimbo and Temuco all grew faster than the largest three cities (Table 5.15). By the 1980s, it was the cities in the south that were prospering most, a consequence of the major boom in agricultural and timber exports. TABLE 5.15 Chile: annual population growth of the largest cities, 1952–92

Santiago Valparaiso-Viña del Mar Concepción-Talcahuano Antofagasta La Serena-Coquimbo Temuco Rancagua Arica Talca 16 largest cities Total national population

1952–60

1960–70

1970–82

1982–92

4.2 2.7 3.5 4.0 2.7 3.2 3.0 0.8 2.8 3.7 2.5

3.3 2.0 3.0 3.7 3.4 4.3 5.1 15.2 3.1 3.3 2.0

2.7 2.0 2.4 3.3 3.1 3.0 4.0 3.9 3.1 2.7 2.0

1.9 1.2 1.9 2.0 3.0 2.9 2.6 1.5 1.4 1.9 1.6

Cities with more than 150,000 people in 1992. Source: CEPAL (2001b). 109


been losing a few headquarters of major companies to Greater Monterrey; in 1980 Mexico City hosted 19 of the country’s 25 largest companies; in 2000 only 17. The city’s relative decline is underlined by the fact between 1980 and 1999 the Federal District’s contribution to the country’s GDP fell by 2.7 percentage points and that the State of Mexico by 0.3 (Arroyo, 2001). Despite this decline, the per capita income of the Federal District, which now contains only 47 per cent of Mexico City’s population, actually rose between 1980 and 1999 and the capital maintained its position at the top of the league table of per capita income in 1999. Although it lost many manufacturing jobs, service employment has grown rapidly. While many of these service jobs have been in low-income activities, like street trading, there has also been a major expansion in production services. Like most Latin American capitals a series of major hotel chains, accountancy firms and advertising agencies have established branches in the city. After all, Mexico City is still by far and away the major centre of decision-making in the country. But, if the central core of the city has become more affluent, the rest of the greater metropolitan area has not. Most of the city’s poor live outside the Federal District in the State of Mexico, an area where per capita income declined between 1980 and 1999. Arguably, Mexico City is experiencing the full social impact of global city status, growing polarization (Sassen, 1991). People with skills and capital have prospered; those without have done badly. Mexico City reflects the new reality under Latin American neoliberalism of a polarization of incomes (Dussel, 2000). The urbanization of poverty is accompanied by the urbanization of affluence.


Santiago grew slowly after 1970 when the combination of fertility decline, structural adjustment and economic de-concentration began to sap its vitality. Indeed, the population of Santiago relative to that of the largest 16 cities remained constant from 1960 to 1992 – 58 per cent.The national capital initially fared badly under Pinochet’s neoliberal reforms because they allowed imports to flood into the country putting many local manufacturing companies out of business. As the largest manufacturing centre, industrial production in Santiago was badly affected and its share of the country’s industrial value added fell from 52.1 per cent in 1970 to 43.5 per cent 15 years later (de Mattos, 1996; 1999: 37). Since the mid-1980s, much of Santiago’s dynamism has returned and it has re-established its former dominance over the Chilean economy; in 1991 51 per cent of Chile’s industrial value added and some 47 per cent of its gross domestic product were produced in the city. Chilean experience is similar to that of Mexico insofar as the neoliberal model has increasingly favoured cities that are linked to the production of exports. However, unlike Mexico, and indeed most of the rest of the region, poverty has been in decline since 1975. Since 1990 the combination of healthy economic growth, the return of democracy, a tendency for unemployment to fall and the establishment of a fairly effective social safety net has cut poverty in both urban and rural areas. Where Chile differs from Mexico is that the incidence of urban and rural poverty is very similar (Table 5.16). The rural poor have gained, to a degree, from the boom in export agriculture. The worrying feature of the Chilean experience is that after so many years of relatively rapid economic growth, one in five Chileans is still living in poverty. Many observers blame this situation on the nature of the development model. First, given the labour reforms and the ability to hire and fire relatively easily, many urban and rural jobs pay very low wages. Second, there has been no change in the distribution of income (Table 5.16) and in Chile, as in the rest of Latin America, inequality is increasingly being blamed for slowing the pace of economic growth (Morley, 1995; Berry, 1998; IDB, 1998; World Bank, 2002b). Many commentators have criticized the Chilean economic miracle because it has failed to reduce inequality nationwide and has created increasingly polarized cities. This is most obvious in Santiago where ‘globalization’ has allowed highly educated Chileans to capitalize on their skills and the inflow of cheap imports has improved their life style while sustaining unemployment and low wages among the less skilled.The nature of urban management has also divided the city (CED, 1990; Dockerndorff et al., 2000; Sabatini, 2000). The military regime demolished squatter settlements located in high-income areas and moved the population to the poorest municipalities (Rodríguez and Icaza, 1993; Scarpaci et al., 1988). What made the situation worse was that the authorities in these impoverished areas were given little in the way of additional resources to cope with the influx. Spatial segregation was TABLE 5.16 Chile: poverty and inequality, 1970–2001 Year

1970 1987 1990 1992 1994 1996 1998 2000 2001

Gini coefficient

0.554

0.553 0.559

% population below poverty line 17.1 38.6 38.1 38.6 34.6 38.6 27.7 38.6 34.6 27.5 34.6 23.2 34.6 21.7 34.6 20.6 34.6 20.0

Source: CEPAL (2002: Table 14); Feres (2001); Scott (1996). 110

% urban population below poverty line

% rural population below poverty line

38.4

39.5

26.9 21.8 20.7 20.1

30.9 30.6 27.6 23.8

Colombia If liberalization and globalization have produced some benefits for the poor of Chile and even Mexico, the balance of advantage in Colombia is currently much more debatable. Colombia went through a period of moderately successful import substituting industrialization in the 1950s and 1960s which, assisted by the discovery of oil, coal, emeralds and nickel, produced steady if unspectacular rates of economic growth. The country suffered some economic and financial problems during the debt crisis, but many fewer than most countries in the region (Edwards, 1995; Green, 1995). Unfortunately, this history of seemingly admirable economic management failed to produce a peaceful society. Not only was Colombia as unequal as most of its neighbours but it had far more than its share of political and social violence. During the 1980s, the number of violent deaths grew rapidly as the drug gangs, police, guerrillas and paramilitary forces came increasingly into conflict. Increasing levels of violence and slower economic growth convinced the economic and political elite that it was essential to change its economic model. A new government in 1986 promised to make Colombia more like an Asian Tiger and the country took a major step along this path in 1990. The neoliberal agenda of the government of César Gaviria (1990–94) was to make the economy more efficient, cut the responsibilities of the state, open up the economy and keep inflation under control (Ramírez-Ocampo, 1998). Colombia also sought to follow Chile’s example by reforming its pension, social security, health and housing systems, reducing the power of organized labour and privatizing many state enterprises (Hommes et al., 1994: 49). The country also introduced political reforms in an effort to reduce the level of political conflict and civil violence. A new constitution in 1991 attempted to liberalize the country’s political institutions and to devolve power to the cities and departments.The political equivalent of opening up the country to foreign investment and imports was to make government more efficient, more democratic and more responsive to ordinary Colombians. If we are to believe the World Bank, which included Colombia in its list of 24 ‘more-globalized’ developing countries in 2001, the new model was highly successful (World Bank, 2001c: 51). Certainly, the pace of economic growth was quite impressive during the mid-1990s and in cities like Bogotá levels of unemployment and poverty fell dramatically (Gilbert, 1997a). Unfortunately, the positive picture changed in 1997 when an economic recession hit the country and when the country began to reap the bitter fruits of the hidden side of globalization (Sarmiento, 1999). Colombia, of course, has become famous for supplying drugs to the developed world. Marijuana, cocaine and, most recently, opium exports have contributed to the economy even if the foreign exchange generated has never been registered in official statistics. Estimates of the value of drug production vary, although the most commonly cited figure is around 2 per cent of GDP (Thoumi, 1995; Fernández, 1996; Steiner, 1998; The Economist, 2001a). The real problem with the drug trade for Colombia is that its illegality has stimulated increasing levels of violence and corruption (Tirado, 1998). In 1989, no less than three presidential candidates were assassinated during the electoral campaign and President Samper was accused in 1994 of receiving campaign contributions from the Cali cartel – a charge that severely weakened his presidency and increasingly damaged the national economy. Gradually, too, the FARC and ELN guerrillas were taking control of the rural areas and imposing ‘taxes’ on drug producers; a ‘business’ that the World Bank (2002b: 127) estimates is worth US$500 million per year. Although violence has been a feature of life in some cities for years, and particularly in Medellín during the reign of Pablo Escobar, the worst problems lie in the countryside. In many areas violence has reached such extreme levels that it has forced people to flee to the cities and it is estimated that more than two million people have been displaced by the conflict (Table 5.17). 111


aggravated in the 1990s by the privatization of space. The creation of guarded residential complexes has protected the better off and even the poor have begun to fence off public space in an effort to cut crime and improve their living conditions (Ducci, 1997).


TABLE 5.17 Colombia: the economy, murders and internal displacement, 1990–2001 Internally displaced people 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Annual murders

77,000 110,000 64,000 45,000 78,000 89,000 181,000 257,000 308,000 288,000 317,375 341,925 90,179 (Jan.–Mar.)

Per capita income (annual growth)

24,267 28,140 28,224 28,026 26,807 22,062 24,155 24,306 26,062 na na na na

Urban unemployment (%)

2.2 0.0 2.1 2.4 3.8 2.9 0.0 1.4 –1.1 –5.6 0.4 –0.4 0.0 (Jan.–Sept.)

10.6 9.4 9.8 7.8 8.0 9.5 11.3 12.0 15.6 18.0 19.5 16.8 15.7

Sources: Rojas (2001: 33); Sarmiento-Anzola (1999: 113); CODHES (2002); Banco de la República (2002).

The drug trade, and the internal violence that it has released, have also brought the threat of international intervention. Under Plan Colombia the US government is helping Colombia to control the production of drugs by providing military assistance and European governments are providing aid to improve social conditions in rural areas. However, the plan is very controversial and to date is showing relatively little sign of success. It is difficult to believe that greater US involvement will not accentuate the deadly cocktail of official, paramilitary, guerrilla and drug-related conflict. The plight of Nicaragua in the 1980s is one possible future scenario for Colombia. It is less than certain how Colombia’s unique combination of formal and informal globalization has affected the recent geography of urban growth. Until 1973, the pattern was relatively clear, rapid urban growth was occurring but was producing a pattern of urban development that was relatively balanced by Latin American standards. Colombia was a country of medium-sized cities and each region had its own urban hub. ISI had increased the level of industrial and urban concentration, and Bogotá certainly benefited considerably, but Table 5.18 shows that many other cities grew just as rapidly. TABLE 5.18 Colombia: annual population growth of the largest cities, 1951–93 City Bogotá Medellín Cali Barranquilla Cartagena Bucaramanga Cúcuta Pereira Total urban Total population Source: CEPAL (2001b). 112

1951–64

1964–73

1973–85

1985–93

7.0 8.0 7.2 4.4 5.1 5.5 5.6 5.0 4.4 2.9

5.8 1.8 4.9 4.0 3.8 5.3 5.0 4.6 4.3 2.9

3.0 2.4 2.6 3.0 3.8 3.0 4.5 3.0 2.7 1.6

2.0 1.2 1.8 1.3 1.9 2.3 1.6 3.2 1.9 1.4

113


After 1973, fertility rates continued to decline rapidly. In the late 1960s the average Colombian woman gave birth to 6.2 children, by the late 1970s this had fallen to 4.3 and by the late 1990s she bore only 2.8 children (CELADE, 2001: 65). This helped to slow the pace of urbanization even if cityward migration continued to boost the populations of most of the larger cities, which continued to grow much faster than the national population and slightly faster than the total urban population. The country was much less affected by the debt crisis than most of its neighbours so that the pace of urban growth did not fall dramatically. Traditionally, Colombia has had a more even pattern of urbanization than most other Latin American countries. In 1951 Bogotá had approximately the same population as that of the next two cities, Medellín and Cali, combined. However, import substitution tended to favour Bogotá’s expansion because of its larger market and because it was the administrative centre of the country (Gilbert, 1975; Dávila, 1996) and its population grew more rapidly than those of its two main rivals after 1964. Since 1985, the liberalization of imports has brought major problems for the textile and clothing industry of Medellín, a situation made worse by the tendency for drug traffickers to bring in very cheap imported goods as a means of laundering drug monies. Colombia has recently postponed the date of its census so we will not know what happened to urban growth in the 1990s for some time. Export production has no doubt had some effect and insofar as most of Colombia’s exports come from agriculture and mining, export production has stimulated growth in a number of provincial cities. The growth of petroleum production in the llanos, nickel in northern Antioquia and coal from the Guajira have all had some local impact on urban growth although the recent decline in the world coffee price had badly affected the central area of the country. The other clear urban outcome is that the flood of displaced people has impacted heavily on cities located in the areas of conflict and increasingly even on major cities like Bogotá. Many rural areas have suffered badly since 1990 and currently as much as 40 per cent of Colombia’s total area is effectively beyond the control of the state. Bogotá has continued to grow despite these problems and indeed has flourished as its administration has become more streamlined and major projects like the Transmilenio bus system have been completed. Indeed, Bogotá is now regarded as the new Curitiba, a Latin American example of how cities ought to be run (Gilbert and Dávila, 2002). Criminal activity is declining, the streets are relatively clean and the parks are well kept. The globalization of Bogotá has produced a World Trade Centre, a glut of BMWs and a series of new exclusive hotels. The main problems come from the high level of unemployment and the city’s inability to generate much in the way of exports beyond cut flowers and leather. The recent decision of the guerrillas to take the ‘war’ to the cities is also a major concern and the wave of bomb and rocket attacks do not encourage too much optimism. This confused situation means that any effort to predict the urban future is difficult. The situation is as likely to get worse as it is to get better. Has Colombia suffered from the urbanization of poverty? Table 5.19 suggests that Colombia fits the traditional theory that economic growth is effective in reducing poverty. Poverty diminished between 1978 and 1995, before rising rapidly during the economic crisis of the late 1990s. The extent to which poverty has increased since 1997, however, is in dispute; CEPAL (2002) reports that 55 per cent of Colombians were living in poverty in 2001, whereas the Colombian government has recently admitted to a figure of 68 per cent (El Tiempo, 2002; Sarmiento-Palacio, 2002). Similar disputes revolve around the reliability of figures on the distribution of income (Londoño, 1995; Sarmiento-Anzola, 1999). The incidence of poverty continues to be much higher in rural areas than in the cities and Núñez and Ramírez (2003: 19) estimate that in 2000, 84 per cent of rural Colombians were living in poverty compared with 50 per cent of their urban compatriots. However, since 1995 poverty seems to have increased more rapidly in the cities than in the countryside (ibid.). There are two fundamental causes. First, unemployment has affected the major cities badly and, second, the arrival of so many displaced people from the countryside has contributed further to urban poverty. In the late 1990s that was the urbanization of poverty, Colombian style.


TABLE 5.19 Colombia: poverty and inequality, 1978–99 1978

1988

1995

1999

80 46 33 112

65 29 19 183

60 21 13 216

64 23 16 210

Urban Poverty rate Extreme poverty rate US$2 per day poverty

70 27 34

55 17 5

48 10 3

55 14 5

Rural Poverty rate Extreme poverty rate US$2 per day poverty

94 68 59

80 48 38

79 37 29

79 37 30

National Poverty rate Extreme poverty rate US$2 per day poverty Mean income per capita ($000)

Gini coefficient

0.54*

0.55**

0.56

0.59

*1980 ** 1991 Source: World Bank (1994) and Sarmiento-Anzola (1999: 79).

AN UNPREDICTABLE FUTURE Urbanization has brought revolutionary change to Latin America insofar as it has changed the nature of most people’s lives.The cities have provided the safety valve for people to escape from rural penury and over the years the quality of life has improved in certain very important ways. Today, people live to a much greater age than ever before, women bear many fewer children, lives are more complex and arguably more interesting and most homes now have a television set. What urbanization has failed to bring is greater equality, justice or even peace of mind. The process of urbanization was fairly similar in most parts of the region during much of the twentieth century. Of course, the pace of change varied, as did the timing of urban growth, but the similarities were undeniable. Rural–urban migration, metropolitan expansion, industrialization, and the proliferation of informal settlement and employment transformed the cities from 1950 until 1980. Urban poverty increased as the cities absorbed large numbers of impoverished rural people, but only moderately. The migration process was surprisingly orderly as the rural people best equipped to survive in the cities moved, leaving the less able and adaptable behind.The new urbanites were broadly conservative; they sought integration into an unequal society rather than striving to change it (Portes, 1972). Urbanization during the latest phase of globalization has continued to be profoundly unequal. Indeed, the cities have arguably become increasingly polarized both socially and spatially. Under neoliberalism, those with skills have generally prospered while the unskilled have encountered a more difficult economic environment. During periods of economic expansion the living conditions of the poor have sometimes improved but during downturns, they have generally suffered. However, if the cities have become more segregated and polarized, the gulf between incomes in urban and rural areas has frequently got smaller. Indeed, today, although the incidence of poverty is still higher in rural areas, the gap between urban and rural living conditions in parts of Latin America has been reduced. The equalization of urban and rural living conditions has sometimes been encouraged by agricultural modernization and the growth of exports. In this respect, liberalization has been a positive 114

FURTHER READING Blouet, B. and Blouet, O. (eds) (2004) Latin America and the Caribbean, John Wiley, New York, 4th edition. An introductory survey of Latin America which includes both systematic chapters and descriptions of individual regions. There is a chapter on the Latin American city. De Soto, H. (2000) The mystery of capital, Basic Books, New York. A highly influential book providing a rather persuasive if terribly simplistic explanation of why poor people remain poor. The book addresses urban problems in most poor countries but as it is written by a Peruvian has a strong Latin American flavour. Gilbert, A.G. (1998) The Latin American city, Latin America Bureau, London, second edition. Considers the causes of urban growth, the diverse nature of Latin American cities and the problems that they face. 115


force. The downside of the shift from ISI to the neoliberal model is that the debt crisis urbanized poverty. Economic stabilization programmes slowed urban growth particularly in the largest cities and economic recession cut both jobs and wages. The gap in incomes between urban and rural areas was reduced in large part because the urban areas got poorer while the rural areas stayed the same. Of course, the New Economic Model created new opportunities and challenges. Some cities have been able to respond while others have not. In the past, it was obvious that the largest cities would prosper; today, they may or may not – it all depends. The past 20 years have ushered in a phase of global competition that ensures that some cities will succeed but usually only at the expense of others. The case studies of Chile, Colombia and Mexico show that cities able to generate exports are likely to do much better than the average. Most national capitals will also fare reasonably well, but as the experience of Mexico City suggests, that is not always the case. Whatever the urban impact of globalization, local conditions are always likely to change, and sometimes extremely rapidly. One of the least desirable features of globalization is that local economic conditions are so unstable. The economy of a city that was doing well last year may plunge into difficulty this. Since 1990, most countries in Latin America have experienced periods of growth interrupted by sudden downturns. The causes of recession have generally originated outside the country, for example, the Tequila, Russian and Asian crises, although inappropriate domestic policies have often made the local impact much worse. In an increasingly integrated world, events thousands of miles away can hit a country or a city suddenly and profoundly. Bogotá’s economy was booming in the mid-1990s and then, suddenly, it was not. In the early 1990s Mexico’s economy was recovering well from the debt crisis, was about to join NAFTA, when suddenly everything went awry. More recent examples are the severe recessions experienced in Argentina and Uruguay. If one of the features of poverty is that people lack a feeling of economic security, then the instability of global processes may well have increased poverty in Latin America. If people feel poorer because their neighbours have become markedly richer than themselves, then the polarization unleashed by globalization has worsened poverty in the cities. And, if the absolute numbers of people living in poverty in cities is greater than ever before, then perhaps we can speak of the urbanization of poverty in Latin America. During the twentieth century, the process of urbanization in Latin America was revolutionary; it transformed people’s lives in unimaginable ways. The danger is that in the twenty-first century, it may become revolutionary in a more political way. Of course, given the unpredictable nature of this ‘globalizing’ world, this is less a prediction than the expression of a feeling of foreboding. In any case, what happens in one Latin American city or country most certainly will not happen in another. The urbanization process in that sense has become both more unpredictable and uneven – and also become inherently more geographical.


World Bank (2002) Globalization, growth, and poverty: building an inclusive world economy, Oxford University Press, Oxford. Concerned only in part with Latin America but is useful insofar as it provides a concise and fairly convincing case in favour of globalization. While it errs on the side of optimism, it does point out the special problems that seem to be holding back so many Latin American countries.

WEBSITES Inter-American Development Bank, www.iadb.org, with up-to-date statistics on economic and social matters. Latin American newspapers (some in English) can be accessed through this web page. World Bank, www.worldbank.org, a very extensive set of web pages, many of which deal with urban matters.

116

6 The political economy of sustainable development Warwick E. Murray and Eduardo Silva

Sustainable development became an increasingly popular paradigm, both in academic and policy circles, in the last two decades of the twentieth century, as it was realized that ‘environment and development are not separate challenges: they are inexorably linked’ (Brundtland, 1987: 37). In this chapter, ‘sustainable development’ is defined in a broad sense. To be sustainable, development must be viable in the long run in a number of closely interlinked ways. Thus, sustainability refers to more than purely ecological/environmental sustainability. In particular, political, economic and social sustainability are considered equally important. Sustainable development is the product of combining environmental and developmental concerns and although it is subject to disciplinary biases it usually refers to decisions affecting the sustainability of consumption, production, the resource base and livelihoods obtained from the resource base (Redclift, 1987). It has been defined as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Brundtland, 1987: 43). Meanwhile contemporary development studies envisages a political economy framework as one which studies the relationships between market-based economics and democratically-based politics.The study of political economy attempts to push enquiry past the purely economic to uncover the root causes of the political and social characteristics of capitalist production. Part of the limitations of the sustainable development thinking and the reformist technical guidelines … is their failure to address political economy. Without a theory of how the world economy works, and without theories about the relations between people, capital and state power, sustainable development thinking is locked within a limited compass. (Goldin and Winters, 1995: 200) This chapter seeks to span this divide, presenting discussion on the political-economic and environmental dimensions of the sustainability of natural resource use in Latin America and the links between these two areas of analysis. It is certainly true that the globalization and population growth of Latin American countries is radically affecting natural resource use. The globalization of Latin American economies has been closely linked to the political and economic objectives of higher economic growth and the policies of economic reform that have been introduced since the mid-1980s in order to achieve it (see Chapters 3 and 4). As a result, trade and investment have expanded, particularly in terms of non-traditional exports. In Latin America (as opposed to East Asia), non-traditional exports have tended to be concentrated more in natural resource areas than in manufacturing. Thus, recent export growth has been particularly evident in the agricultural, fishing, forestry and, to a lesser extent, mining sectors. The emphasis on trade has meant clearing more forest for timber exports and to make more land available for export agriculture and ranching. Such was the case with soya production in Bolivia in the 1990s, and cattle ranching in Costa Rica in the 1980s. The emphasis on trade also produces pressure for more prospecting for and development of mining (oil in Ecuador; gold and gems in Venezuela; iron in Brazil), as well as heightened industrial use of water, and more 117


intensive fishing (World Resources Institute, 1994). International capital markets reinforce the pattern. Latin American nations are saddled with the heavy burden of a debt overhang – the legacy of the debt crisis of the 1980s. Servicing those debts is a key condition of continued creditworthiness in international capital markets. Doing so requires generating even more exports, or else too much precious foreign exchange will go to pay the creditors and not enough will remain for development needs (Miller, 1991). This increased resource extraction has brought into focus the question of the long-term politicaleconomic and environmental sustainability of such economic policies. Environmental factors in particular cannot be omitted from the question of contemporary development in Latin America. If Latin American countries achieve further economic growth in future years, their use of non-renewable resources and their contribution to greenhouse gas emissions will increase, particularly if the level of heavy industry increases.Thus, provisions must be made to promote the efficient use of resources and the minimization of wastes. In urban areas, policies must be formulated to ensure that the development needs of the poor are met without imposing unsustainable levels of resource use and waste creation (WHO, 1992). The interdependence between the environment and society ensures that ecological possibilities are inextricably linked to social and economic policies.Thus, the aim of Latin American societies, within the scope of sustainable development, should be to achieve social, economic, political and ecological targets, while simultaneously minimizing the level of local, regional and global environmental damage (see Figure 6.1). Sustainable development must be concerned with the rational use of resources – minimizing the use of non-renewable resources and ensuring that renewable resources can be used for the long rather than short term. However, the essential point about sustainable development (and one that can be ignored by environmentalists) is that it must aim to meet basic human needs – access to an adequate livelihood, access to adequate shelter and a healthy environment and some form of participation in decision-making that affects those basic human needs (see Figure 6.1). The question of environmental sustainability, then, must be firmly set within the framework of social and political relations. Virtually all national governments in Latin America have declared aims of achieving high economic growth, greater equity and environmental sustainability. However, at present, there are significant trade-offs between these declared aims. With this in mind, this chapter is divided into a number of sections. First, the political economy of resource use will examine the conflicts in resource use between the aims of economic growth and environmental sustainability in general at the continental scale, with reference to particular national and regional scale case studies. It will review the extent of the reliance on natural resource exports that currently characterizes the continent. Then, it deals with questions concerning sustainability given the contemporary focus on primary product exploitation and export. There are essentially two controversies: the political-economic threats to sustainability yielded by current economic policy and the environmental impacts of primary product orientation. In the next section, two policy models for sustainable development are outlined – the ‘large-scale project’ and the ‘grassroots’ approaches. Finally, we attempt to complete the historical framework underlying these concerns and suggest where debate and policy might go from here.

NATURAL RESOURCE USE – ECONOMY OR ENVIRONMENT? Economies use natural resources in ever-increasing quantities to produce the goods and services we consume. Until the past two decades, it was widely assumed that natural resources were ‘free’, in the sense that their extraction need not consider environmental side effects. This view has changed. It is now generally recognized that the unrestrained extraction of natural resources all too often results in their rapid depletion and environmental degradation. The consequences include the health hazards inherent in water and air pollution and the poisoning of land with agrochemicals and pesticides. Local and global climate change threaten. Species extinction contributes to the loss of biodiversity, sapping the vitality of the gene pool life relies on for its creation; it also robs us of economically useful species, 118

MINIMIZING USE OF NONR E N E WA B L E R E S O U R C E S ( Fo s s i l f u e l s, m i n e ra l s, l o s s o f b i o d i ve r s i t y )

S U S TA I N A B L E DEVELOPMENT

S U S TA I N A B L E U S E O F R E N E WA B L E R E S O U R C E S ( e. g . a q u i fe r s a n d f r e s h wa t e r r u n o f f, s o i l s, b i o m a s s )

KEEPING WITH ABSORPTIVE C A PAC I T Y O F L O C A L A N D G L O BA L S I N K S F O R WA S T E ( e. g . fo r gr e e n h o u s e g a s e s, s t ra t o s p h e r i c o zo n e d e p l e t i n g c h e m i c a l s, p e r s i s t e n t c h e m i c a l s, fo r l i q u i d wa s t e s a n d s u r fa c e r u n o f f, ke e p i n g w i t h i n a b s o r p t i ve c a p a c i t i e s o f wa t e r b o d i e s , e t c . )

Access to adequate livelihood (often implies access to n a t u ra l r e s o u r c e s )

MEETING HUMAN NEEDS

Choice Pa r t i c i p a t i o n i n n a t i o n a l and local politics and respect of human rights

Access to adequate s h e l t e r a n d h e a l t hy e nv i ro n m e n t (including basic ser vices)

The political economy of sustainable development

119

Figure 6.1 Components of sustainable development. Source: adapted from Mitlin (1992: 3)


thus jeopardizing food sources and depriving us of potential medicinal and other uses. Unrestrained mining of minerals raises the spectre of scarcity of the basic inputs our economies depend on (Pearce and Turner, 1990; Daly and Townsend, 1993). There are two categories of natural resources: renewable and non-renewable. Renewable natural resources, as the name suggests, are those replaced by nature at rates in proportion to human life cycles, such as forests, water, and animals (including fisheries). Non-renewable natural resources largely refer to minerals. Once extracted, natural regeneration occurs in geological time, which is far too slow a process to be useful to humans; some resources can be re-used through the use of scrap (such as copper and aluminium). Land suitable for agriculture and ranching falls somewhere in between. Growing recognition exists that these resources are interconnected (Commoner, 1990; Pearce and Turner, 1990). This is especially true for renewable natural resources. For example, forests are crucial for watersheds. They maintain rainfall patterns that feed them. Furthermore, they fix soil at the banks and on slopes, thus reducing erosion, siltation and maintaining oxygenation of the water for river life. The watersheds feed rivers and lakes that agriculture, energy creation, and other economic activities rely upon. Clear-cutting the forests that watersheds depend upon affects the entire chain (Myers, 1992). The extraction of non-renewable resources, however, also has effects on surrounding ecosystems and the interconnections inherent in them. Mining operations frequently have devastating impacts on local ecosystems. Oil exploration in tropical forests can pollute land and water to the detriment of local human and animal populations; in Ecuador’s Amazon, an environmental crisis has occurred from the poisoning caused by oil mining by-products not being reinjected back into the wells, but instead left in open pits. Placer gold mining in Amazonia has poisoned water supplies and fisheries with mercury, posing potentially daunting health risks, particularly for children (Schmink and Wood, 1992). In northern Chile, the open cast mining of porphyry copper ores has released large amounts of arsenic into the atmosphere; the mining towns of Chuquicamata and Calama both have high rates of arsenic poisoning and cancer among their inhabitants (Comisión Nacional del Medio Ambiente, 1992; World Resources Institute, 1994). Latin America’s resource export dependency – a paradox of plenty? As our awareness and knowledge grow, all nations face the problem of how to balance natural resource use with sensitivity to related environmental issues. The question, however, is particularly pressing for developing nations. On average, they rely on unprocessed natural resources for their economic growth to a much greater extent than advanced economies. Exports of mineral and agricultural commodities supply a greater proportion of the savings and investment necessary for their economic development. Latin American countries depend on the hard currency generated by commodity exports to trade for food, technology, and research and development key to their economic growth (Furtado, 1976; Cardoso and Faletto, 1979). Thus, a push for economic expansion, or a drive for a development leap, usually requires an increase in the rate of natural resource extraction to sell more on international markets. Latin America has served as a resource periphery for the global economy since colonial times. It is a region extremely rich in natural resources. Given the abundance of ‘gifts of nature’ one might intuitively expect Latin American countries to be among the most ‘developed’ in the world. This is clearly not the case and we are faced with a ‘paradox of plenty’. Since the theorizations of the structuralist school, an increasing array of commentators have touted the idea that resource abundance may actually operate as a ‘curse’ which, under certain conditions, can prejudice long-run sustainable development (Auty, 1993). Various policy initiatives based on such ideas, which have aimed at breaking the continent’s dependence on resource-based development, have not been fully successful. Thus, at a general level, the countries of the region remain on the periphery of the global economy – largely dependent upon the global ‘core’ for consumer goods and for markets for their primary products. 120

TABLE 6.1 Export specialization in Latin America, proportional values, 2000 Major export

per cent

Next two major exports

per cent

per cent Top 3

Venezuela Belize Ecuador T. and Tobago Nicaragua Paraguay Panama Chile Colombia Costa Rica Peru Guatemala Honduras Bolivia El Salvador Uruguay Barbados Argentina Mexico Brazil

crude petroleum raw sugar crude petroleum petroleum products coffee soya beans bananas refined copper crude petroleum office machinery gold coffee coffee zinc ore coffee meat raw sugar crude petroleum motor vehicles aircraft

58.9 25.7 43.5 38.9 27.1 32.8 19.3 25.6 30.6 29.7 16.7 21.3 23.8 11.7 22.2 15.5 14.0 10.8 9.9 6.3

petroleum products, aluminium fruit juice, shell fish bananas, shell fish crude petroleum, natural gas shell fish, meat raw cotton, vegetable oil fresh fish, shell fish copper ores, fresh fish coal, coffee bananas, coffee fish meal fodder, refined copper raw sugar, bananas soaps, lumber vegetable oil, aircraft petroleum products, medicines leather, rice petroleum products, food preps. vegetable oils, petroleum products crude petroleum, statistical mach. iron ore, soya beans

28.6 43.8 22.5 26.4 27.1 17.8 28.2 19.6 14.6 15.4 23.5 15.7 11.1 20.0 8.4 14.3 15.4 13.5 13.8 9.5

87.5 69.5 66.0 65.3 54.2 50.6 47.5 45.2 45.2 45.1 40.2 37.0 34.9 31.7 30.6 29.8 29.4 24.3 23.7 15.8

Latin America

crude petroleum

12.5

motor vehicles, petroleum prods.

9.2

21.7

Source: Calculated from CEPAL (2001a). 121


Aggregate economic figures suggest that exports of both renewable and non-renewable primary products have become of less importance over time. In 1970, such exports accounted for 89.2 per cent of the value of total regional exports. By 2000, this had fallen to 42 per cent. In nominal terms, primary product export values and volumes continue to rise. Industrial exports have risen substantially in a number of Latin American countries – most notably Mexico and Brazil (see Chapter 3) which together account for close to 64 per cent of the value of all Latin American exports. Given this, aggregate data underestimate the continued importance of primary product exports in the remaining majority of countries. In 2000, in 16 countries, primary products accounted for over 50 per cent of the value of total exports. In Nicaragua and Venezuela, the proportional role of primary product exports stood at over 90 per cent. Although reliance on primary products for valuable export earnings has declined in the past 30 years in most Latin American countries, it has not fallen greatly in the smaller countries. If the major export goods for each country are considered, compelling evidence for overspecialization is revealed. In 2000, in 17 of the 20 countries selected in Table 6.1 the major export item in terms of value was a primary product, with only Mexico, Brazil and Costa Rica bucking that trend (CEPAL, 2001a). In many cases, the next two most important exports were also primary products, illustrating the general point that a dangerous reliance on a non-diversified range of such exports exists. In some countries this reliance is troubling; in Venezuela, for example, the top three exports account for around 88 per cent of the total, being comprised mainly of crude and refined petroleum. In general, in 2000, there were ten countries in which the top three, mainly primary product, exports


accounted for over 40 per cent of total values. Formal trade data actually under-estimate the importance of primary product exports as, in some countries, illegal items – such as coca in Bolivia, Colombia and Peru – make important contributions to the informal economy and livelihoods (Weeks, 1995). It is possible that the role of the non-formal economy and some of its illegal components has risen during and after the recent economic crises of Argentina and Venezuela in particular – although data for this is not yet available. Recently, the importance of agricultural exports has been compounded by neoliberal policy in a number of countries seeking to promote the export of counter-seasonal non-traditional agricultural items including, for example, fresh fruits from Chile (see later case study), winter vegetables from Guatemala, and cut flowers from Colombia. Foreign investment has played an important role in the rise of non-traditional exports (NTAX) as transnational companies have set up packing and, in some cases, production facilities in order to supply ‘exotic’ products for the global market (Barham et al., 1992; Murray, 1998; Murray 2002a). The process of the globalization of agriculture has facilitated this growing trend (Le Heron, 1993; Friedland, 1994). In some countries the general global and continental trend towards the declining importance of agriculture has been reversed through such processes; in Chile, Bolivia and Peru the proportional role of agricultural exports has risen markedly in the past 20 years, for example.

POLITICAL-ECONOMIC ISSUES AND IMPLICATIONS The preceding empirical review has made it clear that, in general, Latin American countries are heavily reliant on primary product exports. In the future, if neoliberal policies persist, it is probable that this specialization, based on comparative advantage, will continue. How can resource abundance operate as a curse? What are the prospects for political and economic development based on resource export specialization? What are the major problems associated with reliance on primary product exports? In this section, we look at some of the economic, social and political threats to sustainability and illustrate some of our arguments utilizing evidence from a case study of a renewable primary product export sector in Chile. The ‘terms of trade’ constraint Considerable evidence exists which maintains that the original structuralists’ concern with the ‘secular decline’ of primary product prices is of contemporary relevance (Grilli and Yang, 1988; Barham et al., 1992; Ocampo, 1993).This general trend had a negative impact on the evolution of the terms of trade for most Latin American countries during the past century and especially in the 1980s (Weeks, 1995). Naturally, the trend is affected by the exact mix of exports/imports. For example, in the case of countries exporting coffee and cocoa, the effect has not been so pronounced. However, in countries showing a relative specialization in metal production, cereals or the production of agricultural inputs (e.g. nitrates), the decline has been especially marked (e.g. in Chile, Argentina, Uruguay among others) (Ocampo, 1993). Oil-exporting countries, which initially experienced a rise in their terms of trade in the 1970s, suffered as prices ‘bottomed out’ towards the late 1980s (Weeks, 1995). Given the continued relevance of this problem, the original structuralist calls for the organization of commodity price support systems, regional cooperation and ‘fair trade’ deals in Latin America are as relevant today as they have ever been (Ocampo, 1993; Sunkel, 1993). Price volatility Within the broad decline of primary product prices, it is often the case that world market prices fluctuate considerably. This is particularly the case in energy, metals and minerals markets, which have been subject to rapid changes in economic fortunes (Gwynne, 1990). It is widely argued that windfall profits – such as those conferred on the oil-exporting economies after the first oil-hike – have not been utilized in ways which engender sustainable development. In particular, funds have also been used 122

Dutch disease For commentators such as Auty (1993), the phenomenon of ‘Dutch disease’ explains why energy, metal and mineral exporting economies have performed so badly despite their significant resource endowments. Dutch disease results from the appreciation of the exchange rate brought about by a rapid rise in inflows of rents (defined as surplus above normal profits) in selected sectors. When mineral commodity price booms occur, appreciation of the exchange rate can make manufacturing and agricultural sectors uncompetitive internationally. The major problem arises during periods of recession, when it may prove difficult to diversify exports into manufacturing and agriculture because the sectors have stagnated. This situation was observed in the Latin American oil and mineral exporting economies during the global recession of the mid-1980s. Protectionism and regionalism in the global core The high level of protectionism existent in many developed countries and trading-blocs has aggravated secular decline, most notoriously, in the case of the agricultural sector (McMichael, 1993; Apey, 1995). Guoymer et al. (1993: 231) claim that ‘nearly all of the industrial countries hold resources in agriculture behind a panoply of protectionist barriers that insulate the primary sector from competition’ (ibid.: 231). This has had the effect of distorting patterns of world trade enormously leading to a situation where; ‘production, specialisation and trade in agriculture are determined by the comparative strength of policies not by comparative advantage’ (Hitiris, 1989: 67). Thus, ‘most of the world’s food exports are grown in industrial countries where the costs of food production are high, and consumed in developing ones where costs are lower’ (World Bank, 1986: 154). In the Uruguay round of GATT negotiations agriculture was afforded a high profile. Although certain concessions were achieved, no great breakthroughs with regard to the prospects for developing countries were made (Grant, 1993). Latin American countries are attempting to overcome the potential ill-effects of regionalism in the economic core by vying for membership of free-trade agreements and organizations. For example, Mexico is a member of the North American Free Trade Agreement (NAFTA), and Chile has been particularly aggressive and successful in winning ‘free-trade’ agreements with major trading partners including the EU and the USA and plays a proactive role in APEC. Regional integration within Latin America, most notably MERCOSUR, was of growing importance until the economic crisis of 2001 (Gwynne, 1995). ‘Enclave’ economies The problem of ‘enclave’ economies, which tend to characterize primary product export sectors, has received attention in the Latin American development literature since structuralist writings, and took on extra importance in dependency analysis. This problem is most associated with energy, minerals and metals mining, but is also relevant to certain types of agricultural, forestry and fishing operations (especially large-scale ones). Mining and energy operations may operate as enclaves in two main ways. First, activities are generally capital-intensive and large-scale. This means that they may generate large revenues, but little in terms of employment and other linkages into local, regional and national economies. In the past, given high levels of foreign ownership in the Latin American mining sector, a good deal of surplus was expropriated back to service high levels of foreign investment. More recently, 123


for large-scale projects and ‘showpieces’ – as was the case in Venezuela (Gilbert, 1997b). During global recessions mineral economies have often been hit very hard. There have been some efforts to offset this ‘boom–bust’ process. For example, the Chilean copper-stabilization fund, founded in 1987, saved ‘windfall’ receipts during times of rising copper prices and used them to augment government expenditure in periods of low world prices (Gwynne, 1996a). In general, however, short-term political and institutional interests are such that it is often difficult to escape the negative implications of ‘windfall’ rents and price fluctuations.


higher levels of domestic ownership have partly reduced this problem, although the trend towards privatization is reviving some concerns (Gilbert, 1997b). Second, mining and energy operations are often geographically isolated, located at some distance from major cities. As such, these areas often form distinctive geographical economic zones which can lead to the exacerbation of social and economic inequalities at the regional scale. Foreign ownership and control Foreign ownership in Latin American resource sectors has traditionally been high. This is especially the case in energy and other mineral sectors, given the high levels of capital and technology required to set up production. The controversy of foreign ownership has inspired a number of expropriations and nationalization of sectors where foreign control was high, including Mexican oil (1938), Peruvian oil (1968), and Venezuelan oil (1976), Bolivian tin (1952), and Chilean copper (1973). In the neoliberal 1990s, the benefits of foreign investment were given greater weight, which has led to number of privatizations including Bolivian tin and silver mines, and Mexican copper (Gilbert, 1997b). Currently, high levels of foreign ownership are evident in NTAX sectors that are most explicitly geared towards export for luxury markets in the developed world (Barham et al., 1992; Gwynne, 1993a; Sunkel, 1993; Barton, 1997b). Such ownership can precipitate a number of problems. First, it can lead to technological and financial dependence as transnational companies (TNCs) act as the major, and sometimes only, importers and diffusers of the relevant capital and technology. Second, it can lead to an outflow of profits which could be captured if national potential were developed. Finally, in general there is little incentive for the companies to behave in a way which is explicitly beneficial for the long-run development of a particular country or producing space. For example, firms involved in NTAX production/distribution will actively search for a variety of locations with low labour costs and natural resource abundance. This may compound the ‘locking-in’ of countries into low-skill, lowproductivity activities. Food security In the agricultural sector, recent re-structuring towards agro-exports has reduced food security as traditional staples have been replaced by export cash crops. Furthermore, the protectionist policies of industrialized countries, ‘dumping’ of surpluses, internal controls on food prices in Latin America and over-valued domestic currencies have all contributed to the rising import of food into the continent (Kay, 1995). Inequality and social conflict Often, growth in primary product sectors has had the effect of exacerbating social, economic and geographical inequalities. In the case of the agricultural sector, there is considerable evidence to suggest that re-structuring towards NTAX and the associated ‘modernization’ of agriculture are distributionally regressive (Cornia, 1987; Barham et al., 1992; Figueroa, 1993; Kay, 1995). Capital constraints faced by peasant and small farmers mean that, in general, they have not been able to participate fully in the system. The negative impact for most small farmers during the structural adjustment period was aggravated by the withdrawal of social expenditure which accompanied austere fiscal/monetary stabilization (Sunkel, 1993; Vergara, 1994; Kay, 1995). Tensions created by growing social and economic differentiation are creating political conflict, as witnessed in the recent Chiapas uprising and continuing unrest in Peru and elsewhere. For some of these it raises the potential for revolution (Vergara, 1994).

WHOSE SUSTAINABILITY? THE CHILEAN FRUIT EXPORT BOOM The example of Chilean non-traditional fruit exports (NTFX) is considered the most notable and, for some, most ‘successful’ example of neoliberal re-structuring. However, the Chilean case study also 124

Figure 6.2 The slogan on the board translates as ‘This valley is under control’.While in actual fact the advertising refers to the pisco (grape-based spirit) producing company Control and is a play on words, it is symbolic of the power of the companies involved in the export grape economy in the areas surrounding El Palqui in Chile’s Norte Chico region (Region IV). Photograph: Warwick E Murray 125


highlights a number of problems associated with attaining sustainable social, political and economic development based on NTAX. The neoliberal model was implemented in Chile some years before its neighbours, subsequent to the military coup of 1973. The General Pinochet regime, under the advice of the Milton Friedmaninspired ‘Chicago Boys’, implemented a range of free market reforms which intended to reverse the structuralist-informed inward-oriented model of development prescribed by previous governments (see Barton and Murray, 2002). One of the central objectives of such reform was to stimulate exports. This was achieved with considerable success and had the effect of stimulating an enormous increase in non-traditional fruit exports, as the various comparative advantages that Chile possessed in this activity were allowed to operate in global space. Between 1974 and 2001, the nominal value of Chilean fruit exports rose from US$30 million to US$1,481 million (Banco Central de Chile, 2002b). Growth was especially high in the 1980s as a number of peso devaluations and export incentives took effect (Murray, 1997b). Grapes and apples have been the most important species and have represented over 60 per cent of NTFX earnings since 1974. The fruit boom initiated deep social and economic change in certain localities, such as the Norte Chico and the Northern Central Valley, where the economic base has been transformed rapidly from relatively diversified production for national markets to specialized (in some localities monocultural) export-oriented production (Figure 6.2). In the country as a whole, land planted under fruit rose from approximately 65,000 hectares in 1977 to around 210,000 hectares in 2000 (ODEPA, 1996; 2001).


The heady rise in Chilean NTFX can be explained partly in terms of the large ‘comparative advantage’ such products enjoy on global markets. These advantages are both ‘natural’ and ‘institutionally induced’. ‘Natural’ advantages include the ‘counter-seasonality’ of production with respect to the major markets in the northern hemisphere, especially the timing of harvests for Christmas markets in the USA and Europe; the existence of ample supplies of fertile land and water supply in certain areas; and a most favourable range of climates (from sub-tropical to temperate) ideal for the production of a wide range of fruits. Institutionally induced comparative advantages include state-led investment in the fruit sector during the 1960s; various episodes of land reform in the 1960s and early 1970s which divided up the inefficient latifundio (large estates); and the significant lowering of labour costs through regressive post-coup reforms (Murray, 1997a). Further to these advantages, external conditions were conducive to NTFX growth. In particular, the 1970s and 1980s witnessed the acceleration of the ‘globalization of agriculture’ – especially in the fruit sector. This involved sharp increases in the consumption of ‘exotic’ fruits in industrialized markets, sourced largely by investments in a range of Latin American and other ‘Third World’ countries by transnational fruit companies (Whatmore, 1995; Murray, 1998). Transnational investment in the Chilean fruit sector The role of transnational investment in the Chilean NTFX sector has been central. Although the earliest exporters were domestic companies (such as David Del Curto and Copefrut), during the 1980s foreign (especially US) capital rose to dominate the sector. Important examples include Unifrutti, Dole, United Trading Company and Chiquita-Frupac. By 1994, three of the top four companies (accounting for over 40 per cent of exports) were foreign-owned and only four in the top ten were Chilean-owned. Foreign firms were critical in the introduction of the organizational system which dominates the industry and links domestic producers to the global market. This system has three basic components. First, companies are responsible for marketing, providing facilities for the packing and storage of fruit and gathering produce in sufficient quantities to justify large-scale investments and obtain bargaining power. Second, companies undertake research and development in the adoption and adaptation of fruit varieties and technologies and are largely responsible for transferring these to the growers. Third, and crucially, firms provide finance for growers, acting, effectively, as banks. The vast majority of growers are linked into the system through contracts with such companies. These contracts are extremely exacting, and have become increasingly tight in the 1990s – leading to high levels of economic and technological dependence upon export companies among growers. For some commentators, however, one of the main advantages of this organizational system is that it has permitted the participation of many small-scale growers who would otherwise have been unable to gain access to the system. Others argue that the system has evolved into one which exploits such growers and has led to increasing levels of indebtedness, landlessness and marginalization (Murray, 1997b). The costs of macro-economic success At the macro-economic scale of analysis, the restructuring towards NTFX has proved a resounding success. It has helped lay a firm foundation for the high average levels of economic growth and trade surpluses generally recorded since the debt crisis of the early 1980s. Perhaps most importantly, it has helped diversify the Chilean economy away from reliance on copper exports which by 2000 had fallen to a proportional value of 40 per cent of total exports – from 85 per cent in 1971. However, despite this success, when one reduces the geographical scale of analysis, it becomes apparent that the distributional impacts of NTFX growth have been highly regressive (Murray, 1998). The fruit boom has exacerbated both spatial and social inequalities. In terms of the former, many rural localities and a number of regions have been unable to participate in the system. In particular, in rural regions where environmental and economic conditions are not conducive to fruit cultivation (in parts of the arid North and south of the Central Valley), farmers 126

The sustainability of Chilean fruit exports Doubts are increasingly being raised concerning the sustainability of the Chilean fruit export sector. Given the importance of the sector within the national economy and almost complete reliance on the sector in certain regions and localities, this should be an issue of great concern. First, sustainability is being threatened in an environmental sense. The rapid expansion of fruit cultivation, especially in marginal environments is placing stress on ecosystems. In particular, water shortages, water contamination due to pesticide and fertilizer leakage, and soil salinity due to excessive irrigation are rising. Problems of decline in soil fertility are accentuated on small-scale fruit farms where monocultural practice has become dominant. Second, economic sustainability is threatened. Since the early 1990s, the volume and value (in real terms) of Chilean NTFX have levelled out. This has been due to a range of interacting internal and external factors. Externally, rising global competition from southern hemisphere producers; protectionism; technological change allowing other fruit producers to increasingly impinge upon the Chilean counter-seasonal market; and shifting consumption patterns towards higher quality and new types of ‘exotic’ fruit in the industrialized countries have caused a decline in the real price of Chilean fruit on world markets (Murray, 1998). Internally, problems in the sector have been accentuated by the Chilean state’s reluctance to intervene in order to offset mounting economic threats. Thus, there have been only limited efforts from the state to invest in quality, 127


continue to rely upon traditional, low-margin products for the national market. Such farmers have faced a range of deep problems in recent years (Kay, 1997). These spatial inequalities are causing political tension, recently exemplified by protest marches by ‘traditional’ farmers in the Central region. Free market ideology, which has continued under the three democratic governments since 1990, has been characterized by the absence of an explicit regional policy to reduce the growing spatial imbalances (Murray 2002c). Differentiation between socio-economic groups has also been exacerbated through the workings of the boom. In particular, non-land owners, temporary workers (especially women) and small farmers have seen a decline in their relative socio-economic position in rural society. One of the major impacts of the boom has been to raise the demand for labour to pick and pack fruit. A significant proportion of the increased demand is temporary in nature, leading to economic insecurity in the workforce and to a range of problems associated with the flow of migrants to fruit-producing areas during the harvest season (Gwynne and Ortiz, 1997). Female labour has formed a central part of the labour force employed in the packing houses. Some argue that this process is positive in that it has provided many women with their first opportunity to engage in paid employment outside of the home (Bee and Vogel, 1997). However, women generally receive less than the men ‘in the fields’ for a day’s work, often having to return home to work a ‘double day’ (Barrientos, 1997). NTFX growth has also had a differential impact on farmers of different scales of operation. Medium (20–50 hectares) and large-scale (50 hectares plus) farmers and an increasing amount of urban suitcase-farmers, have prospered enormously from the boom. In contrast, very small-scale farmers (minifundistas) have been precluded from participation due to the high costs of setting up an orchard (up to US$35,000 per hectare). Small-scale farmers (5–20 hectares) initially entered the system in large quantities. However, they have found it very difficult to survive in the market – particularly since the 1990s. Sales of land are rising as larger-scale farmers and export firms move in to take over the parcelas of heavily indebted small-scale farmers. Part of the problem in this context are financially demanding contracts with export firms which allow a significant passing on of costs to politically disorganized growers. Failed growers often fall back on low-paid temporary labour or informal activities. Thus, marginalization, landlessness and proletarianization are becoming increasing realities in export-oriented regions. Again, given the neoliberal model favoured by government, little more than marginal efforts have been made to address the above problems (Murray, 2002b).


diversify the export range, diversify markets, develop value-added production, and invest in infrastructure. These have been left to individual firms who have met with variable levels of success. Ultimately, the ‘easy’ phase of Chilean fruit exports is over and in order to grow, the sector must face the challenges of an increasingly sophisticated global market. Attempts to further increase the sector, however, are likely to have deleterious environmental impacts unless regulated effectively. The neoliberal model is not capable of reconciling the often competing imperatives of economy and environment and is likely to continue to fail as a means of promoting sustainable development in Chile’s fruit complex.

ENVIRONMENTAL ISSUES AND IMPLICATIONS The environmental impact of primary product exploitation in Latin America has received increasing attention in recent years (Figueroa, 1993; Furley, 1996). Studies have tended to emphasize threats to ecological sustainability created by environmentally insensitive activities. Among other things, relevant concerns have included the pollution of river systems and air due to large-scale mining activities; the impact of pollution created by petroleum and petrochemical sectors; the ecological impacts of large hydroelectric power schemes in a number of countries (Furley, 1996); the over-exploitation and depletion of natural resource stocks, for example, the depletion of the fishery stock in Chile (Barton, 1997b) and the deforestation of Brazil within the imperative of ‘expansion of the agricultural frontier’ (Gligo, 1993); the intensive use of inputs and the effects on both ecosystems and human health (Murray and Hoppin, 1990); issues of water supply and the effects of irrigation-intensive production (Gwynne and Meneses, 1994); and issues of increased run-off and flooding due to clear-cutting and soil erosion (Leonard, 1987). The leaders of Latin American nations frequently protest that growing environmental sensitivity in developed nations forces unacceptable trade-offs upon them. For example, they bridle at demands from developed nations for the preservation of large tracts of land (usually forests) in the interest of biodiversity. Latin American leaders argue such demands are unjust. Developed nations became great by exploiting their natural resources not by preserving them; now they seek to prevent developing nations from enjoying the same benefits (White, 1993). Policy-makers in developed countries, and their allies in developing countries, respond that this is a false characterization of the problem. Preservation (non-use of nature) does not stand at the core of policy demands; conservation – commercial use with (as much as possible) the maintenance of the natural setting – is the goal. The issue, then, is not whether to use natural resources. It is how to use them while minimizing environmental damage (Pearce and Turner, 1990; Rosenberg, 1994). According to economists, the problem is one of formulating discrete choices over how to use resources and minimize the environmental impact (Pearce and Turner, 1990; Carley and Christie, 1993; Goldin and Winters, 1995). For renewable resources the choice is over competing sustainable uses, by which economists usually mean sustained-yield harvest: the point at which the rate of renewal is at least equal to the rate of extraction. Thus, the resource is never exhausted. For nonrenewable resources the choice is over acceptable rates of depletion, allowing time for technological advances and substitution to reduce the need for the mineral. Choices may also include the means by which non-renewable resources are extracted to minimize their impact on surrounding ecosystems. Of course, the formulation is deceptively simple. First, there are many difficulties in calculating those points. Second, and more significantly, decisions over minimizing the environmental consequences of natural resource use involve more than discrete calculations of public choice; they also encompass political and social processes (Goldsworthy, 1988; Hurrell, 1991; Hurrell and Kingsbury, 1992). These are most acute in the distributional issues inherent in natural resource extraction: who will benefit from its use? In short, how natural resource extraction and sensitivity to the environment are 128

Large-scale sustainable development One policy response favours the utilization of large-scale private enterprise to foster economic growth, a posture well anchored in the free-market tenets underlying globalization, although public enterprise may also participate in such ventures (see Box 6.1 for example).These companies have the financial wherewithal to invest in both development and environment, thus relieving responsibility from fiscally strapped governments. With respect to natural resource extraction and the environment, the task is to persuade such firms to engage in sustained-yield practices, to adopt pollution abatement technology, to avoid disfiguring and degrading surrounding ecosystems, to respect autochthonous cultures when present. It is assumed that project requirements (when funding is largely by multilateral development banks) and environmental regulations will accomplish those goals. Moreover, private sector projects and their wider economic effects provide employment for the local population. This addresses the link between poverty and environmental degradation. A focus on creating national parks and protected area systems to ensure biodiversity preservation (supported with international funding) complements the approach (World Bank, 1992). 129


combined also entails struggle between social groups for control of the resource and the benefits of its exploitation. In the drive for economic growth, dominant domestic and foreign socio-economic groups linked to agricultural, industrial, and service corporations benefit the most from the extraction and sale of resources. When it comes to settling frontiers, as occurred in Brazilian Amazonia, they may demand or profit from road building and other large-scale projects (such as mining and urbanization). Moreover, colonization programmes may accompany such ventures to provide (in the absence of land reform) land to landless peasants or new settlements and jobs for the unemployed in more established urban areas (Bunker, 1985; Cockburn and Hecht, 1988). In the planning stages, these schema may include environmental protection in resource extraction, as well as extension services to colonists for successful farming. But these good intentions may be abandoned during policy implementation. Such was the case in Brazil. The government institutions charged with administration and oversight of the plans lacked the capacity to carry out their mandates (Bunker, 1985). Centralized bureaucracies and fiscal crises prevented effective follow-through. Moreover, in the Amazonian states of Brazil, those institutions were ‘captured’ by large-scale ranchers and mine owners. They siphoned off meagre credit appropriations from the colonists. As a result, colonists cleared land, and lacking access to credit and know-how to successfully farm their fragile tropical parcels, then sold to ranch owners. Ranch owners bought land as a hedge against inflation and to capture state subsidies for beef produced in Amazonia. Colonists cleared more land for subsistence and the cycle was repeated (Hecht, 1985; Schmink and Wood, 1992). In addition to global and national-level development strategies, the plight of the colonists on the Brazilian frontier highlights a second, oft cited source of environmental degradation in natural resource use: poverty. Extreme necessity forces people to abuse natural resources, especially renewable ones. Dense populations of poor people are forced to continually clear forests for fuel and land in slash and burn cycles.They also overgraze pasture, are unaware of the fragile character of most tropical soils, and use primitive, polluting technologies in small-scale mining. Poor economic performance in any given country exacerbates the problem. It increases the number of desperate, impoverished people (Ascher and Healy, 1990; IDB, 1991; Annis, 1992). Awareness of the above problems led analysts to formulate the concept of sustainable development. The Brundtland Commission’s Our Common Future (1987) first popularized the idea, recognizing the interrelation of economic development, overcoming poverty, and safeguarding the environment. However, formulating policies for natural resource use that effectively link these three overlapping systems is no easy matter. In addition to technical difficulties, funding for programmes are scarce. As a result, policy-makers are faced with significant trade-offs between different policy alternatives (Redclift, 1987; 1992).


BOX 6.1 Industrial-scale sustainable development The Greater Carajás Programme: The Greater Carajás Programme spearheaded the Brazilian government’s Amazonian policy in the 1980s. It focused on export-oriented mineral projects, which allowed this regional development programme to address major national economic problems. The programme covers a wide area in three north-eastern Amazonian states: Pará, Maranhao and Amapá. This vast development project involves state-owned mining companies, local capital, and European and Japanese transnational corporations. After the completion of environmental impact reports, it has also received funding from the World Bank. Extraction and smelting of iron ore have been developed in Carajás; two aluminum complexes have been established, one near Belém and another on the Atlantic coast near São Luis; a hydroelectric plant at Tocurui was also part of the plan. Port facilities near these industrial projects have also been expanded (Neto 1990). Tree plantations in Chile: Chile boasts a timber industry that is the envy of Latin America (Silva, 1997a). In response to the military government’s free-market economic policies (1973–90), and with the aid of substantial government subsidies, a number of powerful Chilean conglomerates invested heavily in mainly-for-export timber plantations (Gwynne, 1993a) (Figure 6.3). Joint ventures with international corporations or wholly-owned subsidiaries of foreign companies also entered the market (Gwynne, 1996a). The bulk of the wood was from radiata pine (Clapp, 1998). In 1994, forest sector exports topped US$1.5 billion, making it one of the leading export industries. It also employed about 95,000 people, roughly 2 per cent of the economically active population.

Figure 6.3 The output of plantation forestry in Southern Chile. Logs are being transported to the local cellulose plant. Both plantations and cellulose plant were owned in the early 1990s by a multinational consortium of Royal Dutch Shell (60 per cent), Scott Paper (20 per cent) and Citibank (20 per cent)

130

The grassroots development approach Given these problems, dealing with the livelihood, or social justice, component of sustainable development calls for complementary efforts or, as some argue, a completely different approach to natural resource use. We call this the grassroots development approach, which focuses on strengthening local communities and fomenting small-scale economic activity rooted in sustained131


Latin American nations’ drive for economic advancement requires some large-scale development of natural resource extraction. The fiscal weakness of Latin American states and the decline in development funding from multilateral development banks certainly open space for more private sector involvement in the process. However, excessive reliance on large-scale development, private corporations, and national parks (viewed as set-asides) presents serious obstacles for achieving sustainable development. There are at least three difficulties with the approach. First, no matter what the rhetoric, the environment is not high on the hierarchy of issues confronting Latin American states, but economic growth is. The fiscal debility of the state itself compounds the problem. As a result, the ministries and agencies charged with regulating, overseeing, co-ordinating, and enforcing environmental policy are weak and lack the capacity to carry out their mandates. Indeed, sometimes the mandates themselves are deliberately narrowly circumscribed, as was the case in Chile (Silva, 1996–97). Supporters argue that market incentives help circumvent these shortcomings. Markets for pollution vouchers and opportunities for companies to pay for forest preservation and plantations to offset greenhouse gas emissions – joint implementation ventures – are often cited. This amounts to the ‘browning’ of the environment (Nielson and Stern, 1997). Such approaches rest on the uncertain assumption that we can calculate ‘acceptable’ levels of pollution. They also ignore the fact that we do not know the cumulative effects of many chemicals acting together. What may be an ‘acceptable’ level for one pollutant may turn out to be quite hazardous to public health when combined with the ‘acceptable’ levels of many others. In the final analysis, irrespective of ideological posturing, government action has been the most effective source of corporate sensitivity to the environment. Second, large-scale, corporate-oriented resource extraction does not adequately address the livelihood needs of impoverished rural populations. Nor does it sufficiently protect native peoples and their cultures from the ravages of modernization. Large-scale agribusiness and mining do provide some employment, albeit at very low wages and frequently in substandard working conditions. Moreover, the capital-intensive ventures throw many more peasants off the land than are employed, driving them further onto the frontier to clear more forest for land or into urban shantytowns putting more pressure on already woefully inadequate services (Montbiot, 1993; Painter and Durham, 1995). The pattern is aggravated by the influx of desperately poor people from other regions of the country into the area where the new concerns are being set up. These migrants compete with local communities, often disrupting and displacing them. The resulting social tension frequently erupts in rural violence (Schmink and Wood, 1992.) Third, the land hunger of these poor and displaced people places great pressure on a country’s protected areas, making unworkable the dream of nature preservation. Land invasions into national parks are common both for the purpose of subsistence agriculture and for placer (small-scale) mining. Again, social tension between migrants and native peoples frequently erupts; it is often exacerbated by the influx of entrepreneurs who follow them to buy cleared land or to forcibly wrestle it from them (Barraclough and Ghimire, 1995). This pattern has repeated itself several times in Brazilian Amazonia (Schmink and Wood, 1992; Ozório and Campari, 1995). As the Brazilian case exemplifies, the problem is aggravated by the weakness of the responsible state institutions: the extension services of ministries of agriculture, environmental ministries, and parks and forest services. Bureaucratic rivalry may also intervene. Agriculture and mining ministries may (at least implicitly) support invasions. Since they are higher on the hierarchy of ministries (and better organized) than agencies of the environment, they often nullify the latter’s mandate.


yield practices (Schumacher, 1973; Ghai and Vivian, 1992; Friedmann and Rangan, 1993; Utting, 1993; Ghai, 1994). It privileges the values of local autonomy, solidarity, self-regulation, and citizen participation in decision-making over the penetration of market forces, community disintegration, and the reduction of participation to the implementation of a few projects. By organizing communities and building small-scale enterprises, more of the income generated stays in the community in the form of higher wages, social benefits, and capitalization. Economic sustainability also depends on the formation of cooperatives to pool resources and know-how, and of linking them to local, regional, national, and world markets. By the same token, environmental sustainability is better served by small-scale use, because, together with appropriate technology, it offers a better opportunity to mimic natural processes (Hartshorn, 1989). Because of the interconnectedness of nature, excessive human intervention in any one area (as occurs with large-scale development) damages the whole web of life. The Plan Piloto Forestal of Quintana Roo, Mexico, is a good example of the grassroots development approach. An alliance of forest peasant communities (Ejidos) wrested control of their forests from private interests and government corporations. The Plan Piloto, with help from the government and international aid agencies, began to market its own timber (mahogany). Member communities received better prices for the timber than before, employed more personnel at higher wages, trained personnel in management, began to add industrial value to the timber instead of just selling whole logs, and redistributed portions of the profits to member communities. There are many such cooperatives in Mexico – for an introduction, see Paré et al. (1997). A significant strand of the grassroots development perspective takes a different stance from current neoliberal trends with respect to the role of the state and social participation. The state has an important role to play in the crafting of industrial and extension policies favouring grassroots development (Lipschutz and Conca, 1993). Thus, the strengthening of state institutions is vital to carry out increased functions. Otherwise, community enterprises, networks of cooperatives, and links to markets are not likely to flourish beyond a few individual instances. Non-governmental organizations (NGOs) are considered central to this process, as well as the inclusion of social groups in the policymaking process. By contrast, a more civil society-centred strand of the grassroots development approach argues against deeper involvement of state institutions. Instead, it emphasizes the nexus between NGOs and organized communities (Browder, 1989; Leonard, 1989; Ekins, 1992). Regardless of the position versus the state, at its irreducible core, participation is about a focus on organized communities as a vehicle for the self-determination of subordinate class and ethnic-based social groups (Ghai and Vivian, 1992: 1–19; Friedmann and Rangan, 1993: 1–10; Ghai, 1994: 1–12). Moreover, participation is about more than just helping to implement policy. It extends to broad deliberation by organized civil society in defining policy agendas, prescribing solutions, and formulating policy. Costa Rican forestry NGOs have a rich experience in these political activities (Brockett and Gottfried, 2002; Silva, 2003). Both critics and supporters of the grassroots development approach to sustainable development recognize several difficulties with its implementation. First, in relation to its emphasis on small-scale development it is capital-intensive, especially in terms of human capital. Where will the financing come from, given that the private sector will not invest in such efforts? Up-front costs are significant: from planning stages involving the leadership of local communities, to the assignation of experts in the field, to coordination with government offices, and to the purchase of equipment. Second, the ideal time line for such projects is a long one: five to ten years. The learning curve to use technology and to learn organizational skills can be a long one. Many programmes are shorter than this. Third, such projects are plagued by potential collective action problems within the community or between the governmental, international, NGO, and community components of a project. These difficulties may be exacerbated by participant state agencies, which frequently lack the personnel, equipment, training, and authority to fulfil their role adequately. Fourth, the techniques themselves may be experimental and unproven. 132

Ideally, a well-rounded policy framework for sustainable development would integrate both the largescale, market-oriented and the grassroots development approaches (Silva, E. 1999). Too much emphasis on the former does not solve the problem of rural poverty and associated environmental degradation. By the same token, an over-emphasis on grassroots development would probably deprive a nation of necessary resources for healthy economic growth. But the world is not ideal. Moreover, selecting the trade-offs between the two models for sustainable development is especially difficult to achieve in one of the most popular approaches to decision-making: the rational actor model, where policy-makers are appraised of a problem and offered a list of options best suited to solve it. The principal obstacles for the effective use of this technique are the scarcity of financing and the logic of globalization. They ensure that politics – the authoritative allocation of value – plays a significant role in determining policy outcomes: whether the market and grassroots approaches will be integrated or whether one will dominate the other (usually market over grassroots). In other words, politics will influence the agenda from which the choices offered to policy-makers will be drawn. Whether effective grassroots development solutions are put on that agenda is not guaranteed. A political economy approach to public policy offers a good starting point to understand the politics of reforming policies for the sustainable development of natural resources. It helps us to identify the main actors, interests, and power as defined by their location in international and domestic economic and state structures. Such approaches also emphasize the role of knowledge and coalitional behaviour among actors as key to understanding outcomes (see Box 6.2).

BOX 6.2 Extractive reserves in Brazil The creation of extractive reserves in Brazilian Amazonia constitutes the most famous example that runs the gamut of actors: international, state, private sector, peasant, and indigenous peoples (Schwartzman, 1991). In the 1970s and early 1980s, the establishment of large ranches ignited a struggle over land between large-scale ranchers, on the one hand, and smallholders, rubber tappers, and indigenous peoples, on the other. Initially, large-scale landowners easily prevailed because traditional rivalries divided these subordinate social groups. Ideas, however, brought them together. A Brazilian NGO came up with the concept of the extractive reserve: areas of land that would be set aside for low-impact extraction of natural resources. With this idea environment became a new issue capable of uniting social groups that had been in conflict with each other. All could identify with the need for land and the preservation of the resources necessary for their livelihood and/or cultural survival (Keck, 1995). However, even when local peoples formed alliances, they could not prevail. Local and state governments (Brazil has a federal form of government) generally backed large-scale landowners. Moreover, alliances between organized local peoples and Brazilian national unions and political parties were also ineffective. The federal government was adamantly in favour of large-scale development. This was when international actors tipped the balance in favour of local peoples. First, the Brazilian NGOs were in contact with powerful US-based international NGOs. These took the fight to the US Congress, which brought pressure to bear on the World Bank to postpone loans to Brazil. At that point, the Brazilian federal government took note and decreed the establishment of extractive reserves. Unfortunately, this heroic effort has not had the success it deserved, for the policy of extractive reserves has run into many economic problems (Assies, 1997; Hall, 1997).

133


THE POLITICS OF NATURAL RESOURCE EXTRACTION


International actors include governments, especially their development aid agencies; transnational corporations; multilateral development banks, such as the World Bank; and international organizations like the United Nations (Haggard, 1990).Their interests regarding environment and development vary widely. Depending on the circumstance, these actors – especially when they are from developed countries – possess significant political and economic power, which they can bring to bear in national policy debates. The domestic side includes state and social actors. The most important state actors are the presidency, relevant ministries and agencies, and political parties represented in the legislature. Social actors run the gamut from large-scale economic interests to peasants, smallholders, and native peoples. In this schema the structure of state institutions (their cohesion, the tightness of policy-making teams, the hierarchy of ministries, and their porosity to social forces) is crucial for shaping the power resources of state actors and social groups (Skocpol, 1979). By the same token, the economic and organizational capabilities of social actors affect their strength or weakness in relation to state actors (Migdal et al., 1994). Environmental NGOs are significant social forces in their own right (Porter et al., 2000). They can be important advocates of market-friendly or grassroots development approaches to forest policy in the policy formulation process. When they are professional organizations, their policy stances generally derive from the intellectual and scientific ideas of their middle-class staff. When they have a peasant base, their economic interest often leads them to advocate grassroots development ideas about combining environment and development (Keck, 1995). Some of the large NGOs of the developed world are also important international actors. Domestic NGOs can also be significant actors in the policy process. Their power often depends on their financial and organizational capabilities and the quality of the expertise available to them. Understanding actors and interests backed by ideas that inform policy stances and power offers a good starting point for analysing the politics of environmental policy-making (Hurrell and Kingsbury, 1992). However, a number of studies have shown that actual policy outcomes depend on the interaction between them (Ross, 1996; Silva, E. 1999). Frequently, policy outcomes depend on the dynamics of coalition formation between social groups, state institutions, international actors, and NGOs. These alliances define the sum of power that competing coalitions can muster in support of alternative policy stances (Gourevitch, 1986; Frieden, 1991; Rueschemeyer et al., 1992). Reforming natural resources policy Reforming natural resource policy along sustainable development lines poses a significant challenge. The range of policy options is well known and broad. It includes infusing large-scale resource use with an environmental component to ensure either sustained-yield practices or a sharp reduction in pollution or both. But it is also recognized that these practices alone will not provide conditions sufficient to alleviate pressure from impoverished rural populations. Nor will they protect the welfare, cultural heritage or survival of native peoples. This is why reform of large-scale resource use must be accompanied by efforts to promote grassroots development. Integrating both approaches to the sustainable development of natural resource use, however, is not an easy task (Silva, 1994). Strong political conflicts may stand in the way of including grassroots development components to policy reform. Nevertheless, these can be overcome. What it takes to do depends on the initial disposition of state and dominant class actors towards such programmes, the degree of local social conflict, whether or not local groups were organized, and the role of international actors. Where government and dominant social classes are cohesive in their resistance to grassroots development, it takes high levels of social conflict and very broad alliances of local, national and international actors to force their inclusion. As the case of extractive reserves in Brazil suggests (see Box 6.2), high levels of social conflict fused a strong coalition between well-organized regional subordinate social groups with national political and institutional affiliations. This brought the issue to the national political arena. However, domestic groups by themselves are usually not strong enough to 134

CONCLUSION In many ways, at the dawn of the new millennium, the countries of Latin America face the same problem which has existed since colonial times. Certainly, there have been advances in diversification 135


prevail. They may agitate but cannot win. Greater pressure from international sources is required. Here, international NGOs, linked with those of the developing country in question, can begin an awareness campaign in developed countries and lobby their government and international institutions to take action. Threatening to suspend loans and other sanctions usually gets that attention of policymakers in developing countries. Where some key sectors of government actors and dominant social classes support sustainable development at the grassroots for one reason or another, local actors may succeed largely on their own, but international actors and local NGOs can make important contributions to policy-making. Tension between dominant and subordinate social groups is often a catalyst for organization in rural communities, which provides the drive from within to demand policies favourable for grassroots development. Knowing they cannot act alone, communities often actively seek allies. When they find them, and especially if they are government actors, the organized community will strive to infuse policy content with its interests. International actors, often the development agencies of more social democratic governments, provide critical support for local communities in their efforts to shape policies emanating from relatively sympathetic government offices. They legitimize the demands of radicalized communities and help with project design and management. Where most relevant government actors are largely indifferent or weak, international actors may be the most important catalysts for the inclusion of grassroots development dimensions to resource use reform. The efforts will be project-oriented and the specifics of the grassroots development orientation will depend on the goals of the lead international agency involved. It cannot be sufficiently stressed that success demands involvement of local communities and a very long-term presence. Moreover, one must always keep in mind that scaling up projects – expanding their application to other areas – requires active government assistance. International presence or pressure alone cannot do the job. Including a grassroots development component to natural resource use never has been an easy task, and globalization makes it even more difficult. The emphasis on free markets by international agencies and governments impedes consideration of the non-market special needs of rural populations in developing countries. Those needs centre on the redistribution of national wealth via subsidies (credit, inputs, price supports) and involve the promotion of an industrial policy to create markets for their products. Globalization, however, favours large-scale industry and concentration of wealth rather than small-scale production and more equitable distribution of wealth. As a result, many international agencies now focus on strengthening institutions for environmental management of pollution and parks for preservation only. They also advocate payment for the environmental services rendered by ecosystems, such as carbon sinks, gene banks, biodiversity and scenic beauty (Heal, 2000). None of these proposed solutions threaten the large-scale market development perspective. Nevertheless, social tension in the countryside and lack of employment in cities to absorb displaced rural populations still provide a fulcrum with which to apply pressure for the inclusion of the grassroots development dimension of sustainable development. The rural poor continue to organize and increasingly frame their demands with reference to environmental problems and conservation. This provides social and political allies among environmentalists domestically and internationally. It also supplies a cadre of professionals capable of working together with organized communities to devise plans for attaching a grassroots development component to carbon offset agreements, pollution tax credits, energy taxes and effective parks management. Equally important, although it is not clear that this is occurring, new international institutions must build in participation and support for grassroots development (Haas et al., 1993; Young, 1994).


and, crucially, industrialization in a number of places. Countries such as Brazil and Mexico are, to a certain extent, breaking away from resource export dependency. However, the majority of countries remain dangerously reliant on primary products for income generation. In this way, they remain highly vulnerable to external conditions and the whims of the global market place, and face considerable internal problems in managing rentier, enclave and, sometimes, foreign-dominated export sectors. Furthermore, ecosystems and local environments are placed under stress, given the continued premium on resource exploitation. Although this situation is not a consequence of recent neoliberalism, its emphasis on the short-term logic of comparative advantage has compounded the problem. Furthermore, non-interventionist logic has augmented the distributionally regressive impacts and negative environmental implications associated with resource export development. As this chapter has shown, neoliberalism has largely failed as a remedy for primary product-dependent economies as it clearly prejudices sustainable development on a number of intricately interwoven fronts. Population growth in Latin America and the drive for renewed economic growth in the context of globalization and free-market economics have significantly increased pressure on natural resources. These problems have been augmented by the rising concentration of wealth among the rich. This has swelled the ranks of the poor whose migration patterns overwhelm the carrying capacity of fragile marginal lands and shantytowns lacking basic services.Taken together, these events deplete vital natural resources, expand pollution, and, in general, degrade the environment. In short, the quality of life of people in rural and urban settings declines. The concept of sustainable development – struggling to become a paradigm – was born to address these trends. It recognizes the connections between economic development, poverty, and environmental degradation. As a result, it does not ask policy-makers to give up the goal of economic growth for the sake of the environment. From this perspective to do so would be to destroy it. But it does urge them not to ignore the livelihood needs of the poor and the integrity of the environment as they pursue their economic ends. Accomplishing these aims is a difficult proposition. Scarce funding and the divergent interests of experts who advise policy-makers have generated many competing policy prescriptions to advance towards the goal of sustainable development. Virtually all of them call attention to trade-offs between the major components of the concept. A number of key questions policy-makers must ask frame the trade-offs they face. The emerging environmental agenda in Latin America and among multilateral lending banks reflects the choices made to date. At what scale do projects deliver the most efficiency? Proponents of large-scale projects argue they reach the most people or largest area with the least chance of implementation chaos. Attention to large-scale business, farms, water treatment, mining complexes, and the like has immediate effects. Their implementation is easier to monitor (fewer firms to control). Since fewer organizations are involved, there is less opportunity for project failure due to miscommunication or conflicts of interest. Proponents of smaller-scale projects argue that large-scale ones frequently break down due to equipment failure, unforeseen side-effects (e.g. siltation of water plants), or fiscal problems in the agencies involved. Smaller-scale projects have lower start-up costs, use more inexpensive and environmentally-friendly inputs (e.g. recyclable materials and compost). Moreover, simpler technology, such as more efficient ovens and modest plantation groves in rural areas, can relieve pressure on fuel wood collection, a major source of deforestation. Active participation by local peoples with clear benefits fosters a stakeholder outlook crucial for project success. By the same token, the question of how to address the livelihood needs of the impoverished is also linked to the issue of scale. At a very basic level, one camp argues that relatively unfettered market forces spearheaded by large-scale domestic and foreign enterprises will drive economic growth. This will increase employment, which is what people need. Others maintain employment alone is not sufficient. Market forces in Latin America may generate employment, but at low wages which makes it impossible to access necessary services – health, education, sanitation. In many cases, penetration of 136

Acknowledgements The authors would like to thank Bob Gwynne for essential input into this work.

FURTHER READING Auty, R. 1993 Sustaining development in mineral economies: the resource curse thesis, Routledge, London. This is the most detailed and thorough discussion of the ‘resource curse’. Barham, B., Clark, M., Katz, E. and Schurman, R. 1992 ‘Nontraditional Agricultural Exports in Latin America’, Latin American Research Review, 27(2): 43–82. This is the best introduction to the non-traditional agricultural export debate, is clear on definitions, provides a useful reference list, and introduces a number of country case studies (including Chile). Cleuren, H. 2001 Paving the road for forest destruction: key actors and driving forces of tropical deforestation in Brazil, Ecuador, and Cameroon. Leiden University Press, Leiden. This provides a contemporary comparative analysis of the political economy of forest destruction. Gibson, C., McKean, M. and Ostrom, E. 2000 People and forests: communities, institutions, and governance. Cambridge University Press, Cambridge. This book provides a wide overview of the forest issue at the global scale, and a discussion of the role of institutions and governance, Karl,T. L. 1997 The paradox of plenty: oil booms and petro-states, University of California Press, Los Angeles, CA. This is the most contemporary and, arguably, most sophisticated, analysis of the socalled paradox which is explored through the Venezuelan case but is also of general relevance to primary product exporting countries. 137


market forces increases poverty. As a result, additional policies are required that focus on small-scale economic projects with the active participation of local peoples. Additional questions suggesting trade-offs between economic growth, social justice, and environmental quality abound. What relationship between public sector and private sector institutions best serves policy formulation and implementation? Are market incentives or regulation the most effective way to ensure results? How to protect fragile lands, forests, and remaining wilderness from the onslaught of economic development and the migrant poor? Do national systems of protected areas work best under a strict preservationist regime? Or, in the absence of concern for the livelihood needs of the rural poor, do these systems succumb to land invasions and environmental degradation? The answer to these questions, as expressed in policy, must necessarily involve politics: the process of authoritatively allocating value. Exhortations of the need for political will do not suffice. Existing socio-economic systems, the manner and beneficiaries of natural resource extraction, who receives benefits and who does not, are all sustained by coalitions of private interests, government actors and international agencies. Change requires the construction of countervailing coalitions. How much change and in what direction – how the questions raised above are answered – depends on the exact nature of such coalitions and the compromises they entail. At the core of the problem, however, significant structural impediments to development – including, most notably, the region’s continued role as a global resource periphery – continue to retard meaningful progress. Free-market economics is incapable of resolving this condition – simply ‘rolling back’ the state can make matters far worse. In order to transcend the paradox of plenty, the time is ripe for the re-incorporation of a number of the ideas of dependency and structuralist thinking which, as this chapter has endeavoured to show, remain relevant. Such ideas must be altered to reflect changing global realities and past weaknesses (Kay, 1989; Dietz, 1995). However, at the centre of such an endeavour should be an attempt to foster the creation of an effective, economic permanence-minded, environmentally conscious and politically inclusive state which can regulate the less fortunate impacts of resource exploitation and implement long-term plans to foster broad-based sustainable development.


Sunkel, O. (ed.) 1993 Development from within: towards a neostructuralist approach for Latin America, Lynne Rienner, Boulder and London.Those who are interested in new or neo-structuralist ideas this is an excellent collection of essays exploring a range of themes relevant to this chapter including; agriculture, environment, development theory, and secular decline, from a ‘revised’ structuralist point of view. World Bank 2003 World development report 2003: sustainable development in a dynamic world: transforming institutions, growth, and quality of life. Oxford University Press, New York. This illustrates the incorporation of the environmental agenda into mainstream lending institution policy, and offers a fascinating read, not least because it is packed with useful statistics.

WEBSITES World Bank, www.worldbank.org, focuses on economic and social development and promotes market-friendly approaches to sustainable development. World Conservation Union, www.iucn.org, this is an environmental organization whose members include states, government agencies, non-governmental organizations, and individual scientists. It focuses on biodiversity conservation projects. Forest Stewardship Council, www.fscoax.org, this promotes socially and environmentally responsible forest management. International Institute for Environment and Development, www.iied.org, this is a member-based environmental nongovernmental organization that promotes sustainable development and seeks to influence public policy. It attempts to integrate both market-friendly and grassroots development approaches. United Nations Environmental Programme, www.unep.org, this is an international organization that promotes research and projects in sustainable development.

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2 POLITICAL TRANSFORMATIONS


7 Authoritarianism, democracy and development Eduardo Silva

The challenge of economic modernization often places the states of developing countries under great pressures, to which democracies seem particularly vulnerable. Democracy implies broad societal representation in policy-making, accountability of executive branches to legislatures, deliberation, compromise and tolerance. Yet economic development frequently requires harsh trade-offs between savings for investment and redistribution for social needs. Recurring economic crises demand swift, decisive, comprehensive responses and impose steep costs on losers. Between 1964 and 1976, those dilemmas generated political tensions that caused many Latin American democracies to give way to authoritarianism. With few exceptions, the military governments that followed proved equally incapable of managing the political economy of their nations. A wave of democratization – which crested in the 1980s – ensued.Today, most of the states in the region are democratic.Yet despite much congratulatory rhetoric, uncertainty over the deepening, consolidation and permanence of those new democracies persists as Latin America confronts the demands of globalization. These cyclical bouts of authoritarianism and fragile democracies raise enduring questions about the relationship between economic modernization in the age of globalization and the state. Is there a fundamental incompatibility between economic development and democracy? Will the current trend toward democracy in Latin America persist? What are the chances for the consolidation of emerging democracies? There are no hard and fast answers. Competing theories about the relationship between economic development, dictatorship and democracy fuel a diversity of opinion. Theorists diverge in their underlying assumptions, in what they mean by democracy and authoritarianism, and in what they believe to be the causes for the outcomes. Because their ideas shape public policy prescriptions, examining contending theories can shed significant light on public affairs debates and policy.

POLITICAL ECONOMY AND THE STATE Understanding the relationship between economic development and the problem of democracy first requires a brief excursion into the relationship between economics and politics. Because the state is the ultimate repository of power and authority, it lies at the centre of this question. How well or poorly state officials perform the functions of this key political institution has everything to do with democratic stability. However, it must be recognized that state officials are, unfortunately, too frequently placed on the horns of all but unsolvable dilemmas. States are long-term expressions of a society’s political power through which some social groups and individuals dominate others within a given territory (Poggi, 1990). Max Weber (in Gerth and Mills, 1958) stressed that the state exercises a monopoly over the legitimate sources of coercion and that social domination is based on unequal access to them. The modern state is organized in a coherent set of bureaucratic institutions based on impartial, rational rule-making which differentiates it from the individual, charismatic style of earlier states (Gerth and Mills, 1958; Nettl, 1968; Poggi, 1990). Moreover, 141


although the state is embedded in society, it must be differentiated from society. State managers may have their own interests, over and above those of the social groups they control in areas such as economic policy, the state’s organization, taxation and territorial expansion through war (Tilly, 1975; Skocpol, 1979). Their capacity to impose those interests depends on the porosity of state institutions to social groups – the less porous a state is to social forces the more it is autonomous from them (Evans et al., 1985). Finally, the form of the state depends on how it is connected to society. Modern states can be classified as liberal democratic, social democratic, monist (one party state), authoritarian and totalitarian, just to name the most commonly mentioned forms. Our concern is with understanding the establishment, consolidation and stability of democratic states. Political economy approaches are very useful for uncovering the strains states are subjected to. Political economy focuses on the effects of economic and social tensions on the state by examining relationships between (a) economic structure; (b) class-based social groups; and (c) politics. Jeffry Frieden (1991:16) argues that all modern political economists study how rational, self-interested actors combine to affect economic and social policy and to influence the form of the state. Those actors pursue their political aims both within and outside of established institutional settings. Venezuela offers an example of these interactions. This country has been afflicted with a prolonged period of economic crisis and instability that began in 1984. Between 2000 and January 2003, conflict escalated between (1) politically marginal underprivileged social actors who wanted to change the country’s political institutions and channel more wealth to the nation’s poor; and (2) propertied actors who resisted such changes. The former, led by Hugo Chavez, won the presidency through legitimate elections in the late 1990s and pursued their goals through state institutions. Those goals included efforts to change those institutions so that they would be biased in their favour. Meanwhile, they also organized popular brigades, frequently resorted to violent demonstrations, and made questionable use of the military. Upper- and middle-class opposition forces resisted and attempted to oust President Chavez. They used established institutions, such as the courts and electoral tribunals. But they also organized marches and demonstrations. This mobilization culminated in a long national general strike to pressure the authorities to call a referendum on the president’s rule. After more than two months the strike failed. Notice how political economy focuses attention on actors, interests and power. This allows clearer analysis of a situation and its likely outcome than approaches that focus on legitimacy or moral right. For political economists, the economic system itself, the structure of production, is a fundamental starting point for the analysis of economic and social policy and political change. It is the principal building block for defining actors and their interests; it shapes relations of domination and subordination among social groups; and it determines some key functions of the state (Anglade and Fortín, 1985). In market economies, capitalists (the owners or controllers of production and money) and labour are usually considered to be the main social actors. Capitalists, in the first instance, dominate labour by virtue of their economic power. To simplify drastically, capitalists seek to maximize profits, which often means paying less to labour in the form of wages and benefits. It also means obstructing labour’s attempts to organize to increase their share of the wealth generated by their work. Many political economists argue that classes must be broken down into smaller units (or disaggregated) to properly understand processes of economic and political change (Gourevitch, 1986; Frieden, 1991). Thus, capitalists are most commonly subdivided by economic sector: financiers, commercial interests, industrialists, landowners, the construction sector, mine owners, etc. Economic sectors can be subdivided further depending on the capacity of subsectors to compete in international markets. Labour is frequently separated into urban industrial, service sector, government employees, and peasants and/or rural labour. The middle classes – usually professionals – are also treated as a distinct category; and they are especially important for political change in Latin America (Rueschemeyer et al., 1992). Disaggregation along these lines permits analysis of how divisions within classes or of alliances between specific sectors of capital, labour and the middle classes affect the direction of economic and political change. 142

DEMOCRACY, AUTHORITARIANISM AND DEVELOPMENT All capitalist states undertake these functions. However, how state managers fulfil those functions varies depending on state form, whether it is democratic or authoritarian. In democratic capitalist states governments are elected by competition between two or more political parties with discernible differences on major policy issues. Electoral participation – voting – should be by secret and universal ballot. Sufficient civil liberties must be guaranteed to ensure full and fair contestation and electoral participation (Dahl, 1971). Participation can also extend to the policy-making process through negotiation between political parties in the congress with the executive or directly through access to the executive by the organizations of labour, capital and other groups. In some instances, democratic capitalist states may also exhibit a high degree of concern over the economic rights of subordinate class-based groups. This effectively extends the egalitarian principle of democracy to the economic sphere (Held, 1996). Given these characteristics, in principle, democratic states protect subordinate social groups (the middle classes and urban and rural labour) from excessive exploitation by business people and landowners. Political parties may represent some of their interests and try to advance them from the executive, the legislature, or both, depending on the party’s electoral fortunes. Greater freedom to organize may allow subordinate social groups to negotiate more directly with capital and state managers. Less able to rely on repression, and in the interest of maintaining political order, state managers have more of an incentive to give some concessions to subordinate groups. However, those concessions cannot be allowed to upset the maintenance of a good business climate for investment and economic growth; nor should they threaten the basic social order. 143

Authoritarianism, democracy and development

Politics and economics are intertwined in another way as well. A country’s economic fortunes have an impact on political stability. Prosperity – economic good times – usually reduces tension between class-based social groups. If economic policies are generating economic growth, and if most social groups perceive a benefit from that growth, social pressure for change will be slight. By the same token, deep or recurrent economic crises exacerbate tensions between class-based social groups and generate conflict as they seek the establishment of alternative policies conducive to a resumption of economic growth (Gourevitch, 1986; Haggard and Kaufman, 1995). If the crisis is severe enough, social groups may perceive that a change in the form of state is the only solution. What are the implications of these features of capitalist societies for theories of the state and the problem of democracy, authoritarianism and development? They point to two essential functions that the state – whether democratic or authoritarian – must perform if it is to remain stable. First, it is compelled to maintain the overall conditions for capitalist economic development (Lindblom, 1977; Przeworski and Wallerstein, 1988). Second, the state must maintain the social order in which capitalists dominate and labour and the middle classes are subordinate to them (Poulantzas, 1973; Mandel, 1978). How state managers approach the task of fulfilling those functions varies. In a synthesis of extensive academic debates, Christián Anglade and Carlos Fortín (1985: 19–23) have argued that state managers intervene in several ways to mediate class tensions that could interfere in the accomplishment of those functions. First, state managers have to maintain conditions to ensure that businesspeople generate sufficient profits to maintain adequate investment levels. Naked repression, however, cannot accomplish this in the long term. Thus, state managers also have to protect labour from excessive exploitation in order to avoid rebellion and to keep up productivity. Second, state managers also intervene on behalf of specific economic sectors of capital to ensure the economic health of the nation through economic policies such as taxation, tariffs, subsidies, and monetary and fiscal policy. In this manner, the state may promote industry over agriculture or export sectors over domestic market-oriented ones. Third, state managers may involve the state directly in production through public enterprise if the private sector is unwilling or incapable of significant investment of its own.


Authoritarian capitalist states, to some degree or another, restrict political competition and participation. The most closed authoritarian political systems – such as Chile and Argentina under military rule in the 1970s and 1980s – do not permit any. The leaders of authoritarian capitalist states also rely heavily on repression of social groups, especially labour and other subordinate class-based and ethnic groups. But middle classes and selected business groups may suffer as well. Given these characteristics, it is widely assumed that the managers of authoritarian states possess the capability to concentrate more exclusively on maintaining social order and a good business climate than those of democratic states.They may formulate policy with far less encumbrance (or none) from socio-political groups than the leaders of democratic capitalist states. Development places great strain on the states of developing countries (Chilcote, 1981; Handelman, 1996). Development occurs when societies less economically advanced than the great industrial powers of Europe, North America and Asia are drawn into political and economic relationships with them. In other words, development is a process in which societies that had been peripheral to the global market economy are pulled into it. Globalization may be thought of as the most recent – and some would argue qualitatively different – stage of this trend. The economic changes that result from the experience generate social change. Political tensions flare as new class-based groups compete with established ones, for example, new industrialists, middle classes and urban labour may clash with traditional landed and commercial elites. A state that expressed the domination of the latter two classes may find itself under pressure to include the new social groups. Depending on how the conflict is resolved, the form of the state may suffer a more or less violent change. This occurred throughout Latin America during the twentieth century, especially during the populist period of the 1920s to the 1960s. As societies are drawn into the world economy, state managers may have great difficulty devising policies that promote economic growth. Shifts in the international economy have a strong effect on the economies of under-developed nations. Because they depend on economically advanced nations for capital and technological know-how, booms, depressions and technological breakthroughs upset established patterns of production more deeply than in the advanced countries. Developing countries must resort to drastic means to adjust their economies. This too places inordinate strains on states; subsequent conflicts over appropriate policy responses can lead to a change in state form. In short, the process of development can generate situations in which state managers have difficulty fulfilling the functions of the state in market economies. They may not be able to generate policies conducive to capitalist economic development. Moreover, they may be overwhelmed by social tensions that make it hard to maintain a social order in which the private sector clearly dominates over other class-based social groups, such as labour, peasants and the middle classes. Because development is such a wrenching process, it poses difficult questions for political order in general, and democracy in particular. As we shall see, approaches to answering these questions fall, roughly, into two categories: political economy and US political sociology. We begin with the latter in the form of modernization theory, contrast it with political economy approaches (dependency theory and bureaucratic-authoritarianism) and conclude with an examination of contemporary modernization theory and political economy. The intellectual history is key for understanding current debates over what to do to strengthen democracy. Modernization theory In the first 20 years following the Second World War, democracy surged in Latin America. It was an optimistic era. Argentina and Colombia returned to the democratic fold after prolonged periods of political instability. Brazil and Venezuela established new democratic regimes; Chile and Uruguay’s longstanding democracies seemed secure. Even a number of Central American countries, following in Costa Rica’s footsteps, established electoral forms of government. This trend seemed to confirm the expectations of modernization theorists who took an optimistic, and deterministic, view of the relationship between capitalist economic development and political 144

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democracy. In their analysis, the causal arrows pointed in one direction only. As countries modernized socio-economically, authoritarian and other traditional forms of government gave way to democracy. Modernization theorists assumed that developing countries would follow the same evolutionary patterns as the economically advanced nations. In the developed nations, they observed that economic modernization had brought about a transition from traditional culture, social organization and political authority to more modern ones. In advanced countries, economic progress produced more rational, goal-oriented thinking, a far more diversified social structure (middle classes, urban industrial and service labour, transformation of agrarian social relations), institutions to process increased demands, and political democracy (Handelman, 1996: 11–14). This approach did not believe the state was a useful concept. Instead, it embraced David Easton’s (1965) concept of the political system, which drew heavily on the sociology of Talcott Parsons (1951). In this view, government institutions (executive, legislative and judiciary) processed the demands of social groups that cut across class lines. These demands constituted inputs into the policy process, and in processing those demands the government mediated group conflict. At the end of the process, governments produced outputs in the form of decisions and actions.This was a thoroughly US-centric, pluralist approach to the study of government. Based on this schema, modernization theorists reasoned that changes in the socio-economic and cultural environment produced changes in political systems due to shifts in policy demands and the sources of support for government. As economically and politically advanced countries integrated developing nations into the world economy, traditional agricultural societies would become modern societies. In the process, traditional societies would go through a sequence of changes that mirrored those of Western Europe (Rostow, 1960). Gabriel Almond and Bingham Powell (1966) argued that in the twentieth century the development of capitalism in economically advanced European states permitted the emergence of full political democracy with greater attention to economic equality through welfare. Almond and Powell (1978) also argued that economic and social modernization caused political development, understood as a distinct concept. For them, political development consisted of two dimensions. First, it encompassed the evolution of ‘specialized political executive and bureaucratic agencies capable of setting collective goals and implementing them’ (ibid.: 358). Second, it posited ‘the rise of broadly articulating and aggregating agencies [such as] political parties, interest groups, and communication media that serve the purpose of relating groups in the population to these goalsetting and goal-implementing structures’ (ibid.: 358). New social groups created and used these institutions to press their demands for greater welfare and inclusion in the political decision-making process. This generated an opening of political competition and participation where traditional authoritarian elites share power with new elites. Once a country reaches economic maturity, full political democracy appears. With poverty vanquished, the question of liberty and distributive issues no longer threaten elites. Some Latin American countries (Argentina, Brazil, Chile, Colombia,Venezuela, Uruguay and Mexico) were thought to have reached economic ‘take-off ’ and to be on the brink of economic maturity and consolidated democracy. Social scientists noted the expansion of the middle class, and, especially, the emergence of party systems similar to those of the United States and Europe. Associational life also seemed to be flourishing with the emergence of organized interest groups among the professions, business and labour. Elected governments processed the demands of these socio-political institutions and generated reformist policies that distributed some of the national wealth and life chances to the traditionally less fortunate social groups of these countries. Modernization theory strongly influenced US policy towards Latin America in the Alliance for Progress during the 1960s. Here, US development aid focused on economic infrastructure and the promotion of US corporations in the region to spur rapid economic modernization. The attendant expansion and strengthening of the middle class were accompanied by strong support for the development of reformist centrist political parties, such as the Christian Democratic party in Chile.


The Alliance for Progress also backed agrarian reform to speed up economic modernization of agricultural production, the differentiation of an agrarian social structure and the distribution of socioeconomic benefits to the countryside. Agrarian reform was also supposed to blunt the revolutionary potential of peasants and, therefore, help to avoid another Cuban revolution. Although modernization theory fell into disfavour during the 1970s and 1980s, its central tenets were worth developing because it has enjoyed a vigorous resurgence. The emphasis on economic modernization, the change in political culture, the importance of associational life and the development of institutions such as political parties have been the focal points of widely applied policy prescriptions for democratisation in the 1990s and 2000s. Under-development, dependency theory, and state form In contrast to modernization theory, in the 1960s, dependency theory took a non-determinist view of the relationship between levels of development and state form. Economic modernization did not necessarily foster political democracy. As the decade gave way to the 1970s, this approach seemed more in tune with events as democracy gave way to military dictatorships in Brazil, Argentina, Chile, and Uruguay. Fernando Henrique Cardoso and Enzo Faletto (1979: 199–212) expressed the theory most forcefully. Although heavily critiqued by Marxists (Chilcote, 1982), their analysis was rooted in a Marxist political economy. Thus, for them, states expressed the domination of the propertied classes over the rest of society. Their primary functions were to maintain social order and the conditions for capitalist development; democratic states were safe as long as they fulfilled those functions. Whether or not they managed to accomplish those functions depended on a number of factors.These included the composition of political alliances within and across class-based groups, their bases of power within state institutions, the organizational capacity of subordinate classes and the nature of their demands, and the presence or absence of internationally and domestically-induced economic crisis. A fundamental insight was the argument that a developing nation’s domestic politics and the prospects for development had to be analysed in the context of that country’s insertion in the international economy. The economically developed nations of the world had pulled them into the world economy.They dominated developing countries because of their superior investment capability, technological advancement, and military capability (in the case of the United States). This condition defined a situation of dependency. A country’s class structure and the economic and social problems facing the state had to be understood in terms of the nation’s connection to economically advanced countries. The situation of dependency was also the cause of persistent under-development due to the assumption that the asymmetrical power relations between developed and developing nations would perpetuate the condition. Development might occur, but it would always be lagging and different in its social, political and cultural consequences. This was called associated dependent development (Cardoso and Faletto, 1979; Evans, 1979). Cardoso and Faletto argued that economic change lay at the root of the crises of the Latin American state that began in the 1960s. They concluded that the globalization of the world economy forced states and domestic capitalists to accommodate transnational corporations.This required a shift in alliances between state actors, international capital, domestic capital and the middle and working classes. The states of Brazil, Argentina and Chile, for example, collapsed under these tensions, ushering in military government. In these countries labour had its own political party (or parties). In the 1960s and 1970s those labour parties won presidential elections and used the state’s power and authority to further include labour and peasants into the political system. Their governments heavily attacked foreign capital. This did not contribute to the business climate necessary to attract transnational corporations and to link domestic capitalists to them. By contrast, the Colombian and Venezuelan states weathered the storm. Colombia was aided by its party system, dominated by two multi-class, catch-all political parties. Neither felt beholden to a lowerclass constituency, thus they were in a better position to mediate between the external sector, domestic entrepreneurs and the lower classes. The country’s system of power sharing between the 146

Bureaucratic-authoritarianism The crisis of the Latin American state that began in the 1960s seriously challenged the core assumptions of modernization theory. Modernization theorists had taken a benign view of the 147


two political parties (the Frente Nacional) also helped. Meanwhile, the Venezuelan state was aided by oil money, which lubricated class tensions through redistribution of resources for all classes, upper and lower. The larger integration of business into the major populist party, Acción Democrática, also helped. Dependency theory was not only an analytical framework for interpreting Latin America’s political economy. Leaders of populist, leftist and progressive political parties and movements drew on dependency theory for their rhetoric, policy prescriptions and political strategies. In many countries, dependency theory reinforced economic nationalism, culminating in the nationalization of international and, sometimes, domestic companies in crucial sectors of their economies, such as oil in Venezuela, copper and other enterprises in Chile, meat packinghouses in Argentina, and the oil and sugar industries in Peru. This was deemed a key step to breaking the cycle of dependency. The state would enjoy greater autonomy in determining the country’s economic destiny as it gained control of major resources, especially those that generated foreign exchange. Dependency theory also shaped class alliance strategies. Salvador Allende’s government in Chile (1971–73) attempted to forge coalitions between urban labour, the middle classes, medium and small business and the peasants to counter alliances between large-scale domestic business and international companies and the middle classes. Brazil’s Labour Party under Joao Goulart (1962–64) tried a similar tactic. Land reform in both countries served as an important tool to cement alliances with peasants (a heretofore politically marginalized social sector) and to break the economic power of a traditional socio-political actor: the landed aristocracy. Dependency theorists, however, were not primarily interested in explaining the relationship between development and the prospects for democracy or authoritarianism. They wanted to understand the socio-economic and political roots of under-development and the difficulty of overcoming it (Frank, 1966; Dos Santos, 1970). Nevertheless, dependency theory made useful, lasting contributions to political economy studies of development and its politics.The concept of the situation of dependency helped to refine our understanding of class structure, class relations and alliances, and economic tendencies in Latin America. Analysis of these factors, in turn, promoted a greater understanding of the functions the state had to perform to meet the challenge of under-development. The choices and actions of national states and classes were conditioned by the preferences of the foreign sector, understood as international capital and the governments of developed nations that supported them. These foreign entities had to be accommodated. In conclusion, dependency theory brought attention to what was different about the class structure and state functions of developing countries in relation to more developed nations, whether capitalist or socialist. The emphasis was on examining how different class alliances helped states to fulfil the functions of social dominance and economic growth in specific historical periods. This was an important contribution, given the proliferation of competing theories that held that all countries went through similar stages of economic, social and political development; what was adequate for explaining European or North American history was also applicable to Latin America. Perhaps more importantly, dependency theory differed from modernization theory in its policy prescriptions and implications for political action. Modernization theory favoured private sector-led economic development and emphasized strengthening political institutions (especially centre-right and centre-left political parties) and changing political culture (education policy to promote tolerance, moderation and rational goal-oriented thinking). Dependency theory prescribed nationalization and state planning for economic development, redistribution of national wealth to lower class sectors of society, effective political participation for lower classes, and the politics of class alliances to support those objectives.


effects that economic, social and political integration into the world economy had on developing countries. Developing nations would follow the idealized sequence of economic, social and political stages of advanced, developed nations. Yet two of the most economically advanced countries of South America, Argentina and Brazil, succumbed to a new type of military dictatorship in the 1960s. Other economically advanced cases in the Southern Cone, Chile and Uruguay, followed suit in the early 1970s. By the middle of the 1970s, most South American countries were ruled by military governments. How to account for this disturbing trend? Dependency theory, as seen above, offered some answers, but lacked sufficient elaboration to fully explain the turn to military dictatorship. Guillermo O’Donnell (1973) took up the challenge. First, he stood modernization theory on its head, proposing a reverse determinism. Developing nations were not destined to replicate the path of advanced industrial countries. Greater levels of economic development did not lead to democracy; instead, they were equated with a new form of military dictatorship, a new authoritarianism. O’Donnell dubbed them bureaucratic-authoritarian (BA) regimes. Second, drawing on a number of sources (Moore, 1966; Organski, 1965; Gerschenkron, 1962; and dependency theory), he constructed a political economy approach to explain the emergence of BA regimes. For O’Donnell, the state stood at the centre of the dilemma. In the 1960s, the prevailing economic development model, import-substituting industrialization, had reached a crisis in Argentina, Brazil, and later Chile and Uruguay. Economic growth was sluggish or non-existent and high inflation prevailed. Correcting these problems required substantial investment to go beyond light assemblies to the more capital and technologically intensive stages of industrialization, which he called the deepening of industrialization. The problem for the state lay in how to mobilize human and material resources to accomplish this end, an end that fulfilled one of the key functions of the capitalist state: providing for the growth and development of the economy. Latin American states faced an additional problem. They were hard-pressed to fulfil the function of maintaining social order. The evolution of class conflicts under democratic regimes threatened both the dominance of propertied classes and the ability of states to maintain a good business climate. In democracy, populist and Marxist social movements, unions and political parties strongly pressured governments. In some cases, they won presidential elections and pushed their platforms even harder. Their welfare policies, and at times revolutionary stances, threatened the established order. This threat from below frightened the upper classes. Industrial, financial and commercial classes allied with landowning elites in defence against populists and would-be revolutionists. This coalition needed a dictatorial state to impose economic and social order. Enter the armed forces. The military in Latin America had developed the doctrine of national security. This anti-communist doctrine held that without economic growth there could be no political order. Thus, the military as an institution took it upon itself to provide political order through repression and to undertake conservative economic modernization strategies. They alone, went the argument, possessed the power and authority to mobilize material and human resources for national development. The eventual success of economic strategies would ultimately recast the society and polity and make democracy safe for capitalism. The military also believed that recreating a good business climate would entice foreign investors back to their countries. And, given a situation of dependency, foreign investment was key for economic success. O’Donnell’s theorizing not only challenged modernization theory, but it also refocused attention on how the structural conditions of dependency affected class conflict and political change. Whether democracy survived in dependent capitalist economies in large measure hinged on the perception of the upper classes, the military and the foreign sector of the state’s ability to perform its functions. Given the acuteness of the crisis of economic development and the political strength of populist forces in the more advanced stages of socio-economic modernization, O’Donnell pessimistically concluded that repressive military governments were Latin America’s political future, not democracy. Higher levels of economic development produced political authoritarianism. 148

Modernization theory revisited With few exceptions, between the end of the 1970s and the middle of the 1990s authoritarian regimes gave way to democracy in Latin America. This democratizing trend underscored some of the bureaucratic-authoritarianism literature’s weaknesses, which were amply debated in a volume edited by David Collier (1979). Principally, it invalidated the argument that higher levels of socio-economic development had an elective affinity for military government. In addition, the literature on bureaucratic-authoritarianism had difficulty explaining the transitions themselves. Some scholars used the BA framework to analyse tensions in military regimes (Cardoso, 1979; O’Donnell, 1979; O’Brien and Cammack, 1985). However, these efforts could not account for the process by which transitions to democracy from authoritarianism took place, nor could they prescribe policies to help the process along and ensure the consolidation of democracy once it was established. Instead, a literature that built on modernization theory emerged to describe and explain this new wave of democracy and to prescribe policy options and strategies for democratic consolidation. Samuel Huntington (1991) and Larry Diamond, Juan Linz and Seymour Martin Lipset (1989) identified numerous preconditions for democracy drawn from modernization theory. They emphasized the importance of adequate levels of socio-economic development and political culture. Huntington argued that the midrange of economic development, measured as per capita income of $1000 to $3000 (late 1980s’ dollars), correlated highly with countries experiencing transitions to democracy. Diamond, Linz and Lipset added that steady growth and broad distribution of wealth were more important than the fact of high levels of socio-economic development alone. In short, socio-economic development promoted civic culture, raised education, increased access to media, and provided resources for distribution that nurtured democratic values such as tolerance and compromise. However, unlike the original modernization theorists, they argued that socio-economic development by itself does not produce democracy. Other factors mediate, such as the policies of external actors – whether they are supportive of dictatorship or democracy. Especially significant for Latin America was the shift in support from military government to democracy by the United States with the demise of the Cold War. Huntington further argued that authoritarian regimes had to go through a legitimacy crisis before democratization became possible. He also noted a Christian religious culture was more propitious for democracy than other religions. The consolidation of democracy and the quality of democracy became increasingly pressing issues as the 1990s wore on. The governability of Colombia, Peru, Ecuador, Paraguay, and even Argentina, Venezuela, and at times Mexico, not to mention Guatemala and Nicaragua, seemed questionable. Building on these ideas, Linz and Stepan (1996) and Diamond (1999), among others, developed the concept of democratic consolidation, understood as the conditions for the stability and persistence of democracy. These scholars argued democracy was consolidated when most citizens and all politically relevant elites considered the democratic state to be the only legitimate means to settle competition for political office and to formulate policy. With varying emphasis, these analysts agreed on five conditions necessary for fully consolidated democracies. Linz and Stepan (1996: 7–15) summarized them as follows: (1) a vibrant civil society based on freedom of association and communication; (2) free and fair elections with universal citizen participation; (3) the rule of law, understood as constitutionally established, broadly accepted and obeyed legal culture; (4) a modern state apparatus with a monopoly of legitimate force based on 149


The theory helped to understand why Latin America was turning to authoritarianism in the 1960s and 1970s. However, because it stressed structural factors, the theory did not address conditions decision-makers could manipulate. Thus, it did not lend itself to policy analysis, especially prescriptions for democratization. The actors interested in democracy or the extension of social and economic rights to the urban and rural poor and otherwise disenfranchised were the objects of repression; they had no role to play in BA regimes.


rational-legal norms capable of regulating society and economy; and (5) a market economy in which the state mediates social and economic needs. Diamond (1999: 77–93) added effective regime performance as a sixth condition crucial for building the legitimacy necessary for democratic consolidation. This measure focused on two arenas: (1) adequate economic performance, understood as sustained increases in GDP, was crucial for providing improved living standards conducive to regime support; and (2) political performance, which largely referred to upholding the rule of law, including protection from criminals and proper functioning of the legal system, was also considered a crucial measure of regime effectiveness. These conditions doubled as policy recommendations that have been the template for prescribed reforms throughout Latin America. For example, the United States has emphasized strengthening the rule of law, especially in the anti-drug crusade, which has centred on Mexico, Colombia and the Andean countries. The United Nations and other international organizations, such as the European Union, have worked tirelessly to ensure free and fair elections in countries where their exercise has been questionable. The USA, the International Monetary Fund (IMF), and the World Trade Organization have also steadfastly promoted neoliberal economic reforms, which they, as well as the scholars discussed above, believe are the only means to improve economic performance. Throughout the 1990s and into the 2000s, the World Bank, the globe’s pre-eminent multilateral development bank, has constructed, articulated and implemented (through its loan conditionality) a neoliberal agenda regarding economic reform, state reform, poverty alleviation and sustainable development. Its free market economic reform measures reinforce those already prescribed by the US government and the IMF. However, the World Bank also recognized that the state was a necessary institution for societies to function effectively (World Bank, 1996). As a result, it has advocated building effective states with reduced areas of responsibility. Those include the provision of law and order (especially with respect to enforcement of private property rights and contracts, but also for personal security) and providing the institutional support necessary for the market to function correctly. Reducing state responsibilities, in this view, also promotes the emergence of civil society. Poverty alleviation, putting a human face on capitalism, took on a neoliberal cast as well (World Bank, 2000). Universal coverage was changed to private insurance for those who could pay, such as the middle and upper classes.The poor received targeted, preventative care on a means-tested basis from the state, such as programmes for pregnant women and infants to strengthen them physically. This reduced infant mortality rates without having to spend on expensive health care facilities. The emphasis is on keeping the young healthy leaving sick poor adults to suffer inadequate public health care. Education programmes were treated in a similar manner. Some version of these policy prescriptions for the consolidation of neoliberal democratic capitalism – based on precepts drawn from revised modernization theory – has been implemented almost everywhere in Latin America. Domestic political, economic and social elites have promoted these reforms too, at least sufficiently to implement this agenda. Taking the lessons of the past to heart, the moderation of political elites, especially of populist and leftist parties in Brazil, Chile, Argentina and many Central American countries has been key for the wave of democratization that has swept the region. For the moment they have withstood the temptation to make demands the state cannot accommodate without jeopardizing its relations to large-scale domestic and international capital. They have also resisted resorting to mass mobilization. In short, to protect democracy they have held in check behaviour that in the past generated the ‘threat from below’ central to O’Donnell’s analysis of the breakdown of democracy. Elite moderation and compromise also ameliorated conditions for democratic breakdown emphasized by Linz (1978) and Crozier et al. (1975).They argued that leaders from the left and centre of the political spectrum had made ill-advised choices.Too many demands had overloaded government’s ability to process them. This so reduced the effectiveness and efficacy of government that it lost legitimacy and the military stepped in. Despite improvements, the revised modernization-cum-neoliberal agenda for transitions to democracy and democratic consolidation still suffered from some of modernization theory’s original 150

Recent political economy theorizing Recent theorizing in political economy concurs that economic development does not necessarily produce either democratic or authoritarian state forms. For political economists, whether one or the other prevails, as well as the stability of political regimes, depends, in the first instance, on the resolution of class-based social conflicts. Otherwise, the fragile institutions stressed by modernization theorists run the risk of being overwhelmed by struggles among antagonistic social groups. Accordingly, contemporary political economists focus on the effects that economic conditions and the relative autonomy of the state have on social conflict and regime stability. As will be seen, these analyses also have concrete policy implications. Because most Latin American countries have now experienced some combination of neoliberal economic reform and democratization, political economy studies frequently focus on the dual problem of economic and political change. They ask: what conditions encourage free-market economic reforms and democratic states simultaneously? Jeffry Frieden (1991) offers an elegant explanation for the connection between the Latin American debt crisis, economic change and the recent wave of democratization. Frieden argues that international pressure for free-market economic adjustment has been relatively constant over a long 151


shortcomings in addition to some new ones. One of the lingering problems was that the preconditions – such as socio-economic development and religious doctrine – do not explain why a country has a democratic or authoritarian form of government. They may be correlated with democracy under the right circumstances, but the causal linkages are still missing and the right combination of factors is not understood. A second problem was the number of factors used to understand transitions to democracy and democratic consolidation. Recognition of the complexity is welcome, but there was little theoretical integration of the variables; the relationships between variables are not clearly specified. The emphasis on the political culture of elites offers hope that leadership can forge democratic outcomes where structural conditions may not be very favourable. But these studies offer no explanation why political elites embrace democratic values. Are they voluntary decisions or the product of historical pressures (Espinal, 1991)? These analytic ambiguities are not just academic; they have real consequences for policy. For almost 20 years, Latin American policy-makers have emphasized free market economics and state reform (also known as state modernization) to support the neoliberal economic agenda; flimsy social safety nets for the poor drift in and out of focus depending on fiscal conditions.The problem is that, with few exceptions (notably Chile), neoliberal economic reform has not generated sustained economic growth, a key condition for democratic consolidation stressed by neo-modernization theorists, and nowhere has it made the distribution of income more equitable. Despite this lacklustre performance, in the 1990s, political elites steadfastly suppressed demands for socio-economic policy change. Instead, they pressed on with political-institutional reforms suggested by revised modernization theory. These focused principally on ‘modernizing’ the state and strengthening the rule of law (police) in the face of mounting corruption and lawlessness. It is questionable, however, whether this approach constitutes an adequate policy response to protracted socio-economic crisis. Karl Polanyi (1957) argued that people naturally seek to protect themselves from the insecurities of the market. The suppression of demands for relief has resulted in peasant uprising in Southern Mexico in the mid-1990s and widespread political instability in Ecuador, Peru and Venezuela in the late 1990s and early 2000s. In the last three cases a new populism arose that made significant political inroads. It remains to be seen whether elites who support the neoliberal agenda will tolerate them. The election in 2002 of a centre-left labour party coalition to the presidency in Brazil raises similar questions about the moderation of elites and the limits of elite consensus in economic hard times. A crucial issue for neo-modernization theorists is whether their work can transcend policy prescriptions that currently only support a neoliberal democratic capitalist state.


period of time. Therefore, domestic class alliances, the extent of class conflict and the degree of state autonomy were more important than external factors in both economic and political change. For Frieden, capitalists are the key class-based actors. Because they control the public functions of investment and employment (also called structural power), their support for any particular state form is crucial for political stability. Thus, in countries with moderate tension between labour and business (low class conflict), state managers should heed the policy preferences of dominant economic groups. Otherwise, economic elites may turn against the government. This occurred in Argentina and Brazil, where many important business sectors disagreed with the military government’s economic policies. Because the dictatorships ignored their demands, they supported democratization, thus strengthening a multiclass coalition against military rule. Conversely, in situations of high class conflict, state managers may have more autonomy in policy decisions. The dominant sectors of the upper classes are more willing to submit to economic policy changes because they need the state to keep social order. This happened in Chile. The implication is that the absence of a multiclass alliance for democracy explains why it was practically the last South American country to redemocratize. Moreover, when the transition to democracy took place, it did in accordance with the military’s agenda. Frieden confined his analysis of political change to the regime loyalties of capitalists, assuming that their regime preferences weighed heavily in the process of transitions to democracy. This was a significant, if not unique, insight. The limitation was that by themselves the regime loyalties of upper classes did not determine the outcome. Dietrich Rueschemeyer, Evelyne Stephens and John Stephens (1992) address this limitation. Following Barrington Moore (1966), they argue that democracy or dictatorship is the result of broad class alliances. The power of those alliances is mediated by state autonomy and international factors. The authors stress that capitalist development weakens labour-repressive authoritarian classes, especially traditional landowners. It strengthens classes that have an interest in democracy: the bourgeoisie (capitalists), the middle classes and labour. But the mere emergence of those classes is not enough to explain whether democracy or dictatorship will prevail. In Latin America, as in Europe, the bourgeoisie had an interest in creating protected, oligarchic, democracies that included them in policy-making but excluded subordinate social classes/groups. Depending on the case, this characterized Latin American politics from the nineteenth to the middle of the twentieth centuries. The struggles and organizational capacity of the middle class, instead of labour as in Europe, turned the tide in favour of full democracy. Labour in Latin America was simply organizationally too weak to perform the role. Thus, a middle class that did not feel threatened by labour could ally with it, and some sectors of the bourgeoisie, to build democracy. Conversely, when middle classes make common cause with upper classes, authoritarianism might result. In other words, authoritarianism is likely to emerge in the presence of highly organized and institutionally and ideologically cohesive autonomous states (independent of civil society) and severe class tensions. In recent transitions to democracy, the foreign policy of the dominant external power also makes a difference. Thus, US support for democracy as of the middle of the 1980s strengthened the movement to democracy in the region. Rueschemeyer et al. developed a framework for analysis based on the relationship between class structure and organization, state institutions and transnational forces. They focused on how long-term processes of capitalist development affected those variables and their impact on state form. Stephen Haggard and Robert Kaufman (1995) developed a framework for analysis more suited to short-term studies of transitions from authoritarianism to democracy and the prospects for democratic consolidation. They also examined the socio-economic and institutional conditions under which elites embrace democratic values; issues the new modernization theorists and the increasingly popular strategic choice analysts (O’Donnell and Schmitter, 1986) had ignored. Haggard and Kaufman argued transitions to democracy were most likely in cases with poor economic performance and lack of elite cohesion. Economic crises tended to undermine the state managers’ ability to purchase the compliance of social groups. Elite fragmentation weakened the state’s 152

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capacity to manage the crisis. Under these conditions of regime decomposition, the political organizations of middle-class groups and labour could press for full political democracy and even ally with some disgruntled upper-class groups; but only if they moderated their policy platforms. In cases without economic crisis and where elites remained cohesive in support of military government, authoritarians were able to hold out longer and impose more restrictions on the democratic regime that was to follow them. The prospects for the consolidation of democracy depend on two institutional factors, according to Haggard and Kaufman. First, centralized executive structures are better because they facilitated the initiation of economic reforms necessary to resume economic growth, without which there can be no long-term political stability. Having initiated economic reforms, state managers must build support coalitions for the implementation of those reforms in order to sustain them. Second, Haggard and Kaufman suggest that the structure of the party system is key for constructing such support coalitions. Specifically, they advocate building two-party systems. These tend to reinforce compromise and moderation. None of these studies, however, argued that labour played a significant role in democratization. Ruth Berins Collier (1999) addresses this omission. Her work is ambitious. It links theories of democratization based on class analysis with elite bargaining theories. Berins Collier carefully avoids claiming labour played a determining role. She shows that in most cases organized labour consciously developed strategies in support of democratization and that its actions affected the democratization process. In concert with other social groups, it mobilized in the streets and also participated in negotiation over regime change with opposition and government elites. Which strategies they adopted, and the allies they chose, depended mainly on the degree to which they were included or excluded from official negotiations by the authoritarian regime. Although not strictly the subject of this chapter, it is worth mentioning that Berins Collier develops a finely crafted model of class-based actions to account for distinct modes of transition to democracy in South America and Southern Europe. These political economy analyses share a common assumption. Democratization involves a complex process of constructing multiclass coalitions to support both democratic institution building and a socioeconomic development model. Consequently, political economists offer the following policy advice. Political leaders must forge social coalitions to support their policy initiatives and the institutions they seek to build. The relevant coalition partners are urban based: different sectors of business, the middle classes and labour.The urban bias is rooted in a tradition of assuming that agrarian interests have a greater affinity for authoritarian regimes (albeit for different reasons depending on whether they are large-scale landowners or peasants). Developments in Brazil during 2002 may call those assumptions into question. The Brazilian Labour Party – with strong ties to rural labour unions and social movements – won a presidential election there. Another policy prescription flows from the recognition that class-based social groups have different interests. Thus, political leaders that represent these diverse interests must exercise moderation and compromise to achieve democracy. Many analysts interpret this as an admonition to labour groups and strongly reformist middle-class groups who in the past pushed too many demands that democratic regimes could not meet without destabilizing their countries economically and politically. This was O’Donnell’s ‘threat from below’, or Crozier’s (1975) ‘excess of participation’. However, the recommendation also applies to upper-class elites and conservative middle-class leaders, as well as the occasional right-wing labour organization. To ensure political stability, they must relent in their efforts to uncompromisingly implement their neoliberal agenda. Excessive reliance on repression and other forms of coercion will not ensure long-term political stability, as testified by events in Ecuador, Peru, Argentina and Venezuela in the first decade of this century. The prescription to focus on social coalition building is a strong one. Political economists argue that in the absence of such support coalitions, efforts to build legitimacy for democracy based on formalprocedural rules of the political game, such as the rule of law, will most likely collapse, especially during


economic hard times. In other words, the institution-building focus of modernization theorists is unlikely to prosper if social coalition building is ignored. Those institutions will most likely be overwhelmed by social tensions generated from systematically excluding the demands of socio-economic groups from the policy and institutional design agendas. Latin America is full of historical examples of this process, especially in the first half of the twentieth century and now at the turn of the twenty-first century. This does not mean that advice to construct institutions to channel conflict, such as Haggard and Kaufman’s suggestion to generate two-party systems, are without merit. It means that when these are used to exclude the demands of broad social groups from political negotiation, such institutional arrangements can be overwhelmed by social mobilization and conflict. Even two-party systems have been proved vulnerable in Latin America, as occurred in Uruguay in 1973, and as is occurring in Colombia, Venezuela and Argentina at the beginning of the twenty-first century. Moreover, economic good times by themselves cannot generate social compliance; the distribution of wealth is also crucial. Hence, political economists also need to address the conditions under which social justice can be advanced without threatening elites to the point where they withdraw their support for democracy. The same applies to efforts to increase social participation in policy-making, which has been severely curtailed in many Latin American democracies. The various efforts to protect democracy from the ‘masses’ produced a burgeoning literature on Latin America’s penchant for democracy with adjectives, such as tutelary democracy, protected democracy and delegative democracy (O’Donnell, 1992; Loveman, 1994; Smith et al., 1994; Collier and Levitsky, 1997).

CONCLUSION In the 1980s, a consensus across methodological perspectives emerged that no lineal relationship exists between economic development and the form of the state. Economic modernization does not necessarily lead to either democracy or dictatorship. Perhaps the greatest value of modernization theory, especially in its current incarnation, lies in its emphasis on elite strategies and the structure of political institutions. We have the sense that we can control them; we believe they are a matter of choice. Whether political elites value democracy, their tolerance, and their willingness to compromise are clearly important. Whether political institutions mediate or exacerbate social and political conflicts is also crucial. However, the modernization approach lacks a systematic view of the relationship between these variables. It also does not provide the tools to understand the multiple tensions that tear at political leaders, the wellsprings of social movements, or that institutions require social support.Thus, as argued previously, policy prescriptions frequently ignore problems that require attention if political leaders are to exercise the moderation necessary for successful institution-building. These problems have plagued modernization theorists and the policy-makers who take their advice since the 1950s. They are very much with us today. Political economy approaches offer tools to address those problems. They shift the focus onto the economic and political factors that influence the demands and power relations among social groups. These, in turn, shape the strategies of elites. Political economy also recognizes the existence of the state and its role in society. Understanding the functions of the state in capitalist economies provides a sound foundation for analysing the effects of economic and social tensions on political stability over time. The addition of factors such as international variables and the structure of political institutions further advance our understanding of the prospects for democracy and the danger of backsliding to authoritarianism. Moreover, there are two elements of heavily criticized dependency theory worth rescuing. One is the analytical importance of the region’s historical specificity. That is, understanding how the region’s unique economic, social and political history affects outcomes. Second, analysts should always bear in 154

FURTHER READING Centeno, M. A and López-Alves, F. (eds) 2001 The other mirror: grand theory through the lens of Latin America. Princeton University Press, Princeton, NJ. A collection of essays that bring universal theory into dialogue with specific Latin American history. Chalmers, D. A., Vilas, C. M., Hite, K., Martin, S. B., Piester, K. and Segarra, M. (eds) 1997 The new politics of inequality in Latin America: rethinking participation and representation. Oxford University Press, Oxford. The essays in this volume explore the unfolding relationships among social change, equity and the democratic representation of the poor in Latin America. Dunkerley, J. (ed.) 2002 Studies in the formation of the nation state in Latin America. Institute of Latin American Studies, London. A general historical and sociological exploration of complex and contested issues around the character of the Latin American nation–state. Eckstein, S. E. and Wickham-Crowley, T. P. (eds) 2003 Struggles for social rights in Latin America. Routledge, New York. This volume addresses a broad span of social rights struggles in Latin America. Topics covered include environment, citizenship, workers’ rights, women’s movements, AIDS and indigenous people’s rights. Murillo, M.V. 2001 Labor unions, partisan coalitions, and market reforms in Latin America. Cambridge University Press, Cambridge.This book address why labour unions resist economic restructuring and adjustment policies in some countries and in some economic sectors while they submit to it in other cases. Stokes, S. C. 2001 Mandates and democracy: neoliberalism by surprise in Latin America. Cambridge University Press, Cambridge. An analysis of the reasons and effects of the betrayal of mandates by 155


mind how the region’s particular insertion in the world economy influences socioeconomic and political tendencies (Stallings, 1992). In short, political economy draws our attention to the economic and social challenges facing state actors and how these affect institutions and socioeconomic groups. Political economy-based policy prescriptions stress the need to build social coalitions (or support) for institutions. Constructing that support requires broad inclusion of organized social groups in institutions, meaning that they not exclude or skew power too much against significant social groups, even if they belong to subordinate classes. The same advice applies to the distribution of socioeconomic benefits. For example, if neoliberal reforms leave most citizens prey to private power and do not provide better material conditions for masses of people, those masses will sooner or later demand protection from private power. Political leaders will emerge to champion alternative agendas, challenge the policy consensus of established elites, and eventually question the utility of a rule of law in which their material interests are ignored or, worse, consistently repressed. In other words, moderation among all elites is not always possible, and institutions, no matter how well designed, may be overwhelmed by social mobilization and political strife. Current emphases on the rule of law and institution-building simply may be perceived as instruments of exclusion and repression by a number of social groups. In the final analysis, prudent political leaders, functioning political institutions, and support from principal social groups are all necessary for democracy to thrive and to avoid authoritarian reversions. While one would like to give a better report, Latin America at the beginning of the twenty-first century seems about the same it was in the previous one. Tensions flourish in a number of familiar cases, such as Venezuela, Argentina, Colombia, Peru, and in some of the formerly war-torn Central American countries. Other cases, such as Chile, Mexico, Costa Rica, Uruguay and perhaps Brazil offer hope, as they have in the past. Policies there seem to draw on a blend of modernization theory inspired and political economy oriented prescriptions.


democratically elected governments, meaning when politicians promise one thing to get elected and do another once in office. This is a growing trend in Latin America. Tokman, V. E. and O’Donnell, G. (eds) 1998 Poverty and inequality in Latin America: issues and new challenges. University of Notre Dame Press, South Bend, IN. This anthology introduces readers to fundamental issues of poverty and inequality under neoliberalism. It explores strategies of job creation and reconstruction, social welfare and social protection.

WEBSITES Interamerican Development Bank, www.iadb.org, is the oldest regional multilateral development bank established after the Second World War. It supports economic and social development projects. International Labour Office, www.ilo.org, this organization promotes social justice and internationally recognized human and labour rights. Latin American Network Information Center (LANIC), www.lanic.utexas.edu, is a clearing house for sites about Latin America with many direct links to Latin American countries. United Nations Economic Commission for Latin America and the Caribbean, www.eclac.cl, contributes research for economic and social development of Latin America and is generally critical of unbridled neoliberalism.

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8 The new political order: towards technocratic democracies? Patricio Silva

At the beginning of the twenty-first century, Latin America is plagued by severe political and institutional crises that in some countries have brought democratic rule almost to the point of collapse. As a result, much of the hope and expectations that existed in the 1990s about the ability of the new democracies to provide for higher levels of political stability and economic progress in the region have rapidly evaporated. Today, pessimism, uncertainty and even despair have begun to typify the general mood existing among many Latin Americans about the immediate future of their countries. Whereas neoliberal economic and institutional reforms applied in the 1980s and 1990s profoundly transformed Latin American societies, they clearly failed in most cases to create a firm basis for economic growth, social prosperity and political stability. For almost two decades, the pro-market agenda defended by the so-called ‘Washington consensus’ represented an almost uncontested project for the region. In recent years, however, increasing poverty and poor economic performance have resulted in street riots against neoliberal policies and the re-emergence of populist political leaders who promise an active pro-poor social agenda. The election of leaders such as Hugo Chávez in Venezuela, Luiz Inácio ‘Lula’ da Silva in Brazil and Lúcio Gutiérrez in Ecuador – to just mention the most emblematic cases – can be seen as expressions of a marked discontent with neoliberalism and a desperate search for alternative policies. This has not yet shown its capacity to provide an effective answer for the current economic and institutional crisis. In contrast, countries such as Mexico, Chile and some Central American nations seems to have definitively chosen a close commercial alignment with the United States and the acceptance of a clearcut market-oriented developmental strategy. This might indicate the gestation of a new schism in the region between countries that have finally accepted the neoliberal developmental path and those countries which are still attempting to pose some resistance to the ‘Washington consensus’ and the globalization agenda. This chapter analyses the rise of the neoliberal project in the region and its current crisis by focusing on its main socio-political and cultural effects on Latin American societies. It represents an attempt to go beyond the ‘transitional’ scope followed by most democratization studies during the last two decades, which have focused on the specific ways in which the democratic transition process took place. However, little effort has been made to assess both the main features of the new democratic order and the factors that have generated the current crisis.

NEOLIBERALISM, MODERNIZATION AND DEMOCRACY Since the restoration of democratic rule in the region in the early 1980s, the relationship between neoliberalism, modernization and democracy has been constantly plagued by severe tensions. So, for instance, most of the democratic governments have been unable to successfully legitimate both economic neoliberalism and its related discourse of modernization. This, in my view, has been the consequence of a series of factors. 157


To begin with, we must not forget that both the neoliberal economic project as well as its accompanying discourse of modernization were applied in countries such as Chile, Argentina and Uruguay by military regimes, that is, by forces opposed to democracy. The ‘modernization of society’ constituted the ideé force behind the application of the neoliberal policies during those authoritarian regimes. This modernization project was translated in practical terms as the accomplishment of a series of macro-economic goals such as the privatization of the economy, the reduction of state bureaucracy, the liberalization of markets and the strengthening of the export-orientated economic sectors. What we observe today is that, in fact, most of the current democratic governments have largely continued to visualize modernity along the same macro-economic lines as did the former military governments. This element of continuity from the previous regime made it extremely difficult for the new democratic authorities to legitimate neoliberal policies during the 1980s and 1990s.The fact is that the implicit call of the democratic authorities to accept the neoliberal economic guidelines proved unpalatable for the social and political forces who fought against the military regimes.They experience this reality as an inadmissible legacy of the past, and consequently they resist accepting the neoliberal model as being the economic engine sustaining the democratic fabric for the coming years. This phenomenon is present even in Chile where neoliberal policies have been relatively successful. The centre-left Concertación coalition, which has ruled the country since democratic restoration in 1990, has been constantly criticized ‘from within’ by the so-called autoflagelante faction. Although this sector is part of the government, it has systematically rejected the continuation of neoliberal policies because it represents a heritage of the Pinochet era (Brunner and Moulian, 2002). Second, an important obstacle in the attempts to legitimate neoliberal policies in the region is that, in many countries (such as Nicaragua, Venezuela and Ecuador), the adoption of neoliberal economic policies and its correlated modernization discourse have been regarded by broad sectors of the population as being externally imposed. International financial institutions such as the International Monetary Fund (IMF) and the World Bank have been denounced by several Latin American political forces and social movements for pressurizing Latin American governments to apply structural adjustment policies (Petras and Morley, 1992). These ‘dictates’ from the North have left almost no room to manoeuvre for the new democratic governments in the formulation and implementation of their own socio-economic agendas (Green, 1999). Paradoxically, this thesis (and the resulting rejection of the neoliberal agenda) have found support in Latin America among quite heterogeneous political and social groups; these include the left, certain religious groups, some nationalist sectors (both inside and outside the army) and some entrepreneurial circles (afraid of free-market policies and especially of foreign competition). The lack of popularity and support for neoliberal policies in many countries of the region has led to a quite peculiar situation. So while only very few political forces in Latin America dare openly to express their unconditional support for neoliberalism, neoliberal economic policies have become de facto dominant in the continent. In other words, almost no political force is seriously trying to elaborate an ideological legitimation for the new neoliberal order. One of the few exceptions in this respect can be found in Chile, where neoliberalism is not only enthusiastically defended by the rightwing parties and entrepreneurs but even, though in more implicit terms, by some sectors of the left (Moulian, 1997; Tironi, 2002). Finally, another major difficulty faced by the new democratic governments in getting their neoliberal economic policies accepted by the people is related to the great social expectations generated by the restoration of democracy in the region. For many Latin Americans, democracy still means in the first place the existence of a government which really cares for the needs of the majority (that is, the masses) and which has to be actively and genuinely engaged in the struggle against poverty and social injustice. From this follows the expectation that in the new democratic era an active role for the state is required to meet the consequence of the immense ‘social debt’ left by the former authoritarian regimes. What many people have experienced instead is that the restoration of democracy has been 158

THE DEPOLITICIZATION OF SOCIETY Contrary to what was broadly expected, in most Latin American countries the restoration of democratic rule was not followed by a strong and sustained ‘political resurrection’ of civil society. On the contrary, one of the most striking features of the new democracies has been the growing depoliticization of society and the marked absence of national political debates. This phenomenon of increasing depoliticization of Latin American societies has been the product of a complex blend of past and current political experiences faced by the people, as well as a consequence of the neoliberal modernization project and its ideological impact on the people’s political behaviour. The origins of this process of political deactivation have to be sought during the former authoritarian regimes, when systematic repression against any independent political expression inaugurated a dark period of ‘forced depoliticization’. Paradoxically, state repression eventually led to the emergence of a firm response from certain sectors of civil society. This was expressed in the germination of active social movements and the creation of many NGOs that defended human rights and attempted to ameliorate the social conditions of the rural and urban poor (Oxhorn, 2001). At the same time as the use of physical repression, military governments in countries such as Chile, Argentina and Uruguay attempted to convince the population that ‘politics’ was synonymous with subversion, chaos, decadence and corruption. For this purpose, the military simply exalted and 159

The new political order: towards technocratic democracies?

accompanied by a further abandonment by the state of its traditional social tasks, resulting during the past decade in a dramatic deepening of the social inequalities in the majority of Latin American countries. This lack of a ‘social dimension’ in most of the neoliberal economic programmes applied in the region has been severely criticized by leading intellectuals, as well as by the Church and nongovernmental organizations (cf. Oxhorn and Ducatenzeiler, 1998). From the very beginning, the restoration of democratic rule in the early 1980s was strongly conditioned by the implementation of structural adjustment programmes by an increasing number of countries, following Mexico’s dramatic announcement in August 1982 that the country was unable to keep its international financial commitments on the repayment of its foreign debt. This marked in the entire region the initiation of a profound shift in development strategies. Following the outset of the debt crisis the traditional pattern of import substitution industrialization (ISI) was strongly criticized by domestic and international actors who demanded the adoption of market-orientated reforms. Initially, many Latin American countries decided to apply non-orthodox stabilization programmes (for example, the Austral Plan in Argentina, the Cruzado Plan in Brazil, the Inti Plan in Peru) in an attempt to reduce the social costs of these austerity policies. By the late 1980s, however, it had became clear that these and other stabilization programmes had failed to put an end to the crisis and to provide the expected economic recovery. As Green (1995: 69) indicates, once ‘easy’ heterodox solutions had been discredited, neoliberalism spread rapidly across the region; these were the years when the long-term structural adjustment of Latin America’s economy gathered pace. Trade liberalization, government cutbacks, privatization and deregulation have since then become the norm in almost every country. While a general consensus emerged among most of the Latin American governments about the need to abandon the traditional pattern of state-led industrialization and to modernize their economies by adopting neoliberal free-market policies, they have had immense difficulties in translating the goal of modernization into political terms. For instance, rarely has an attempt been made to provide a clear explanation of how modernity is related to democracy or to indicate the concrete differences existing between the modernization project of the former authoritarian regimes and the new democratic authorities. Both the pre-eminent role of structural adjustment policies under the new democracies and the lack of a clear political project have resulted in the insertion of neoliberal economics into the political realm. In this manner, official politics in contemporary Latin America has tended to lose its own dynamic, having been in many cases reduced to a functional mechanism for the implementation of the neoliberal economic project.


manipulated the feelings of discontent with politics and politicians, which were already entrenched among some parts of the population as a result of the general political and economic crisis which had preceded the arrival of the military to power. The extremely repressive nature of military governments also convinced many individuals that to become involved in politics could lead to big problems, as one risked not only one’s own life but also the physical integrity of family members and friends. Other people, after so many years of official antipolitical indoctrination (through mass media and education), became finally convinced that politics was ‘indeed’ intrinsically perverse. So, although at the end many people repudiated the systematic violation of human rights by the military and demanded an immediate re-establishment of the rule of law in these countries, the restoration of democracy did not completely eliminate the deep apprehensions and mistrust that had been engendered in the previous decades against politics in general, and political parties and politicians in particular (Silva, P. 1999). Another factor contributing to the further depoliticization of Latin American societies has been the negotiated nature of most transitions, as restoration of democratic rule was achieved following a series of bargains between the democratic forces and the military authorities (Casper and Taylor, 1996). During these negotiations the opposition forces involved tacitly or explicitly agreed not to actively encourage political effervescence among the people. Furthermore, several democratic political leaders came to regard the continuation of the political demobilization of the masses as a prerequisite for achieving an ordered and peaceful democratic transition and to guarantee governability under the new democratic scenario. Strong calls for political moderation also came from academic circles. A group of prestigious political scientists, for instance, offered in an influential four-volume study detailed practical advice to Latin American civilian leaders about how to minimize the levels of political instability which usually accompany transitional processes. In the last volume, O’Donnell and Schmitter recommended, among other things, providing the armed forces with an honourable role in accomplishing national goals. Meanwhile, political parties were asked to abandon their traditional role as agents of mobilization to become instruments of social and political control of the population (O’Donnell et al., 1986: 32, 58). They furthermore recommended that democratic leaders should not upset the interests of the dominant groups, and not threaten the institutional existence, assets and hierarchy of the armed forces. With respect to the left-wing forces, they advised them to accept the political restrictions of the transition process, leaving them only ‘to hope that somehow in the future more attractive opportunities will open up’ (ibid.: 69). The ‘cupular’ or top-down nature of the democratization process, which has been often portrayed as an ‘elite settlement’ (Higley and Gunther, 1992), produced a deep disillusionment (and a subsequent demobilization) among many people, such as supporters of left-wing parties and members of social movements who had expected a more participatory process of democratic reconstruction. This, together with the conscious decision of political leaders to maintain the legacy of political demobilization, has certainly played an important role in the further depoliticization of society. Following the restoration of democratic rule, the expectation among popular organizations was that the new authorities would bring to justice those responsible for human rights abuses during the military governments. However, the specific way in which the new democratic governments finally dealt with the highly controversial question of human rights’ abuses also contributed to political demobilization of the population, as a consequence of the considerable disappointment at the results. In Brazil, for instance, there was an implicit agreement between politicians and the military not to make the prosecution of human rights violators a political issue. In Argentina, the Alfonsin government passed in 1987 a punto final amnesty law by which prosecutions of most lower rank military for human rights abuses were declared ended on the grounds that they had simply carried out orders. In Chile, the Truth and Reconciliation Commission, established by the Aylwin government in 1990, brought a detailed report about the human rights abuses during the Pinochet regime. However, the existence of the self-decreed amnesty law of 1978 protected the military from possible trials. 160

Figure 8.1 Graffiti saying ‘Death to the Guerrillas’, Central Colombia, 2001. Photo by Laura Maynard 161


Following the arrest of Pinochet in London in October 1998 and his return to Chile in March 2000 expectations were aroused about his possible prosecution in his homeland. The ‘Pinochet affair’ reached a defining moment on 9 July 2001, when an appeals court in Santiago declared General Pinochet to be mentally unfit to stand trial. Although the court decision was qualified as ‘temporary’ – implying that he could face a trial again if his health condition should improve in the future – most observers saw this as marking the end of the legal prosecution of Pinochet (cf. Silva, 2002). A general amnesty law was passed in El Salvador in 1993 as part of the peace agreements between the government and the guerrillas (Figure 8.1), and in Guatemala, the human rights issue remained largely unresolved (Jelin and Hershberg, 1996).The practical impunity obtained by the military in most of the countries produced deep disappointment among significant sectors of society, resulting very often in indifference towards the government and politics in general. Another factor to reinforce apoliticism among the Latin American electorate has been the traumatic effects of the hyper-politicization experienced in the past. The high degree of social and political confrontation preceding the military coups in the Southern Cone countries, together with the institutionalization of fear and repression during the military regimes, has now generated a kind of ‘political exhaustion’ among the generations who consciously and actively lived through those years (Koonings and Kruijt, 1999). The same is true for people who for years have suffered from political violence resulting from open or disguised civil wars such as in El Salvador, Guatemala, Nicaragua and Peru.The endless effervescence, the destabilization of daily life, produced in the long term a distressing psychological situation and an unbearable (political) fatigue. Under these circumstances, the disconnection with politics has become for many people a kind of personal ‘survival strategy’ in both psychological and emotional terms. The increasing ‘social democratization’ experienced during past years by broad sectors of the Latin American left is certainly another factor in contributing to the political deactivation of civil society. Most left-wing parties have explicitly abandoned the objective of revolution to replace it with the search for gradual and consensual changes in the struggle against poverty and social inequalities (cf. Vellinga, 1993). This has been the case with parties such as the Brazilian Social Democratic Party (PSDB), Mexico’s Party of the Democratic Revolution (PRD), the Chilean Socialist Party (PSCh), and Venezuela’s Movement to Socialism (MAS). As Castañeda concludes, ‘As left-of-center reformism in


Latin America is pushed to the fore and transformed into a meeting point for many other historical currents of the Latin American left, it is also being driven to the center’ (1994: 174). In the new democratic order, political parties have, in general, dramatically lost their appeal for the population. This has been in part another aspect of the heritage from the authoritarian era, as repression severely hit and dislocated political organizations. This resulted, in many countries, in the establishment of a substantial distance and mutual alienation between political parties (most operating clandestinely) and civil society, characteristics that continued after the restoration of democracy. The rendezvous between parties and the electorate after so many years of disconnection has been full of surprises. For instance, many parties had experienced dramatic ideological changes during the authoritarian period and had become almost unrecognizable to the population in the democratic transition. In contrast, other organizations maintained their pre-coup ideologies almost unaltered, and hence became anachronistic in countries which in the meantime had experienced profound transformations in their demographic, socioeconomic and cultural structures. The depoliticization of society has led to the breakdown of historical party loyalties as during the past years a significant segment of the Latin American electorate has not voted for political parties or political projects but for specific individuals. The presidential victories of political outsiders such as Collor de Mello in Brazil and Alberto Fujimori in Peru, in 1989 and 1990 respectively, are cases in point. As Little (1997: 191) points out: both . . . came out of complete obscurity as self-proclaimed saviours of the nation and their promises of a clean sweep of the political stables clearly struck a chord with the electorate. Collor . . . [and] Fujimori . . . symbolize a popular distance from the old party politics. Both politicians fully compensated for the lack of firm party structures with the effective use of television. In current Latin American politics, television has replaced parties, unions and ‘the streets’ as the most important instrument for creating (and destroying) the public ‘images’ of the members of the political class. Political leaders no longer speak to the crowd, but address directly the atomized community of millions of television spectators. Paradoxically, this modern medium could help to generate a revisited version of old-fashioned personalistic politics. Fujimori, for instance, was able to combine a smart use of the modern media (as he did during the hostage crisis of the Japanese embassy in Lima in 1996) with old-fashioned populist methods (such as frequent visits to urban shantytowns and rural communities, distributing presents and promising solutions for people’s problems). In the end, Fujimori lost the support of the masses following the accusations of fraud during the 2000 presidential elections which allowed him to run a third consecutive term in office. In addition, he and his closest associate, the secret police chief Vladimir Montesinos, faced mounting accusations of corruption, nepotism and gross abuses against human rights. In November 2000 Fujimori fled to Japan, marking the end of his autocratic rule. His successor, Alejandro Toledo, has been so far unsuccessful in delivering the promises of eliminating corruption, bringing more transparency to the way his government rules the country, and improving the situation of millions of Peruvians who live in conditions of extreme poverty.

POLITICAL LEGITIMATION AND CONSUMERISM Most of the new democratic governments have attempted to counterbalance their lack of a political project by putting special effort into expanding the level of consumption among certain segments of the population. One of the main arguments used by the authorities in legitimating the application of policies directed to market liberalization was the promise of full access to better and cheaper foreign products. Indeed, after many years of applying neoliberal economic policies, the upper and middle classes in countries such as Mexico and Chile have acquired very sophisticated patterns of consumption which have resulted in the configuration of veritable ‘consumer societies’. The increasing 162

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presence of foreign consumer goods in most Latin American capital cities has in many cases radically transformed the physiognomy of the streets, as thousands of new cars have invaded the roads and a large number of giant shopping centres (malls) sell products from all over the world. Although the main beneficiaries of this pattern of increasing consumption have certainly been the high-income groups, one cannot under-estimate the extent to which the rest of the population has also participated in the consumption of foreign goods. Many people who actually cannot afford these products have obtained access to these goods by contracting consumer credits, or more often by making use of payment facilities (in monthly terms) offered by most large shops and stores. While the high-income sectors obtained access to modern European cars, to very sophisticated US or Japanese electronic products and to tourism abroad, the poorer segments of the population acquired radios, television sets, battery watches, foreign clothes and trainers, products to which they previously had less access. As the current crisis in Argentina has shown, however, these consumer societies are built on very fragile bases and they can disappear overnight due to the extreme pauperization of large sectors of the middle classes in that country. In fact, the idea of replacing ‘politics’ by increasing consumption constituted, together with repression, one of the central mechanisms used by the former military regimes to depoliticize society. In the authoritarian conception of modernity ‘liberty to consume’ was intended to replace political liberty in an effort to deactivate civil society politically and to obtain the required civilian support for the military rulers. Chile is a clear case in point. The attempt by the military governments to redefine Chileans as consumers instead of citizens was mainly directed to privatize the nature of the social relations within civil society. For this purpose, the regime tried to destroy all kinds of collective identities existing in Chilean society, such as party and neighbourhood loyalties and social solidarity with the needy, which were officially seen as unwanted heritages of a ‘socialist’ past. As a substitute for the search for collective goals, the military government offered a neoliberal ideology which was entirely directed to the achievement of individual ambitions. In this manner individual freedom was redefined as representing the free access to open markets, while the ‘pleasure of consumption’ was presented as an instrument to express social differentiation and as a way to obtain personal rewards. From this perspective, the regime’s ideologues pointed out that social mobility was in fact mainly a question of personal achievement (cf. Lavin and Larraín, 1989). According to this conception of modernization, to be up-to-date in terms of the acquisition of consumer goods represented the single most important criterion for modernity. Moreover, the imitation of lifestyles and values imported from the industrial world as a result of the free-market policies became the only way to participate in the experience of modernity; in other words ‘to be modern’. As Brunner indicates, the market is unable by itself to produce normative consensus among the population or to generate social identities. Together with this, the market does not accept the constitution of solidarity bonds and rejects any behaviour that is not based on rational calculations. At most, the market can only create lifestyles that are crystallized in the consumption of particular goods (1988: 97, 119). In the end, the expansion of consumerist behaviour in Chile generated a kind of passive conformism among the population, who eventually accepted the individualistic tenets of the neoliberal economic model based on the search for private satisfactions (Silva, 1995; Halpern, 2002). The increasing internationalization of Latin American economies has not only strengthened consumerism in local cultures but has also led to the adoption of values, beliefs, ideas and even patterns of behaviour and cultural orientation that resemble those of the core countries. Many people have embraced a system of meritocratic and individualistic mobility, replacing the old system in which one had to be part of a group (such as political parties) and in which mobility was conditioned mainly by the capability of the group to exert political pressure on the state. More generally, the ‘discovery’ of this new world of consumption convinced several social forces that they have a direct advantage in the continuation and deepening of the ongoing process of transnationalization of their societies. In recent years, however, a growing discontent with globalization has emerged among the masses and within certain intellectual and political circles, as


the poor performance of most Latin American economies reduced the ability of the population to maintain their previous levels of consumption. Together with consumerism, the new democratic governments have also tried to secure the political support of the population by attempting to obtain (and maintain) macro-economic stability. Today in Latin America it is no longer rhetoric but real socio-economic and financial achievements that have become the main criteria to evaluate the quality of governments. After so many years of neoliberal economic rationalism, many people in Latin America have learned to evaluate government performances almost exclusively on the basis of economic success. Variables such as the level of inflation, the dollar rate, volume of exports and the balance of payments are the main evaluation parameters. It seems that after many decades of over-ideologized discourses an increasing part of the population has become extremely conscious of choosing tangible economic benefits. As the Argentine case has shown, the ability of the Menem government to defeat inflation and to achieve macro-economic stability became decisive for his re-election in 1995. By the same token, the inability of the de la Rua government to deliver the goods led to its dramatic fall in December 2001. Because of the increasing importance of economic stability in current Latin American politics, the possession of a team of prestigious economists in charge of economic and financial policies has become a condition sine qua non not only for keeping the confidence of the business community (both national and international) but also that of the electorate. So, for instance, following the electoral victory of Lula in Brazil, one of the most discussed matters by both the local and international press, as well as by key financial institutions, was the question of who was going to be appointed as the next Minister of Finance.

THE TECHNOCRATIZATION OF POLICY-MAKING Following the restoration of democratic rule, technocrats have acquired in many countries a clear public presence and a higher degree of acceptance and legitimacy among the political class and the population than in the recent past. Technocrats are defined here as ‘individuals with a high level of specialized academic training which serves as a principal criterion on the basis of which they are selected to occupy key decisionmaking or advisory roles in large, complex organizations – both public and private’ (Collier, 1979: 403). This is reflected among other things in the fact that the leaders of technocratic-orientated economic teams, such as the Ministers of Finance Fernando Henrique Cardoso in Brazil, Domingo Cavallo in Argentina and Alejandro Foxley in Chile, have gained significant popularity among the electorate (Domínguez, 1997); indeed, Cardoso was elected President of Brazil after his stint at the Finance Ministry.This situation, however, cannot be solely explained by referring to the technocrats’ central role in the application of the recent stabilization programmes or to the fact that they are now operating in a legitimate democratic environment. An even more important factor for the consolidation of technocratic politics has been the dramatic weakening and – in some countries – a virtual disappearance of the forces which traditionally resisted technocracy in the past, such as left-wing parties, trade unions, student movements, and so forth. It is the latter factor which also helps to explain why, since the restoration of democratic rule, most countries have adopted (or maintained) neoliberal economic policies (Silva, 1998). One must remember that the existence of technocratic economic teams and the application of neoliberal economic policies constituted one of the main features of the former military regimes.Thus, it is remarkable that, following the democratic restoration, electoral campaigns which openly or implicitly supported neoliberal policies (such as those of Fujimori in Peru, Flores in El Salvador, and Menem in Argentina during his re-election) were successful. This was linked to the global hegemony achieved by neoliberal ideology, the pressure of international financial organizations, the perceived lack of economic alternatives and the increasing apoliticism of the Latin American population (Espinal, 1992). The more profound reasons why large segments of civil society are beginning to accept this new technocratic and neoliberal reality lie in the quite traumatic events of the recent political past. 164

technocrats who had long argued for more open economies and a bigger role for the private sectors suddenly found increased backing from the outside. They could count on political support from the United States and other advanced industrial countries, intellectual reinforcement from the IMF and World Bank, and empirical evidence of successful performance from countries that had followed an open-economy model. These technocrats have also played a strategic role in conducting negotiations with industrialized countries as a means to reschedule existing debts and to obtain new credits and financial aid. As Kaufman (1979: 189-90) indicated, these technocrats are more than simply the principal architects of economic policy: they [are] the intellectual brokers between their governments and international capital, and symbols of the government’s determination to rationalize its rule primarily in terms of economic objectives . . . Cooperation with international business, a fuller integration into the world economy, and a strictly secular willingness to adopt the prevailing tenets of international economic orthodoxy, all [form] a . . . set of intellectual parameters within which the technocrats could then ‘pragmatically’ pursue the requirements of stabilization and expansion. In this manner, local neoliberal technocrats have become the national counterparts of foreign financial experts from lending institutions who assess the performance of the Latin American economies that are currently executing adjustment programmes. As Centeno (1993: 325–6) points out, the communication between the foreign financial experts and the local technocrats has been clearly facilitated by their common academic backgrounds: [they] not only share the same economic perspectives, but perhaps most importantly, speak the same language, both literally and metaphorically . . . The technocrats do not necessarily have to represent one ideological niche or the other, they simply share a familiarity with a certain language and rationale . . . The graduate degrees from U.S. universities . . . enable these persons to present arguments that their fellow alumni at the World Bank . . . understand and consider legitimate. Although the above-mentioned international political and economic factors have certainly played a decisive role in legitimating and consolidating the position of technocrats within the political elite, any attempt at explaining the technocratic ascendancy as being exclusively the result of external influences would be inaccurate. As the Chilean case shows, the ascendancy of neoliberal technocrats and the adoption since the mid-1970s of severe economic stabilization policy reform in that country were 165


The military dictatorships inaugurated in the 1970s inflicted a major blow to the politics of populism, based on clientelistic relations between the state and civil society. Indeed, populism suffered a significant psychological defeat as many people, right or wrong, internalized the view that populism had been one of the main causes of the economic and political crisis that had preceded the breakdown of democracy. This is partly the reason why in most countries in the region the electorate was initially not inclined to support the adoption of populistic policies after the departure of the military.The recent strengthening of populism in Latin America has been mainly facilitated by the failure of neoliberal policies and the dramatic expansion of poverty in the region. The adoption of orthodox adjustment programmes has almost always been accompanied by the appointment of technocratic-orientated neoliberal economists in strategic governmental positions (ministries of economic affairs, finance, central banks, planning agencies, etc.) who have been responsible for the formulation and application of these new economic guidelines. The extreme visibility which many governments have consciously given to the economic teams is related to their efforts to send the right signals both to the domestic and to the international business community (Schneider, 1998). Moreover, Latin American technocrats have felt quite confident in the policies adopted, as the policies encompass completely the neoliberal economic thinking which, since the 1980s, began to achieve an almost uncontested hegemony. As Stallings (1992: 84) pointed out:


primarily a product of domestic political and ideological struggles resulting in a distinctive balance of power in favour of neoliberalism (Valdés, 1995). The increasing technocratization of decision-making in most countries in the region has resulted in a general trend of governments trying to ‘technify’ social and political problems. The problem of poverty has been mainly approached in technical terms, and its solution is posed in terms of adopting the ‘technically correct’ social policies. By doing this, poverty and social inequalities have been consciously ‘filtered’ of their political, economic and social dimensions. This has resulted in countries such as Bolivia, Chile and Costa Rica adopting anti-poverty strategies with a strong asistencialista orientation, intended to alleviate to some extent the hardship of the neoliberal policies. For this purpose, Latin American governments have obtained technical and financial assistance from regional institutions such as the UN Economic Commission for Latin America and the Caribbean (ECLAC) and the Inter-American Development Bank (IDB), as well as from the World Bank and from developed nations.

DISENCHANTMENT Today in Latin America, a generalized mood of disenchantment with the accomplishments of the new democracies can be perceived. Some people are deeply disappointed by the inability of many governments to improve the social conditions of the less privileged segments of the population. Instead, and as a result of the application of neoliberal policies, the gap between rich and poor has increased in most Latin American countries. The restoration of democracy has brought a clear improvement in the human rights records in many countries and in the general macro-economic situation. Nevertheless, time and again the great inequality existing in the distribution of the fruits of modernization and economic growth between the different socio-economic and ethnic segments of society becomes manifest. This is partly inherent in the nature of neoliberal policies as their emphasis lies in generating economic growth and not in producing a better income distribution. Most governments have abstained from playing an active role in the area of income distribution, as that option has been regarded as a step back to the old interventionist state. The increasing impact of the process of globalization on the national economic and political agendas has also discouraged from many people believing in the real possibilities they have to influence decision-making in their countries. Today, an important part of what is happening to their economies is the result of regional trade agreements (such as Mercosur) and other arrangements and processes that go beyond the national borders. The adoption of neoliberal adjustment programmes has been seen by many in countries such as Nicaragua, Venezuela and Costa Rica as a clear loss of national sovereignty as they, rightly or wrongly, perceive these policies to be the result of foreign imposition. This has negatively affected not only the degree of legitimacy of these policies but also the status of democratic governments as they appear as weak vis-à-vis the international financial institutions. There is also a growing discontent among the indigenous people, as in many countries the democratic authorities have not been able to satisfactorily protect their civil rights and to guarantee respect for and acknowledgement of their cultural contribution to national identity (see Chapter 10). In this respect, the commemoration in 1992 of the 500 years since the discovery of America was chosen by the indigenous movement all over the continent to protest firmly against their status as second-class citizens. In countries such as Ecuador, Bolivia and Guatemala significant legal steps (through amendments in the Constitution and the adoption of special indigenous legislation) have been taken in recent years, directed at the elimination of formal discrimination and tutelage towards the indigenous population. Notwithstanding the willingness of several governments to accomplish some tangible improvements in the general condition of the indigenous people, very little yet has been achieved (Van Scott, 1995; Díaz Polanco, 1997). Democracy has also experienced a loss of prestige through the high degree of political corruption existing in many countries in the region. This has been the case in Peru where the initially very promising government of President Alan García ended in 1983. Corruption had penetrated the entire 166

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structure of power, including the president himself who finally fled the country. President Fujimori’s kleptomania was even more rapacious. Unfortunately, Peru has not been an isolated case. Presidents Fernando Collor de Mello in Brazil and Carlos Andrés Pérez in Venezuela were forced to abandon power in 1992 and 1993, respectively, following accusations of corruption (Little and Posada-Carbó, 1996). Political corruption and the spread of nepotism were also among the main causes that provoked the fall of President Abdalá Bucaram in Ecuador in 1996. In February 2003, the Paraguayan President González Macchi narrowly survived a parliamentary impeachment in which he was charged with notorious misconduct and corruption. In the past years, the growing influence of capital coming from drug-trafficking activities has further reduced the already low levels of probity characterizing state institutions in many Latin American countries. In countries such as Honduras and Guatemala, corruption related to narcotráfico has already penetrated the judicial system, the army and the police forces, the mass media and almost all spheres of public life. Increasing poverty, drug-trafficking, corruption and the material and institutional weakness of police forces have led in recent years to a dramatic increase in the levels of violence and delinquency in most Latin American countries. As a result, there are even people who feel that the levels of security have decreased under the new democracies rather than increased in comparison with the situation under the former authoritarian regimes. Opinion polls of inhabitants of the largest Latin American cities continually indicate ‘criminality’ as the most urgent problem the government should resolve. The question is, of course, whether the growing levels of delinquency are the direct result of the existence of democracy per se. Most probably this phenomenon has more to do with the ongoing process of modernization which has resulted in a gradual disintegration of traditional norms and values, mechanisms of social control, and so forth. Some people in Latin America constantly compare the current democracies with the former military regimes, often being inclined to blame democracy for almost all the problems affecting their societies. Nevertheless, the militaristic option is today not very appealing for most Latin Americans, so the only viable alternative to the current democracy, they perceive, is not authoritarianism but an improved democracy. This does not mean that the threat of a military takeover has been entirely overcome in the region, as the failed coup d’état against Hugo Chávez in April 2002 has shown. Paradoxically, the several deficiencies of current Latin American democracies have stimulated political indifference among the population, as has been the case in most Central American countries. Not even Costa Rica has been able to escape from this general trend, as the turnout in recent elections has been low, despite the fact that voting in that country is compulsory. In those few countries in which the restoration of democratic rule has led to manifest improvements in the general socio-economic and political conditions of the population, political apathy has become generalized. Chile is a case in point. Since the restoration of democracy in 1990 this country has achieved a relatively good performance in terms of socio-economic development, as the living standards of the entire population have dramatically improved since then. The political situation in this country has been very stable as the ruling Concertación coalition has been able to arrange workable agreements with the opposition, permitting a successful consolidation of democratic rule in the country. Nevertheless, strong apathy for politics has emerged among the population. During the parliamentary elections of December 1997 (voting is compulsory), almost a third of the people who attended voting stations did not vote for any candidate (by leaving their vote void or by invalidating it). Moreover, there are more than 1.5 million youngsters, and 0.5 million adults who have not even registered on the electoral roll. The Chilean political class has become alarmed by the increasing political indifference among the electorate. However, the phenomenon can be explained as being the consequence of the political and economic stability now achieved. Similar patterns occur in most Western democracies. The disenchantment with democracy has not resulted in the adoption of antisystem attitudes, but has rather strengthened the general mood of apathy and depoliticism.


THE FUTURE OF DEMOCRACY IN LATIN AMERICA At the beginning of the process of democratic transition in the region several political scientists expressed their doubts about the chances for firm consolidation of democratic rule in the continent. Scholars such as Malloy and Seligson (1987) openly declared their scepticism about the prospects for democracy. They referred to the historical inability shown by Latin American countries in the recent past to maintain democratic rule for a long period. Until now, the presence of democracy in the region has been characterized by a cyclical pattern in which democratic and authoritarian ‘moments’ have been constantly alternating. In other words, the current democratic period could simply be just another democratic intermezzo that after a certain period of time could be followed by another wave of authoritarian rule. Nearly two decades after the publication of the volume edited by Malloy and Seligson one can say that the new democratic governments have faced very serious social, economic and political problems, and that generally their performance has not been very satisfactory. But despite all the difficulties they have faced so far, the probability of an authoritarian regression in the region has been substantially reduced. The reasons for this, however, have not been always a direct accomplishment of the new democracies themselves. So, for instance, the almost complete disappearance of the revolutionary left has eliminated one of the main grounds on which the armed forces in the past attempted to legitimate their military coups. While a large part of the left has adopted social democracy and showed a strong commitment to the preservation of democratic rule, the military has consciously chosen to stay out of contingent politics and to concentrate its attention on the further modernization of its institutions (Millet and Gold-Biss, 1996). In addition, following the end of the Cold War the United States is no longer disposed to support military coups in the region, as they made clear to the military who deposed President Aristide in Haiti and to seditious officers threatening democratic rule in Paraguay and Ecuador. Since the late 1980s US foreign policy towards Latin America has begun to emphasize countries’ human rights performances, the achievement of good government and the consolidation of democratic rule (Wiarda, 1990). Nevertheless, it is still too early to say that the armed forces have fully accepted their institutional subordination vis-à-vis the civilian authorities in their countries. In countries like Guatemala, Venezuela, Peru and Chile the army still maintains a strong presence in national affairs. In short, most of the new democracies have so far been unable to fully eliminate the ‘authoritarian enclaves’ left by the former authoritarian regimes (in the form of non-democratic legislation and special attributions for the armed forces). In the coming years, poor management of each country’s affairs by their government and conspicuous corruption will remain serious threats for the Latin American democracies, as the falls in Ecuador of Presidents Abdalá Bucaram in February 1997 and Jamil Mahuad in January 2000 have shown. In both cases, the army played a decisive role in forcing them to abandon power and, in that critical moment, the constitution of a military government was clearly among the possible outcomes of the crisis.The legitimacy provided by democratic procedures towards elected authorities is certainly not enough to guarantee the support of the people under any circumstance as the fall in November 2000 of the Fujimori regime in Peru has shown. What many democracies still have to prove towards the citizenry is that this form of government is more efficient and successful in economic terms, and more sensible from a perspective of social justice than was the case during the previous authoritarian regimes. In the years ahead, further technocratization of the democratic governments can be expected. In my view, the current technocratization of decision-making in government circles does not represent a temporary phenomenon, associated with the political and economic requirements of the democratic transition and the application of structural adjustment programmes; it has rather become an integral feature of many Latin American democracies. Even in countries like Ecuador, Brazil and Argentina where governments have recently adopted a more nationalistic and populist rhetoric, one can find that the most strategic positions in charge of the economic policy-making continues to be in the hands of technocrats. 168

FURTHER READING Avritzer, L. 2002 Democracy and the public space in Latin America. Princeton University Press, Princeton, NJ.This provocative study shows how citizens have made use of public spheres in the new Latin American democracies, focusing on human rights movements, neighbourhood associations and other local-level participatory experiences. Camp, R. I. (ed.) 2001 Citizen view of democracy in Latin America. University of Pittsburgh Press, Pittsburgh, PA. In this excellent book ten leading scholars on Latin American political culture analyse and interpret the data provided by a large survey conducted among citizens in Costa Rica, Mexico, and Chile on the ways they define and understand present-day democracy. Oxhorn, P. and Ducatenzeiler, G. (eds) 1998 What kind of democracy? What kind of market? Latin America in the age of neoliberalism. Penn State University Press, University Park, Pennsylvania. A critical study of the social and political consequences of the application of neoliberal reforms in Latin America in the 1980s and 1990s. Problems such as high levels of poverty, income inequality, criminal violence, and the growth of the informal sector are directly linked to these reforms. Peeler, J. 1998 Building democracy in Latin America. Lynne Rienner Publishers, Boulder, CO, and London. A thoughtful analysis of the Latin American experiences with democratic rule from the 169


Since the restoration of democratic rule in the region one can argue that the concept of democracy has lost much of its participatory implications in relation to the decision-making process. Instead, the Schumpeterian view of democracy is beginning to be tacitly accepted in practice. In this way, democracy is merely conceived as a method of reaching political decisions in which citizens reserve the right to decide by whom they will be governed through elections in which various elites compete for the electorate’s vote. Moreover, we see that today the use of traditional methods of civil pressure and protest (such as property seizures, unauthorized street protests, politically motivated strikes) are generally considered illegitimate acts by political elites. Despite the fact that technocratically-orientated groups have become key actors in the new political landscape of Latin America, in many cases local public opinion is not very aware of the existence of this phenomenon. Negative collective memories about the populist past, profound changes in the political culture of major left-wing sectors, together with the recent neoliberal transformations have allowed the almost unchallenged ascendancy of technocrats in the continent. Although it is quite probable that in the coming years a further depoliticization of Latin American societies will take place, this certainly does not mean that the continent will be spared social effervescence or even violent political confrontations. The crisis in Argentina has shown that depoliticized masses are still able to mobilize themselves in the streets to show their total condemnation of politicians and party politics. Until now, the modernization process in Latin America has been mainly restricted to the financial and economic spheres. Profound changes must also take place in the social and cultural realms. The goal of achieving the modernization of society – as has been repeatedly stated by most democratic governments in the region – also demands huge efforts to obtain a substantial reduction of the existing high levels of poverty among the population. Real efforts have to be made to expand access to education, health and housing to those social and ethnic groups which are today marginalized from the fruits of modernization. The existence of real tolerance on the part of the political establishment towards people and political organizations who do not agree with neoliberal policies and exercise their democratic rights to fight for a possible alternative social order still cannot be guaranteed in most countries in the area. In short, the persistence of extreme poverty, discrimination against the indigenous and black populations, political corruption and excessive isolation of government technocracy will remain serious obstacles to the definitive consolidation of the democratic order in Latin America.


nineteenth century to the present. It provides a very useful introduction to basic issues of general democratic theory and contrasts it to the Latin American reality. A strong plea is made for deepening the current democratic systems by expanding popular participation. Weyland, K. 2002 The politics of market reform in fragile democracies. Princeton University Press, Princeton, NJ. A good study on a series of political and economic reforms implemented in Latin America since the mid-1980s and their underlying logic.

WEBSITES Latin American barometer, www.latinobarometro.org, provides very useful information on public opinion in Latin America on issues related to support for democracy, authoritarian bias, and political culture in general. This information is obtained through large opinion surveys which are carried out in 17 Latin American countries. Political Database of the Americas, http://www.georgetown.edu/pdba, is one of the best resources of political data on Latin America on the internet, including information on electoral systems, elections, political parties and civil society. This is an initiative of several institutions, coordinated by the Center for Latin American Studies at Georgetown University, Washington, DC.

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3 SPACE, SOCIETY AND LIVELIHOODS


9 Livelihood transitions, place transformations: grounding globalization and modernity Anthony Bebbington

There are many ways of talking about the transformations that have occurred in Latin America and the Caribbean in the past few decades. Political economy provides one set of tools, as demonstrated in the first part of this book that uses a political economy approach in order to talk about the structural changes that have (and have not) come to pass in the region over the last few decades. Such interpretations typically cast their analysis at a macro level, telling general stories of national and regional shifts and the broad forces that explain these changes. These macro-explanations are as characteristic of radical dependency theory as they are of neoliberal interpretations of change, and they are important in many ways: they are the stuff of general political debate; they inform those types of economy and society wide interventions that typically underlie public and multilateral policies and interventions; and they tell the general story. Another option – neither better, nor worse, but different – is to focus on how people weave their way through, make sense of, rework and live out these structural transformations. Again there are many ways of doing this: analysis of literature, poetry, photography and life histories are just some such approaches. Another approach that has been popular among some researchers – perhaps especially geographers – and which holds open links with the concepts and techniques of political economy analysis has been that which aims to understand the dynamics of people’s livelihoods. Again this focus has taken many forms, and we will consider some of them in this chapter. Still, one strength common to these different approaches is that adopting this point of entry can convey more sense of the experience of, and responses to globalization and neoliberalism than do more structural interpretations. It also tells more disaggregated and local stories of the nature of globalization in Latin America – a level of disaggregation that is arguably important material for thinking through the type of (regionally and sectorally sensitive) neo-structuralist agenda traced in the first chapter of this book. Another potential quality of a concern for livelihoods is that it can – though need not – draw attention to the creative responses that people craft and which might offer the seeds for reworking globalization processes so that they are more inclusive, pro-poor and pro-environment. In each of these senses, if macro-explanations are better placed to speak to the economy-wide policies of government and inter-governmental actors, livelihood analyses are arguably somewhat more relevant for those actors – such as non-governmental organizations (NGOs), social movements and poor people’s organizations – that operate at a more local level. With this opening gambit in mind, this chapter will unfold as follows. It begins by outlining three (related) ways of conceptualizing livelihoods under conditions of globalization in Latin America. Second, it discusses some core themes in the ways in which livelihoods have changed in the region since the rise of neoliberalism. It then discusses some of the intersections between production and other elements of social change that a focus on livelihoods can illuminate – in particular those ways in which a look at livelihoods can help understand political agency.The fourth section considers the ways 173


in which organized actors in civil society have addressed questions of livelihood and development. Finally, the chapter takes the livelihoods discussion back to a reflection on globalization processes by reflecting on the extent to which livelihoods in the region are as much structured by transnational processes and relationships as they are by local phenomena.

CONCEPTUALIZING LIVELIHOODS IN LATIN AMERICA Notwithstanding the recent enthusiasm for ‘the livelihoods approach’ to development among both researchers and development agencies (such as, for instance, the Department for International Development of the British government), a concern for livelihoods is nothing new in the literature on Latin American development. Research informed by dependency and world systems theory (Kay and Gwynne, 2000; see Chapters 1 and 4) often drew links between processes of under-development in Latin America and the dependent nature of poor people’s livelihoods in the region. This work tended to emphasize the extent to which the broader development model constrained and undermined people’s livelihoods. Other approaches – while not eschewing the ways in which broad processes of capitalist development in the region exclude people and limit their livelihood options – have taken a different approach. They have argued that a careful analysis of how people compose livelihood strategies can reveal many lessons for policy and can suggest ways in which openings, however small, in the overall development model might be reworked and taken advantage of, both by poor people and organizations that aim to work alongside them. Each of these approaches points to some of the ways in which globalization is grounded in people’s livelihoods and particular locations, thus suggesting how we might think of the links between place formation, livelihoods and globalization. Finally, some of these approaches also point to the relationships between the materiality of social life, day-to-day popular practices, and forms of political resistance and engagement: they thus suggest links between livelihoods, culture and politics. These are, then, the four sub-themes for this section. Dependent development, dependent livelihoods As noted in the introductory chapters, various forms of dependency theory, world systems theory and Marxian political economy dominated socio-economic research in Latin America up to the 1980s (see also Kay, 1989). While research conducted under such theoretical rubrics often had a more systemic and structural orientation, questions of livelihood were still often present. An important concept in this regard was that of functional dualism (de Janvry, 1981), and the notion was often used to analyse questions of income generation, shelter and organization among the urban and rural poor. The notion of functional dualism asserted that it was unacceptable to analyse the modernizing sectors of Latin American economies independently of the peasant economy in the countryside, or the urban informal economy in the city. Instead, it was argued, these two economies (the modernizing and the popular) were structurally linked: indeed, it was argued that the modern economy needed the popular economy as a source of cheap labour, cheap foodstuffs and cheap goods and services. The two economies were thus dual, but linked, and the one was absolutely functional to the other. However, their relative power and resilience were quite different and as a result livelihood possibilities in the popular economy were not only dependent on what was happening in the modernizing economy – they were also ultimately constrained. That is to say, the sense to emerge from much of this work was that the structural need for cheap labour, food production and other products and services meant that poor people would never (or hardly ever) be able to escape from their poverty. They would always be sources of something cheap. In the urban economy this concept led to fascinating work on urban employment, the informal economy and petty commerce (Bromley and Gerry, 1979), as well as on the chronic problem of shelter and housing provision (Burgess, 1978; Edwards, 1982; Gilbert and Ward, 1985; Gilbert and Varley, 1991; Fernandes and Varley, 1998). The thrust of much of this work was to question more populist notions of the possibility (and desirability) of self-help approaches to housing provision and 174

Development openings, livelihood strategies Thus, even if dependency theory has become less popular in the last couple of decades, some of its messages remain highly pertinent today, in particular those regarding the livelihoods constraints that poor people face under current macro-economic conditions. While taking that recognition as a starting point, livelihoods might nonetheless be conceived somewhat differently. That is to say, rather than view livelihoods primarily in terms of their dependence, they might also be seen as creative responses by poor people that might offer a basis for rethinking development strategies that can enhance livelihood opportunities, albeit within a broader political economy that still presents many obstacles and still favours the interests of elites. Again, this is hardly an entirely new point. Indeed, de Soto’s The Other Path referred to earlier might be viewed as just such an approach. Based on work conducted in Lima during the 1980s, a period of chronic economic decline in Peru, de Soto and his colleagues argued that people had devised any number of remarkable strategies to make a living. However, rather than emphasize the extent to which the economic system constrained these livelihoods, de Soto instead focused on the pernicious effects of government bureaucracy and state intervention, illuminating the various and significant costs that 175

Livelihood transitions, place transformations: grounding globalization and modernity

micro-enterprise development (Rokowski, 1994). Of course, such work did not intend to denigrate the efforts and achievements of squatters or self-employed workers. Rather, the idea was to show that in the end such initiatives would only go so far, and no further, because of the structure of the dependent political economy. This structure would ultimately constrain the possibilities of accumulation, and from time to time would deliver shocks of one sort or another which would undermine people’s savings, investments (e.g. in housing) and subsequent possibilities. This meant that efforts (as were increasingly popular in the 1980s) to support and develop the informal economy were misconceived: the informal economy would only become a basis of viable livelihoods if there were broader changes in the political economy. Such observations and analyses were directly relevant to policy discussions of urban poverty, and, for instance, fed into the debates on strategies for improving poor people’s livelihoods that raged after the publication of Hernando de Soto’s (1989) The Other Path (e.g. see Bromley, 1994). While authors such as Bromley carried this argument forward for the urban sector, in rural areas the touchstone for this type of interpretation was the work of economist Alain de Janvry (1981; de Janvry and Garramón, 1977; Deere and de Janvry, 1978). Though there were many themes in this research, two are of particular relevance here. First, the work aimed to understand the nature of the peasant economy, emphasizing inter alia the ways in which Latin America’s insertion into the world economy systematically worked to the disadvantage of the rural poor and reduced the possibility that all but a few of them would escape from poverty. Second, and given this context, the work questioned the extent to which land reform and rural development programmes could really do much to improve rural livelihoods. Indeed, the realities of much Latin American politics of the 1960s and the 1970s led authors such as these to assume that national and international elites would never allow policies that might do more to address the causes of rural poverty. As Chapter 4 has shown, these debates continue to be relevant in contemporary Latin America, where poverty rates and the overall quality of livelihoods at the start of the twenty-first century often seem little or no better than they did in the 1970s. Indeed, many analyses continue to emphasize systemic constraints on livelihood improvement – both academic analyses as well as analyses deriving from certain social movements within Latin America. Edelman (1999), for instance, points to the severe constraints that programmes of structural adjustment and economic liberalization have placed on Costa Rican rural (agricultural) livelihoods since the early 1980s. Yet at the same time – and here Edelman’s work reflects one important difference between more recent approaches and those of the 1970s – he also provides a vivid ethnographic sense of some of the ways in which rural people in Costa Rica have lived through the neoliberal period, and ways in which they have mobilized in organized form to contest the most damaging of neoliberal policies.


bureaucratic requirements placed on small-scale entrepreneurs. De Soto argued that a reduction of such bureaucracy would make it far easier for small- and medium-scale entrepreneurs to establish businesses, create jobs, generate profit and thus contribute to the production of more viable livelihoods. Indeed, unlike modern-day dependencistas, de Soto argued that liberalization was desirable for livelihood improvement, and that the need was not to change overall economic relationships but rather to reduce government presence in the economy (de Soto, 1989; Bromley, 1994). At around the same time that de Soto was developing his argument, Robert Chambers (1987; Chambers and Conway, 1992) was elaborating a somewhat different position on poor people’s livelihoods: one that occupied an intermediate position between de Soto and the dependencistas’ approaches to livelihood. In a disarmingly simple but very influential working paper, Chambers (1987) argued that any conception of sustainable development must be based upon the rationalities that poor people manifest within their existing livelihoods (Chambers was writing in the context of the Brundtland Commission (WCED, 1987) and then later of the United Nations Conference on Environment and Development held in Rio de Janeiro, 1992). Chambers’ analysis emphasized the extent to which poor people struggle to compose livelihood strategies under conditions of constraint that derive from overall lack of assets and structured disadvantage. While Chambers spent less time theorizing the sources of this disadvantage (see discussion in Bebbington, 1994), his view was apparently closer to that of the dependency theorists than de Soto’s. Indeed, the implication of his work has always been that institutional change can be a source of livelihood improvement – that there is, in other words, room for manoeuvre within the constraints of political economy. While not writing specifically on Latin America, this work has influenced thinking in the region (as elsewhere). Chambers’ work is important because it has been a point of departure for more recent approaches to the relationships between livelihoods and development that aim to engage both with Chambers’ deep respect for the validity of poor people’s own strategies, as well as with the real problems of political economy. Here we comment in particular on one approach – that focusing on assets – to studying livelihoods that falls into this vein and that has been elaborated over recent years in various bodies of research, including work on Latin America (e.g. Moser, 1998; Bebbington, 1999; see also Scoones, 1998). Asset-based frameworks focus on ‘what the poor have, rather than what they do not have’ (Moser, 1998: 1).These frameworks understand livelihood strategies as the ways in which people gain access to these assets, combine them in particular ways and transform them into livelihood outcomes (Bebbington, 1999; Figure 9.1). For further information, see Bebbington (1999), Scoones (1998) and Moser (1998). In particular, the following types of asset are emphasized: • Human capital – the assets that one has as a consequence of one’s body: knowledge, health, skills, time, etc. This can include labour, though some frameworks (e.g. Moser, 1998) prefer to identify labour as an asset in and of itself. • Social capital – the assets that one has as a consequence of one’s relationships with others and one’s membership in organizations – such relationships in turn facilitate access to other resources. • Produced capital – this includes both physical assets (in the form of infrastructure, technology, livestock, seeds, etc.) and financial assets (in the form of money, working capital and physical assets that are easily converted into money). • Natural capital – in the form of the quality and quantity of the natural resources to which one has access. • Cultural capital – the resources and symbols that one has as a result of the culture of which one is a part. In addition to having a broad view of the assets upon which people draw, the framework also has a wide view of what people pursue in their livelihoods – or in other words, what they produce when they transform these assets. In this sense, these frameworks work with a multi-dimensional view of poverty (Moser, 1998). The framework portrayed in Figure 9.1 conveys the notion that people produce not only material income (or income in kind) in their livelihoods, but also meaning and 176

INSTITUTIONS SOCIAL STRUCTURES

DEVELOPMENT

Access

Material Meaning Capability well-being

Natural capital Produced Human capital capital Social Cultural capital capital

INSTITUTIONS SOCIAL STRUCTURES USE TRANSFORMATION REPRODUCTION Figure 9.1 A livelihoods framework

capabilities.That is to say, there is an inherent relationship between livelihood and culture, and between livelihood and political capacity: livelihoods are in and of themselves meaningful (Escobar, 2001a), and a change or loss of livelihood possibilities necessarily implies cultural change; likewise, a reworking of assets necessarily means a change in the ability of, and the ways in which, a person will participate politically. It is also likely to have implications for the concerns that they will pursue in that political participation. Furthermore, just as livelihood trajectories and decisions have cultural and political consequences, they are also driven by cultural and political concerns – or in other words, livelihood decisions are not only economically driven and structured, they are also imbued with cultural and political significance. As they combine their assets in pursuit of their objectives, it is supposed that people tend to pursue those livelihood strategies that do the following: • are the most consistent with the portfolio of assets that they control at that point in time; • reflect their long-term aspirations as well as immediate needs; • seem to be the most viable given the opportunities and constraints made available by the circumstances within which they live. Thus, for instance, where families have access to land, and where agricultural market conditions are favourable, then there is a greater possibility that people will pursue livelihood strategies based on agriculture. Conversely, in other cases in which families have little land, but do have skills that are demanded in labour markets, as well as networks of relationships that ease their access to such markets, then it is more likely that at least some family members will pursue livelihoods based on offfarm employment – in some (or many) cases such strategies may also lead them to spend extended periods working in other regions. 177


Household and its members


In thinking about livelihoods in this way, it is also important to introduce a time dimension in the sense that people’s livelihood practices at the present may differ from their strategies for the future. Put another way, where people invest the majority of their time and effort now may not reflect their aspirations for the future. Indeed, it may be that a livelihood strategy works at two levels simultaneously, with people accessing and using the resources they need to meet immediate family needs, while also trying to steadily build up those assets which, when accumulated over time, will allow them or their children to pursue a different sort of livelihood. One example of this (which has been encountered often during recent research in the Andean countries: Bebbington et al., 2002; Zoomers, 1999) is that where rural families not only pursue agriculture to meet immediate needs, but are also investing in those assets that allow their children to gain education so that they can move out of agriculture (and even out of the countryside). This ‘capital switching’ is a dynamic process that likely reflects what is happening (or is desired) in much of the countryside, but which agrarian conceptions of the campesino may not catch. Likewise, in emphasizing the importance of access to resources, such frameworks also emphasize the ways in which broader social structures, and market, state and civil society institutions affect this access and the ways in which people are able to transform, reproduce and accumulate their resources (Figure 9.1). For instance, the influence of the state on livelihoods can be profound. This influence is exercised in many ways: through laws that influence who has access to resources; public policies and programmes that provide resources and also influence market conditions; state-sanctioned violence that makes control of assets insecure, and depresses local economies; levels of repression or democratization that influence the relative inclination of more powerful social groups to take the assets of the poor, and so on. Edelman (1999), for instance, shows just how deeply rural livelihoods in Costa Rica were influenced by public programmes, and thus how adversely they were affected when, in the course of adopting neoliberal policies, the state began to reduce the scope of those programmes and scale back protection for smallholder agriculture. The ways in which institutions and social structures affect livelihoods are described in other parts of the book. For instance, land reform programmes (see Chapter 12) reflect attempts to change institutions so as to increase access to land for some people; squatter settlement land titling programmes aim to change poor peoples’ access and security of control over urban property; the promotion of extractive industries affects the quality and security of environmental assets. Likewise, social movement struggles of various types (see Chapter 10) often reflect attempts to challenge the formal and informal institutions and policies that restrict their members’ access to certain assets (e.g. land); the security of their control over those resources (e.g. because of violence); or their ability to transform them in particularly productive ways (e.g. because of policies that allow cheap imports and thus reduce the price people can command for their agricultural products); or because of racism or sexism that reduces black, indigenous or women’s ability to gain access to employment even though their educational level is more than adequate. These are just some of the senses in which the assetbased framework attempts to keep political economy and the institutions of market, state and civil society at the forefront of how we think about livelihoods and development. Asset-based notions of livelihood are just one effort to formalize and structure a whole range of discussions of poverty and livelihoods that have been around for several decades. In many respects, these different approaches to livelihoods are not so much mutually exclusive as different in what they emphasize and in the language they use. For instance, although recent research by Zoomers and colleagues (1999; 1998) on livelihoods in highland Bolivia uses a somewhat different language, its concerns remain very similar. In that research, livelihood strategies ‘are defined as “the way households handle opportunities and limitations” or, more specifically, “the way families respond to change, resulting in the reallocation of land, labour and capital resources”.’ Thus, livelihood strategies are directly related to external context (agro-ecological situation, market access, infrastructure and the presence of development institutions), the availability of resources at the household level (labour capacity, land and capital) and the family’s set of goals and priorities’ (Zoomers, 1999: 18). Indeed, rather than arguing over the best framework for conceptualizing livelihoods, and emphasizing the 178

BOX 9. 1 Common themes in livelihood approaches While there are various approaches to studying livelihoods, they share some common orientations. They tend to do the following: • focus on what people actually do, rather than derive conclusions from broader theoretical statements about how the political economy works; • emphasize people’s ability to be creative, believing that in that creativity lie the seeds of development alternatives; • tend to emphasize diversity among livelihoods and thus argue for more participatory approaches to politics and policy formation that will help make that diversity visible; • believe that the material basis for getting by is very influential in how people live their lives, allocate their time and engage politically, without believing that explanations can be only materialist; • emphasize more locally based research and the power of case studies as a basis for theorizing about development, both in Latin America and elsewhere.

Grounding globalization: livelihoods and place formation The tendency for studies of livelihood to be more locally oriented and to focus on case studies points to the relationship between livelihoods and processes of place formation in Latin America. ‘Place’ is an important but also a difficult, vague and slippery concept in contemporary social science. In its most straightforward sense it draws attention to the character and ‘feel’ of localities – a ‘feel’ that often varies depending on who is encountering that place. In more recent times, discussions of place have often been combined with reflections on the ways in which the character of places and of the activities pursued within and through them are affected by frequently long-standing processes linking those people and places to others in often far removed locations (Massey, 1991; Bebbington and Batterbury, 2001; see later in this chapter too). Livelihoods help constitute both the feel and the material nature of places. What people do, what and how they build, what and how they cultivate, what and how they consume – all these facets of livelihood are part of place formation. However, the facets of livelihood influencing this place formation are themselves influenced not only by the decisions and preferences of people, but also by globalization processes and national political alliances that help determine which livelihoods are going to be possible in which places. These influences occur in many ways. Perhaps the more obvious ones revolve around the influence of neoliberal economic policy. For instance, the opening of agricultural markets and other related economic changes can steadily undermine the competitiveness of smallscale agriculture, leading ultimately to its demise, and the abandonment and/or consolidation of landholdings – thus changing the nature and feel of rural places. Globalization can also open up opportunities for new types of economic activity: employment in the maquila industry in northern Mexico, in the booming, new greenhouse-based flower industry in northern Ecuador or the transformation of Chile’s Central Valley due to the massive growth in fruit and wine exports; or the rise in particular locations of fair-trade coffee and cocoa production for sale in Northern markets. In each of these cases the new activities change livelihood possibilities and the ‘feel’ of places. Global relationships affect the feel of localities in other ways. Once the colonial centre of Lima was denoted a World Heritage Site by UNESCO, informal street vendors (the same type of proto-capitalist entrepreneur celebrated by de Soto) were slowly pushed out in the name of urban preservation and in the hope that this would make Lima that much more attractive to international 179


differences among different approaches, perhaps what is most important to keep in mind is that these different approaches generally share a similar set of general concerns and emphases (see Box 9.1).


and national tourists – and thus a better business prospect for those Limeños catering to the high end tourist industry (Seppänen, 1999). Here globalization in the sense of both global conservation programmes and the international tourist economy intersected with particular national and metropolitan interests in Peru, and led to a remaking of central Lima that involved the exclusion of vendors’ livelihoods from its streets. Of course, a clean, colonial downtown Lima without legions of street vendors can seem an enchanting, fascinating and much more desirable site to a tourist or even an upper-middle class Limeño. But it can also engender anger and a sense of exclusion for those vendors who previously sold products and pursued their livelihoods on its pavements and along its pedestrianized walkways. This merely highlights the notion that different social groups experience places in different ways, depending on their particular interests. Similar processes to those in Lima can also occur around national parks and other protected areas, when rural residents’ ability to harvest natural resources, plant crops or pasture their animals is changed once an area is designated ‘protected’. Indeed, the viability of those protected areas can often be threatened as such excluded groups either protest against or in one way or another sabotage conservation initiatives which they view as undermining their livelihoods and benefiting international tourists and elite national interests (Naughton-Treves, 2002). It is partly for this reason that, recently, one of the more urgent themes in conservation initiatives in Latin America has been to find ways of accommodating both place and environmental conservation with the livelihood interests of local groups (Zimmerer and Young, 1998). Moving beyond these particular contexts of conservation, it is possible to make the more general argument that many places in Latin America have become more conflictive in the neoliberal period as certain livelihoods have become systematically disadvantaged under conditions of globalization. Such conflicts can take many forms, from increasing violence (as Moser and MacIlwaine, 2000, discuss for the case of urban Colombia) to more organized forms of protest. Looking at changes in livelihoods is therefore not only a way of addressing the ways in which globalization ‘touches ground’ in distinct ways in distinct places in Latin America, it is also a window on helping understand contemporary forms of place-based (and wider) protest in the region. Livelihoods, culture and politics When talking of livelihoods, it is easy to assume that one’s focus is on how people make a living. Of course, this is to a great extent true. But we cannot separate the question of how one makes a living from the sorts of meanings people apportion to that living, and the ways in which they will struggle both to defend and to enhance what they value in their living.This is not the place to delve deeply into the complex and at times arcane debates on the ways in which making a living, culture and politics are related, but suffice to say at least that they are indeed related (e.g. see Smith, 1989, for the case of highland Peru). Cultural concerns can affect choice of livelihood, such as the values that lead people to want to keep their family together, send their children to a distant high school, or live in the same place they grew up. Conversely, how people make a living can lead to changes in what they value – in what is meaningful to them. In this sense, livelihoods are deeply imbricated in the production of popular cultures of the types discussed in Chapters 2 and 10. These concerns will also affect how people engage politically. Of course, not all popular political action in Latin America is related to livelihood concerns, but there can be little doubt that much is. There are many senses in which this is so. One of the easiest to see is the way in which people struggle to defend or gain access to the assets they need to put a living together. Examples abound here: the long slow struggle for land on the part of peasants prior to, during and after land reform laws (e.g. Smith, 1989); the on-going efforts of the Landless Peoples’ Movement in Brazil (the MST, or Movimento dos Trabalhadores Rurais Sem Terra) to gain access to land (Wolford, 1998; see Chapter 12); the slow, often invisible but heartfelt struggles of communities to improve the quality of schooling in their neighbourhoods; families’ efforts to gain access to electricity that allows their kids to do homework, but also allows them to run small-scale machinery for home enterprises, and so on. 180

LIVELIHOODS SINCE NEOLIBERALISM If we take Zoomers’ (1999) definition of livelihood – ‘the way households handle opportunities and limitations’ – then, given the diverse and geographically varied ways in which neoliberalism and globalization have reworked these opportunities and limitations, we would expect to find considerable variation in the ways in which livelihoods have changed in the past two decades.That said, it is worth reflecting on some more general tendencies in these livelihood trajectories in this period. While the impacts of neoliberalism and structural adjustment on livelihoods have been varied in the region, for many, the post-adjustment period has been one of increasingly precarious livelihoods, in both rural and urban areas. Responses to this crisis have been both ingenious and also increasingly constrained. Caroline Moser (1992; 1998) has traced these responses for more than two decades in Cisne Dos, a neighbourhood of Guayaquil, Ecuador, where by 1992 fully 77.2 per cent of residents were living in poverty. Using an asset-based approach, she then traced the ways in which people confronted this crisis. First, more women began to mobilize their labour in order to earn cash (from 32 per cent of women in 1988 to 46 per cent in 1992). Likewise, men began to dedicate more time to work as they migrated out of the city to seek employment. Family members also had to dedicate more time in order to access basic services whose overall quality was declining. Just for the case of sanitation services, families spent on average 45 minutes a day collecting water, and increasingly shifted to private vendors because public supply was failing. Families also began to use their houses to generate income (by working from home, adding a small store, etc.). Finally, in addition to these new ways of using human (labour and skills) and produced (houses) capital, families also mobilized their social capital – between a half and three-quarters of families borrowed money from friends and neighbours to buy food, and between 15 and 25 per cent of families depended on friends for childcare so that they could work (Moser, 1998: 8). A significant theme in the image portrayed by Moser is that families in Cisne Dos have had to dedicate more time to tasks in order to compensate for the declining ability of the government to provide services. This was so either because they had to spend more time searching or queuing, etc., or because they had to earn more money in order to purchase privately those services that the government could no longer provide with any quality (for instance, by 1992 fully 50 per cent of families used private health care when they got sick). In a completely different context – rural Costa Rica – 181


Arturo Escobar, one of the most visible and important commentators on development in Latin America, has argued that a central motivation for contemporary social movements is the ‘defence of the local’ (Escobar, 1995: 226), a key part of which is presumably to defend how their members make a living in those localities. But the ways in which they defend these localities often involves relationships with actors in other localities. Escobar has argued this primarily with reference to the Afro-Caribbean communities of the Pacific Coast of Colombia (Escobar, 2001b), but similar patterns emerge elsewhere. Marc Edelman (1999; 1998a) has traced ways in which peasant mobilizations in the North West of Costa Rica have been linked over time with national and Central America wide peasant organizations, all sharing the same concerns – to challenge neoliberal economic policy and to push for policy alternatives that will make it easier for peasants to continue making a living, and thus to continue living, in rural areas. While Escobar, Edelman and social researchers in general have tended to focus on the ways in which poor people pursue livelihood concerns through social movements, there are doubtless also relationships between these livelihood concerns and how people choose to participate in political parties and formal electoral processes. A livelihoods approach, therefore, does not – or at least should not – avoid paying attention to the political and cultural issues raised in Chapters 2, 8 and 10. What it does do, though, is ask us to think a bit more about the links between changes in the ways in which people get by in Latin America, cultural changes, and changes in the ways in which people engage in politics. These themes structure the next few sections of the chapter.


Marc Edelman’s research during the 1980s and 1990s tells a disconcertingly similar story. Costa Rica’s was arguably the most elaborate social democratic state in all of Latin America, and its social and economic programmes reached most corners of the country, touching most livelihoods in one way or another. Since Costa Rica’s own debt crisis (which Edelman dates as 1980–82), cutbacks in public spending led inevitably to reductions in state-provided social safety nets (e.g. family benefits), social services (e.g. health care), and productive services (agricultural extension, credit, etc.). This in turn had ramifications for people’s livelihoods, as they either spent more money and time accessing these services from the private sector, simply reduced their use of such services, and/or drew on other social and institutional relationships in order to access them from other sources. Another theme in both Moser’s and Edelman’s analyses is the notion that livelihoods have become increasingly diverse, flexible and mobile. That is, individuals and families have incorporated more activities among the things that they do – and need to do – to get by. Certainly in rural areas in Latin America it is very difficult now to talk of purely agricultural peasant families (see Chapter 12). In a study of 11 countries for which data was available, in nine of them between 65 and 92 per cent of rural women worked in non-farm activities by the late 1990s, and between 25 and 54 per cent of men did (Reardon et al., 2001). In Peru, 51 per cent of the net income of rural households came from offfarm activities (Escobal, 2001). In Costa Rica, Edelman talks of people combining farming with trade, VCR repair work, being a mechanic, and so on. In urban areas families combine self-employment, working for others, trade, and a range of other petty activities. While such multi-activity livelihoods are not only recent phenomena (e.g. Bromley and Gerry, 1979), they appear to be even more pervasive now (Reardon et al., 2001). As part of this diversification of strategies both within the family and over time, migration has also taken on an increasingly important role (see Chapters 5 and 11). Again, this is not in and of itself a new phenomenon, but in rural areas the significance of migrant income appears to have increased. This is often a step along the way to making the decision (especially for young adults) to move more permanently to urban areas. But as Moser’s case also suggests, even in urban areas, as livelihoods become more unstable people have opted to begin migrating elsewhere, often to centres of export industry based on natural resource extraction in the mining, fisheries, hydrocarbons, timber sectors (sectors which have themselves been among the primary beneficiaries of neoliberalism: see Chapter 6). Migration to these areas has, in its turn, favoured the growth of urban areas at the centre of these extractive economies (Portes, 1989). Increasingly, such decisions have also led to international migration, as witnessed by the increasing number of Latin Americans seeking livelihoods in the USA, Spain, the Netherlands, etc. (Jokisch and Pribilisky, 2002; also see below). Under neoliberalism, then, livelihoods have become more diverse, multi-active and mobile in addition to becoming in many cases more vulnerable.These are changes that clearly reflect the political economic transformations that the regions’ economies have undergone in the last two decades. However, they also reflect the assets at people’s disposition, while at the same time leading to a change in the relative significance of those assets in livelihood strategies. The increasing importance of non-farm income for rural families means that land – though still vital – has become relatively less significant as a source of livelihood, while human capital (as skills) and social capital (both as contacts helping people access work, and relationships that help people cope with crisis) have become more important. Likewise, in urban contexts, human and social capital have become increasingly important (Moser, 1998) – and social capital appears to have become particularly important in helping people deal with increasing levels of violence in the places in which they live (Moser and MacIlwaine, 2000) even though levels of trust and cooperation have at the same time been seriously damaged by such violence (Moser, 1998). Having said all this, it is also important to note that neoliberalism in Costa Rica also led to the opening of new economic opportunities, above all in activities linked to exports, and that a good number of people and families have reoriented their livelihood strategies to these sectors. This is an important caveat because other observers (e.g. Hamilton and Fischer, 2003) have suggested that in some cases (they write on Chimaltenango, Guatemala), poor people have benefited from the new 182

LIVELIHOOD POLITICS An important theme to emerge in research on social movements in Latin America (Alvarez et al., 1998; see Chapter 10) has been that political engagement in Latin America in the neoliberal period has reflected identity and citizenship-based concerns as much as material concerns. Indeed, some have cautioned that some discussions of social movement politics in the region have gone as far as to downplay the continuing significance of material livelihood concerns in politics (Edelman, 1999). While the livelihoods framework sketched earlier on in this chapter cannot, and certainly should not, be used as a basis for trying to explain all forms of modern, popular political activity in the region, at least one of its merits is that it draws attention to the inseparable relationship between the material and the cultural in livelihoods (Escobar, 2001a), and as such dissuades analysts from ‘over-explaining’ political activity in one or another way. It suggests that when people engage in struggles over material concerns they are also struggling to protect and project particular meanings; and also that in many cases, struggles over meaning are also very often also struggles to defend or enhance material interests (or in the language of the framework, to defend or enhance their control over various assets, and/or the productivity of these assets). Again, using the language of the framework, these struggles might be oriented either to gain direct control over assets, or to change the institutions and social structures that govern access to and the productivity of those assets. One can think of many cases of the former type of struggle. Perhaps the clearest example is the long and continuing history of particular groups’ struggles to gain access to particular parcels of land.The land invasions of the 1950s and the 1960s in many countries in the region (Stavenhagen, 1970; Smith, 1989), and the continuing invasions by the MST in Brazil (Wolford, 1998) are just some examples here. In some of these cases – and of course this is the great struggle of the MST in Brazil still – the cumulative effect of these invasions was the implementation of land reform policies that in one or another way did change the institutions governing access to land, and did challenge some of the social structures linked to the control of land. But in many cases, these struggles and mobilizations are localized and at best lead to the local group gaining access to the land. In cities, the land invasions by shanty dwellers – invasions not only of the past but also very much of the present – constitute an urban analogue of these rural struggles. This is all the more so if the housing built on the land acquired increasingly becomes a productive asset for the household, used as a home workshop, small store or guarantee for a loan for some other form of economic activity (Moser, 1998). Yet it is important to note that rarely are the gains from such struggles shared equally among the poor, and in such squatter settlements processes of social differentiation among landowners and tenants become often and quickly apparent. 183


export markets that have emerged under neoliberalism (in their case markets for horticultural crops). Indeed, even in the case of Cisne Dos men were migrating to work in shrimp farms, themselves a booming (if environmentally destructive) sector of the Ecuadorian economy under neoliberalism. So, even if much research conveys a strong sense of increasing livelihood crisis for many of the urban and rural poor in Latin America, this is not always or necessarily the case. Perhaps the more important points to recognise are that: (a) the opportunities and threats opened up to livelihoods under neoliberalism vary geographically (see Chapter 3); (b) people’s ability to take advantage of these opportunities, or the likelihood that their livelihoods will be seriously compromised, depends greatly on the assets they have at their disposal – their human, produced, natural, social and cultural capital – and the institutional conditions affecting the security and productivity of those assets; and (c) whatever the case, people reallocate these assets as their adjust their livelihood strategies to these new contexts. This reallocation in turn has implications both for the assets that people are most likely to struggle to gain access to, politically as well as on a day-to-day basis, and for the most appropriate areas of intervention for programmes that aim to improve the livelihoods of poor people under such conditions. We return to these two points in the next two sections of the chapter.


Material gains such as these struggles over land also constitute significant cultural gains, not only because they allow a particular way of living, but also because they convey new meanings about the dignity and political potential of the poor. In a similar vein, mobilizations to protect the natural resources that local populations depend upon have also had simultaneously cultural and material concerns – as, for instance, in the on-going struggles of the Mapuche/Pehuenche in Chile against dam building, or of the U’wa in Colombia against oil development. Struggles to gain access to land (natural capital) have perhaps been the most visible form of livelihood politics aimed at gaining direct access to resources, but there have also been important struggles to gain access to other assets. People have struggled for access to roads, credit and a range of other forms of produced capital; and an important arena of struggle has been over access to education (human capital). Some of this struggle is on a very individual and day-to-day basis, as parents reorganize livelihood strategies (by changing residence, or by changing age and gender work roles in the family) in order that their children might go to school for more days of the week, and for more years. Other of these struggles are more organized. At the most local level the efforts of parents to organize Parent Associations strong enough to pressure teachers to come to school all week, or to assume a role in managing and improving the local school, reflect examples of this. Indeed, research in Cusco in the rural highlands of Peru has suggested that such struggles are among the greatest priorities of adults (García, 2000). In some cases, such struggles have spilled over onto a national stage, and have ultimately influenced some of the rules governing how poor people are able to gain access to human capital. An example of this has been the ways in which the national indigenous movements in Ecuador have influenced policy governing education for indigenous peoples (Box 9.2).

BOX 9.2 Indigenous organizations and the politics of education in Ecuador (source: Selverston-Scher, 2001) That education has constituted one of the primary concerns of the indigenous movement in Ecuador is not surprising, given that many of its leaders themselves were involved in programmes of bilingual education in the 1970s and the 1980s. What, however, is interesting is the extent to which these organizations have been able to shape elements of educational policy in the country, and the extent to which certain moments of government policy have facilitated this process. While early (and very important) literacy programmes (some conducted by public institutions) focused on Spanish literacy, by the late 1970s the government was supporting literacy training in Quichua and the development of curricula for bilingual education. This programme – managed by the Centre for Research in Indigenous Education (CIEI) at the Catholic University of Ecuador – opened 300 bilingual schools from 1979–84, and illiteracy rates dropped from 25.7 per cent to 12.6 per cent in the same period (Selverston-Scher, 2001: 88). Once the government changed in 1984 to a more authoritarian regime the programme languished, but on the election in 1988 of a centre-left government, the Confederation of Indigenous Nationalities of Ecuador (CONAIE) negotiated with the government the creation a National Directorate for Bilingual Education (DINIEB) that would sit within the Ministry of Education and Culture but would be staffed and run by CONAIE itself (giving CONAIE and its affiliate organizations the considerable power of selecting teaching staff in bilingual schools). Indigenous organization around education has thus clearly affected public institutions and education policy and politics in Ecuador, opening up significant spaces for indigenous participation and management of education. Whether this management has been handled well, however, is another matter. Since 1988 ‘DINEIB has been wracked by political and economic difficulties’ (Selverston-Scher, 2001: 89), clientelism has continued, and conflicts among currents within the indigenous movement have been played out through DINEIB. 184

LIVELIHOODS, NGOs AND DEVELOPMENT One of the reasons for studying existing livelihood strategies is that they may point to options for development interventions that might have implications for policy and practice. On the one hand, they might – within the conditions of the existing macro-economy – point to interventions that hold out more hope of enhancing people’s incomes, capabilities and sense of fulfilment. On the other, such analyses might help identify specific policy changes that could create new opportunities for people to enhance their livelihoods. This second point is important, because if one is to advocate a form of neostructuralism as a new policy agenda for Latin America (as does the introductory chapter to this book), it is vital to give some details of what this agenda would be: what sorts of state intervention, what sorts of livelihood enhancing, targeted protectionism, what sorts of new relationships between state and society? Many NGOs in Latin America have argued for some time that this is indeed what they aim to do. They have attempted to understand existing livelihood strategies, and on that basis have devised development interventions and policy recommendations. It is therefore instructive to consider some of what has derived from these experiences – to see how far an analysis of livelihoods really can point to policy change, and under what conditions. This is what this section attempts to do, taking the rural areas of Andean countries of Bolivia, Ecuador and Peru as a point of reference. While rural development NGOs are very diverse and are discussed in more detail in Chapter 12 (see also Bebbington, 1997), it is a reasonable generalization to say that most of them aim – through 185


If successful, livelihood-based struggles that challenge and change the institutions and social structures governing control and use of assets, have far greater and far longer-lasting impacts on the quality of many more people’s livelihoods than do more localized struggles to gain access to assets.Yet, perhaps not surprisingly, such political struggles are far less frequently successful. In part, this is because such forms of livelihood politics are often spontaneous and short-lived. Nowhere has this been clearer than in mobilizations (so-called ‘IMF riots’) against neoliberal macro-economic policy that – though highly visible – have rarely led to significant to policy changes. In other words, the more dominant the policy and the political economic structures that sustain it, the less likely it is to change even in the face of significant protest. Of course, such ostensibly spontaneous mobilizations are not always that spontaneous. They often build on concerns built up from everyday political engagements and networks of solidarities often constructed in the course of people’s composing their livelihoods. Also in many instances they have depended upon coordinating and organizing activities of social movements and other more formalized organizational structures. Yet even in those cases where such mobilizations have been grounded in a strong fabric of popular organizations struggling, inter alia, to protect their members’ livelihoods, their effects have been limited. One of the conclusions of Edelman’s (1999; 1998a) research on peasant movements in Costa Rica and Central America was that, although they achieved many things and were able to participate in discussions about economic and agricultural policy in the region, ultimately they had little or no impact on the nature of those policies. They were unable to change policies that liberalized trade, removed price guarantees and that in various ways undercut the economic viability of the small-scale farming sector. Yet this may not always be so. The national indigenous movements in Ecuador (discussed in detail in Chapter 10) have influenced more areas of policy, particularly in the education sector but also to some extent in rural development more broadly (though arguably still not in macro-economic policy formulation). And in Mexico, the Zapatistas have – because of their broad base of support and their use of arms – softened policies, institutions and social relationships that have historically prejudiced the access of the indigenous and rural poor to a range of assets and political processes. Yet even in this case, the influence thus far on broad macro-economic policy in Mexico must be deemed limited.


different means – to enhance the quality of rural people’s livelihoods. Most do this primarily or only through project interventions that aim to provide assets directly; fewer, though some, aim to challenge dominant institutions and social structures, and to develop alternative policy ideas that might then influence the thinking of governments and other agencies. Some NGOs do this alone, while others combine this and direct interventions, aiming to derive broader policy and political lessons from their own projects. One measure of the quality and relevance of these approaches is to assess their actual impacts on poor people’s livelihoods. In practice, there are only few studies that have been able – mostly for reasons of funding and time – to do this with some degree of research intensity and broad coverage. The results of these studies are, however, not especially encouraging (Zoomers, 1998, 1999; Bebbington et al., 2002). Of the many reasons for this limited impact one that stands out is that project interventions may well not address the primary constraints on rural livelihoods. Many of these constraints – as intimated in the literature on dependent livelihoods – relate to those dominant institutions and social structures which underlie: limited access to land; market slumps due to cheap imports since trade liberalization; racism and its multiple impeding effects (see Chapter 2); inequalities in relationships of power that led to overall government neglect of and policy biases against peasants. However, another reason for this limited impact seems to be that NGOs have often misperceived the nature of rural livelihoods. They have tended to continue acting as if rural livelihoods depended primarily on agriculture for income generation, and as if the medium and long-term vision of peasants was that they and their children would continue to be agriculturalists. Yet as we have seen above, the changes that have occurred in rural livelihoods particularly in the neoliberal period suggest that rural livelihoods are less and less based on agriculture. Indeed, one study in parts of Peru and Bolivia showed that many families (including quite poor ones, if not the very poorest) were making great efforts to invest in assets that would help their children leave the countryside. In particular, they went out of their way to invest in children’s education. They did this by direct investments (spending money so kids could go to school), but also by less direct means.They would, for instance, develop social relationships with people living near secondary schools so that their children could stay with them during the school week. Those who were slightly wealthier would also aim to acquire small plots of land in urban areas and slowly build a house so that ultimately the children could sleep there while schooling. Once the children had finished secondary school, these houses would then be somewhere they could live while they pursued their new urban livelihoods (Zoomers, 1998; Bebbington et al., 2002). In circumstances where campesinos seemed to be dedicating significant resources to a strategy of slowly shifting their families’ livelihoods out of agriculture, it is not surprising that rural development interventions aiming to foster increased investment in agriculture should have limited success. What is perhaps more surprising is that NGOs should have been so slow in recognizing these tendencies, and in recognizing the changing significance of certain assets, and of certain economic activities, within livelihood strategies. In such circumstances, what might constitute more effective interventions? Here people’s livelihoods, and their discussion of what they aim to pursue through them, might offer some clues. In these studies, people (especially women) repeatedly referred to education as the asset that mattered most to them. They also showed through their strategies – as noted above – that this was indeed important. People struggled, perhaps above all else, to build up their and especially their children’s human capital. A second asset that appeared important were social relationships (or social capital). However, while much rural development literature assumes that the most important forms of social capital for rural development are those linked to peasant and other types of rural people’s organization, in these studies people had not made much effort to invest their time in strengthening such organizations. Instead they had aimed to develop the social networks that would allow them access to information, housing and other such resources – resources that would help them school their kids, find work as migrant labourers, pool resources in times of crisis, etc. It is notable that Moser’s work in urban 186

Ecuador (Guayaquil) and Colombia has come to quite similar conclusions (Moser, 1998; Moser and MacIlwaine, 2000). Other work has also suggested that financial capital – often delivered in very small and flexible loans – is increasingly important in these new livelihood contexts. This capital helps people slowly establish themselves in new activities and places (see Figure 9.2). In many cases, these activities are very small-scale – selling prepared food on the streets of Lima (assuming one has not been evicted by urban preservation programmes!) or on the squares of small towns; buying equipment to work as plumber, electrician or builder; buying a cow to fatten and sell. However small, these activities each require an initial financial investment that can be onerous for poor people. There is also evidence that loans for housing investments to help people consolidate their urban base are also very helpful and readily repaid. What does all this mean for rural development NGOs? It may mean that it is more important to provide interventions of a sort that help people build the livelihood strategies they see as most desirable and most feasible, rather than interventions that presume to know the type of livelihood strategy that people most want. In the area of credit and savings, in fact, an increasing number of NGOs have indeed recognized this and have created new organizations specifically concerned to offer credit to poor people, and to help people save (in however small amounts). This has been particularly so in Bolivia where NGOs and NGO-owned financial service companies provide the bulk of credit to the rural poor, and large amounts to the urban poor. While in some cases the credit is still tied to particular agricultural activities, borrowers often find ways of ‘bending’ the credit to their actual needs. In human capital formation it might mean programmes that help people find the sorts of training they want – rather than the NGO deciding on the nature of the training to be given. And in social capital formation it might mean helping people and groups make the links they see as most fit, rather than fostering the emergence of the more or less pre-defined types of peasant, producer, women’s or other such organizations that NGOs have typically supported in the region. This is all easier said than done, however, and it is easy to be wise after the event. Indeed, there is a growing body of thought (published and spoken) which is gratuitously unfair to NGOs, many of whom have worked and struggled politically under levels of hardship that their critics would never have 187


Figure 9.2 Male and female market traders, Otavalo, Ecuador. Photograph by Sylvia Chant


endured. It is also hard to change because most NGOs in the region depend on financial support from other sources – in the form of contracts, project grants or institutional grants. In many cases these resources come from Europe and North America, or if they come from Latin American governments do so from public programmes that themselves have international funding. Thus, for interventions to become more open-ended and more adapted to the sorts of mobile, multi-activity and flexible livelihoods that people increasingly seem to live in the region, then these international sources must also change their views of the conditions on which they will transfer resources globally. This point anticipates a theme we return to in the closing section of the chapter – the extent to which livelihoods, and livelihood possibilities, continue to depend on globalized as much as local relationships.

GLOBALIZATION AND LIVELIHOODS IN LATIN AMERICA Although a livelihoods analysis focuses our attention on a more local scale and on questions of human agency, it is important to keep in mind the ways in which those local processes and livelihoods are related to processes that occur at wider scales. At the same time, it is also worth recognizing that this influence of ‘the global’ on ‘the local’ is not only a phenomenon of the past 20 years, as accounts of globalization can often imply. In the closing section of this chapter, we address some of the ways in which Latin Americans’ livelihoods are affected by and embedded within global processes, and some of the ways in which, occasionally, livelihoods can affect these processes. Historical continuities In some sense, the very idea of ‘Latin America’ is itself a product of globalizing processes, referring inter alia to the ways in which Europe and part of the Americas became linked from the period of the conquest on. Indeed, the conquest gave rise to a series of activities and relationships that transformed livelihoods in the region, primarily through changing the relationships of power that governed the control of land, markets and exchange relationships, natural resources, spiritual faith, and a whole range of other elements of everyday life. While the sorts of linkage between the Americas and Europe that underpinned these changes may not be the same as those that are today commonly referred to as globalization, they were nonetheless linkages that led to the flow of resources and people across great distances, and the establishment of transnational networks affecting those flows (e.g. those related to the government of Colonial Latin America, or to the functioning of the Catholic Church). The tendency in much literature is to emphasize the extent to which these early globalizations destroyed livelihoods in Latin America: through expropriating land, introducing various forms of servile and indebted labour, through the decimation wrought by the introduction of European diseases, etc. However, even in these early global entanglements it was the case that local practices gave placespecific forms to globalization. Steve Stern (1993), for instance, discusses the sixteenth-century silver mining economy in Potosí, Bolivia, to show how indigenous workers aimed to resist the types of labour relationships that the early Spanish entrepreneurs aimed to impose on them – and how they were able to rework some of these labour relationships. Spanish colonizers ‘discovered’ Potosí in 1545, encountering the vast silver mountain located there in the midst of the Bolivian altiplano. On realizing the immense quantities of silver in the mountain (it is still being mined today), the Spanish introduced ‘enormous sums of capital’ and new technology, transforming the physical landscape with dams, aqueducts, and refineries. At the same time, they aimed to introduce labour systems (the encomienda and later the mita) that attempted to control workers and (in this case) ensure that the mines could function effectively allowing the transfer of silver back to Spain – a globalized transformation of livelihood and landscape reminiscent of contemporary accounts of new mining and natural resource extraction investments by multinationals (see below, and see Oxfam America website). Yet Stern shows that in practice, indigenous labourers were far more difficult to control than such explanations imply. In the early years, Spaniards depended on both free Indian miners and encomienda 188

Transnational linkages These responses draw attention to a further global dimension to livelihoods in some regions of Latin America. These livelihoods encounter globalization not only in the form of external investments by global capital, the local effects of economic policy under neoliberalism, or the new social policies that have accompanied neoliberalism. People can also encounter it through their involvement in interorganizational and social networks that directly or indirectly link them to actors in other countries, either in Latin America or in the global North. Again, such linkages are not absolutely new. As just one example, the Catholic Church and orders within it (such as the Jesuits, Franciscans, or Dominicans) 189


workers who retained important levels of control over production and even over the ore extracted. Furthermore, Indians controlled much of the ore smelting market. When in the 1570s the Spanish Crown introduced the servile mita labour system which ‘sent thousands of labourers to the mines and refineries for a one-year stint of poorly remunerated work’, the Spanish gained far more control of the production process. Yet by the early 1600s this control was again being systematically resisted and challenged by labourers – both indentured and free – who pushed to increase their income from mining by moving from a wage-based system to a ‘sharecropping’ arrangement in which they kept some of the silver ore as payment and/or mined the veins for themselves on weekends. While the mitayos were unable to change the conditions of their work, free labourers – over half the workforce – succeeded in retaining apparently significant shares of the silver finally refined in Potosí. This, however, is not to deny that far vaster quantities of precious metals were not shipped back to Spain. In parts of the Andes globalization processes then, already touched livelihoods 450 years ago. Furthermore, in defence of their livelihoods some people were able to rework the ways in which globalization processes worked themselves out in specific places. This case study is particularly interesting, because if we fast-forward to the late twentieth century in Cajamarca in the Andes of northern Peru, it is apposite to ask how similar these processes are today. Among the various mines and mining companies in the department, Cajamarca is home to Latin America’s largest gold mine, owned by the US-based Newmont Mining Corporation (this section draws heavily on Bury, 2002).The mine, developed only during the 1990s now covers an area larger than the city of Cajamarca and its development has, as in Potosí, involved the infusion of immense amounts of capital and technology. Clearly, again, livelihoods have been transformed in the process: farmers have sold land and moved out of agriculture; others have experienced water contamination; urban water supplies are, many argue, threatened; road networks have been expanded; urban employment opportunities have increased in response to miners’ spending, though these opportunities are mostly in the service sector and are not always legal; a city has been transformed (ibid.). Globalization – this time in the form of a transnational mining company and global commodity chains linked to gold – has reworked livelihoods: closing opportunities for some, opening them for others (ibid.). But, as in Potosí, local human agency concerned to defend livelihood interests has partly reworked the process of globalization. Both rural and urban social movements have emerged to challenge some (or all, depending on the particular livelihood interests of the movements’ members) of what the mine does. In some instances, their responses have themselves become globalized, as the movements have made links with national and international non-governmental organizations. Through these networks of relationships, pressure has been placed on the mine, on its US owner, and on the World Bank Group (which financed some of its operations) to change elements of the mine’s operations. Nonetheless, as in the colonial case, Newmont and its affiliates have still transferred vast wealth to the USA, and – another historical continuity – it is poignant to recall that Cajamarca was the site at which the Spanish executed the Inca Atahuallpa while also taking the ransom in gold that had been mobilized by the Inca in order to pay his release. Nonetheless, it is important to keep in mind that – be it in the sixteenth or the twenty-first centuries – these globalization processes do not go uncontested.


have long spanned North and South, and have affected livelihoods in particular places where the Church has had a presence. In more recent times, these intra-church networks have connected parishes in Latin America with parishes or other groups in the North and have channelled resources and ideas in ways that impinge on local livelihoods. In more recent times, as Protestantism has exploded in the region, especially in its evangelical form, different networks linking people and places in Latin America with church groups in the North (especially the USA) have also emerged, and have again served to channel resources and ideas in ways that are significant for livelihood options. Depending on the networks involved, such resources have been used for activities as diverse as building drinking water systems, funding primary schooling, or lobbying for land rights. While transnational linkages related to the Catholic Church are perhaps among the longeststanding manifestations of this phenomenon, there are of course many others. We have already talked of the different ways in which NGOs and social movements affect livelihoods. However, it is also important to recognize that the activities of these organizations often mobilize resources accessed from sympathetic groups outside Latin America. These groups are diverse, ranging across nongovernmental organizations, governments, social movements, trades unions, human rights groups, environmental organizations and many others in Europe and North America. The relationships involved are not always easy ones, and a perhaps growing number of NGOs in Latin America complain with ever more annoyance that their ostensible ‘partners’ in Europe or North America are increasingly inclined to impose conditions before approving resource transfers (Aldaba et al., 2000). But even so, it remains the case that these networks continue to exist, and link organizations that ultimately intervene in and have effects on livelihoods in particular places in the region. In this sense NGOs in Latin America are not just organizations with projects in particular places. They are also parts of transnational networks that change people’s livelihoods in the places where those networks touch solid ground in Latin America. We can, then, think of globalization as working not only through the economic networks that structure the movements and investments of capital, but also through transnational networks – or what some have called global civil society (MacDonald, 1997) – that channel resources for social change and attempt to lobby for policy and political change. Livelihoods in the region are affected by each of these dimensions of globalization. To close this section, it is worth commenting on one other sense in which livelihoods have become increasingly transnational. An increasing number of people in Latin America – more in some countries and some places than others – have begun to construct livelihoods that are based both within and beyond Latin America (Jokisch, 1999; Kearney, 1996; 2000). This phenomenon is particularly apparent for those who spend periods of the year, or several years at a time, working in the USA. By 1997 estimates were that there were 13.1 million people living in the USA who had been born in Latin America and the Caribbean (Jokisch, 1999).There are 400,000 people in the USA from Ecuador alone (Jokisch and Pribilsky, 2002), and on Colombian television, telephone companies advertise their longdistance services by explicitly appealing to Colombians to maintain their links to family members now living in various parts of the USA. In addition to these US–Latin America livelihoods, there are also increasing numbers of people who have moved to work in Spain. For instance, following the last few years of economic crisis in Ecuador, many Ecuadorians have travelled to Spain to work (Jokisch and Pribilsky, 2002). Other migrations include those of Bolivians to Argentina and Chile (Cortes, 2000; Preston, 2002). Of course, many of these migrations involve a permanent move and so to the extent that they do not involve a constant circulation between and identification with two countries they cannot be thought of as transnational livelihoods. Nonetheless, these migrations still affect livelihoods in Latin America in many ways: they may lead to labour shortages (increasing workloads for those staying in Latin America); and they may lead to remittances of money earned in the North back to migrants’ home families and communities, even if the size and frequency of such remittances generally decline over time. While in the mid-1990s the IMF estimated that migrants from Ecuador sent $406 million back 190

CONCLUSION Livelihoods have without any doubt changed profoundly in the neoliberal period, even if this is certainly not the only period of Latin American history in which they have been globalized. These changes – though diverse in nature – have often involved an increase in livelihood vulnerability in rural and urban areas, an increasing pressure on the viability of small farm agricultural livelihoods, increasing levels of mobility, and a trend towards more multi-activity livelihoods. Again, none of these are new phenomena restricted only to this period, but they do seem to have intensified in the period since 1980. These changes imply challenges for forms of development programme and for popular political strategies. Focusing on the nature and dynamics of these new livelihoods, and on the many and creative ways in which people get by within, and respond to the contemporary political economic context in the region may provide pointers for rethinking such programmes and politics. Whatever the case, while a focus on livelihoods certainly does not obviate the need for careful analysis of political economic context, it does caution against making sweeping theoretical and policy generalizations. It suggests that perhaps the most effective way to develop policy, politics and theory that can cope with the contemporary context in Latin America is to grow them from the grassroots (Blauert and Zadek, 1998; Bebbington and Bebbington, 2001).

ACKNOWLEDGEMENTS Parts of this chapter draw on Bebbington (2002).Thanks to Denise Humphreys Bebbington for insight into the dynamics of small-scale financial services among the poor. 191


‘home’ to Ecuador each year (Jokisch, 1999), by 1997 this amount had risen to $643 million, and by 2001 to $1.41 billion (Jokisch and Pribilsky, 2002). Many of these remittances are from one family member to other family members, but in cases where a number of migrants move to the same destinations, they have sometimes organized collective remittances. Marie Price, for instance, has shown how migrants from Cochabamba, Bolivia, who have moved to northern Virginia in the USA organize to support community development, welfare and infrastructure projects in their home villages in Cochabamba. So some international migration is permanent – but for other people, such migration is more circular. There is much evidence of people building homes in two countries at once, circulating to and fro between them, often illegally and dangerously. Jokisch (1999), for instance, has shown how rural people from Cañar (in the southern highlands of Ecuador) have migrated to New York. In this process family networks have been stretched transnationally, but resources accessed in New York, and news and people from Cañar, continue to circulate through them (in ways facilitated by the Internet, Western Union and Ecuadorian businesses in New York). Many of these resources are then invested in landscape transformations in Cañar. Many people have invested in conspicuous, modern two- and three-storey brick houses in rural landscapes where until recently the norm was single-storey cinder block and adobe houses. They have also invested in cattle, and one consequence of this migration appears to have been that in Cañar, agriculture (which requires more labour) has declined and there has been an increase in livestock production (which requires less labour). Livestock also requires a significant investment in animals, which has been made possible by money earned in New York. As a result of all this, Cañar has become for some people mainly a place where one demonstrates one’s success in migrating, by building flashy houses. For others, it becomes a place for resting and ultimately retiring on the basis of earnings gained in the USA. For still others, Cañar remains a place of production, of peasant agriculture and traditional practices. For all people, though, the ‘experience’ of Cañar has changed during this process of transformation and living in parts of Cañar at least is associated with having contacts in the USA.


FURTHER READING Bebbington, A. 1999 Capitals and capabilities: a framework for analysing peasant viability, rural livelihoods and poverty, World Development 27(12): 2021–44, for more empirical and conceptual detail related to the way this chapter discusses rural livelihoods. Bebbington, A. and Batterbury, S. (eds) 2001 Transnational livelihoods and landscapes. Ecumene 8(4). This Special Issue contains three papers on Latin American livelihoods which address the issues discussed in this chapter from a political ecology perspective. Bromley, R. and Gerry, C. (eds) 1979 Casual work and poverty in Third World cities. New York, John Wiley. Many useful case studies on urban livelihoods. Moser, C. 1998 The asset vulnerability framework: reassessing urban poverty reduction strategies. World Development 26(1): 1–19. A good introduction to the study of urban livelihoods. Zoomers, A. 1999 Linking livelihood strategies to development. experiences from the Bolivian Andes. Amsterdam, Royal Tropical Institute/Centre for Latin American Research and Documentation. Useful resource for the study of the changing Andean livelihoods.

WEBSITES Department for International Development, http://www.livelihoods.org, a helpful site for livelihoods. Grupo Chorlavi, http://www.chorlavi.cl, a very useful and well-maintained site for issues related to the rural economy and rural livelihoods. Oxfam America, http://www.oxfamamerica.org/advocacy/art2607.html, this website is useful for exploring livelihoods and extractive industries.

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10 Civil society, grassroots politics and livelihoods Sarah A. Radcliffe

Transformations in civil society over the past few decades in Latin America point to the need to understand broad structural processes alongside local actors’ concerns about livelihood and their creative responses to shifting political systems and economic situations. Political systems in the past three decades have moved through various waves of authoritarian and exclusionary regimes to electoral democracies in which the role of civil society and social participation is lauded by national politicians and aid agencies alike. In the economic sphere, actors have responded creatively to economic crisis by organizing new forms of social reproduction (that is, feeding, teaching and caring for community members), as nation–states have transformed the ways in which resources are distributed following international measures to restructure their economies. The major structural changes in national and regional politics and societies over these decades relate to the macro-level processes of neoliberal reform and globalization. Explanations of civil society transformations at the macro level clarify the consequences of state reforms and nationwide political processes while informing debate in Latin American public opinion. By contrast, looking at civil society transformations among grassroots actors provides a distinct entry point for understanding social and political change in the region. Information on actors’ differentiated experiences of, and responses to, political and livelihood change provides us with an understanding of what organized civil actors can achieve (or not) under conditions of neoliberalism and globalization. Drawing on outlines of regionally and sectorally sensitive neostructuralist and livelihood approaches (Chapters 1, 9), this chapter examines how different social actors in civil society organize themselves through informal political activities (on formal politics, see Chapters 6, 7). The chapter begins by outlining what we mean by civil society and informal politics, and informal political action. Second, it discusses the patterns of civil society mobilization in the 1970s and 1980s. In Latin America’s ‘high modernization’ period (Chapter 2), many countries had weakly organized civil society while formal (electoral, party-based) politics was generally absent, due to the authoritarian military regimes that swept to power in those years (Chapter 6). Yet paradoxically, those same decades experienced the mobilization of diverse actors in social movements and other forms of collective action. The third section considers the degree to which informal political action among civil society actors contributed to the transitions to electoral democracies. In the fourth section, we discuss how neoliberalism and globalization have contributed to the on-going transformation of Latin American civil society in the past two decades. Both neoliberalism and civilian action contributed to macro-level constitutional reform in many countries, while further differentiating between the livelihoods and identities among local actors and institutions. Civil society was transformed internally by growing income inequalities and externally by changing relations with the state and new institutional actors such as non-governmental organizations (NGOs). 193


CIVIL SOCIETY IN LATIN AMERICA: SOCIAL DIFFERENCE, RIGHTS AND THE STATE Civil society is classically viewed as the sphere of society existing outside the capitalist market and outside the state (Adler Hellman, 1995). Civil society plays a key role in maintaining society by means of practices and values persisting in diverse groups such as families, households, and religious and cultural organizations, among others. Two consequences follow from this. First, civil society actors are concerned crucially with their position vis-à-vis the market and the state, and are often involved in struggles over the distribution of responsibilities for livelihood and social reproduction among the three spheres. Second, civil society is very heterogeneous, crosscut by differences in gender relations, class difference, race–ethnicity, culture, and location, which position individuals very differently vis-à-vis the state and markets, and each other. Civil society’s relationship to the state and the market has often been framed in terms of rights, which specify the access to livelihood, security and political society enjoyed by individuals in a country (Arce and Long, 2000). The classic description of rights from T.S. Marshall remains useful in outlining the different kinds of rights that states have guaranteed (or not) for their citizens. Ideally, civil rights are those that sustain individual freedom and freedom of expression, religion and property, guaranteed by the justice system. Political rights by contrast refer to the right to vote, to be a member of a political authority, and be elected as a representative. Finally, social rights refer to the goods and services that a state provides to citizens, through social programmes and public services (such as education and health). In Latin America, different types of political regimes historically created different ‘packages’ of rights, changing over time in a continual ‘reconstitution of the regime of rights’ (Calderón et al., 1992: 29; Foweraker, 1995). The state’s rights regime shapes the ways in which the market, civil actors and state organize the distribution of resources, access to livelihood and security. Latin America has what many commentators argue is a regionally specific set of rights where in mid-twentieth-century populist development, states expanded social rights under conditions of closely controlled political rights and under-developed civil rights (Roberts, 1995). Corporatist regimes organized social rights (access to welfare provision) via unions or state-recognized associations, thereby limiting others’ access to these goods (Calderón et al., 2003). Under authoritarian governments, civil and political rights were repealed as voting, political organizations and public meetings were banned. However, in Brazil social rights were extended under the military, until economic crisis forced cutbacks. With the return of electoral democracies, civil and political rights were newly established on paper although ongoing economic crisis often entailed limited social rights (Foweraker, 1995: 28). More recently, neoliberal reforms and globalization reconfigured regimes of rights yet again (see below). Latin American civil society is heterogeneous, with extreme income and cultural differences within nations, combined with racial-ethnic diversity, gender and rural–urban and cultural differences. Social heterogeneity is moreover combined with social hierarchies, the valuing of certain social categories (white-mestizo, male, urban) over others (indigenous/black, female, rural), a characteristic that Jorge Larraín attributes to the long tradition of authoritarianism in the region (Chapter 2). Baroque and later Enlightenment principles contained implicit normative values by which social actors were judged. In Latin America, citizenship – and hence rights of various kinds – has long been tied to certain characteristics (male, white-mestizo, urban, upper income), thereby limiting other social actors’ citizenship status and civilian role. Social heterogeneity and hierarchy through the twentieth century were built into conceptions of citizenship, development and state–society relations, shaping actors’ relationship to livelihood, the market and the state. For many actors, Enlightenment goals of equality and inclusion are still to be realised (Schuurman, 1993: 187), generating what Elizabeth Jelin describes as ‘struggles from below’ (1990: 15). However, as they are engaged more immediately with local livelihoods and specific cultures, many Latin Americans do not perceive the issue in macro-structural terms. Rather, their livelihoods bring them into the socially transformative experiences of migration, education, new forms of employment 194

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and nationalism, each of which changes the meaning of citizenship and social identity. Involving millions of people from the mid-twentieth century, (largely urbanward) migration and education reconfigured civil society and social difference. Education provided new work opportunities while creating a new sense of pride and recognition among poor and rural populations. New racial–ethnic categories were created in cities (such as the Peruvian cholo) while new gender divisions of labour, informal sectors and household forms emerged (Chapter 11). Rapid urbanization inevitably transformed civil society, political consciousness and social interaction. Urban migrants began to interact with nation–states and labour markets in new ways, demanding resources as well as full citizenship. State-sponsored nationalism attempted to create a universal sense of belonging to transcend profound social gulfs, while social actors forged local ‘geographies of identities’ (Radcliffe and Westwood, 1996). The nation–state promoted ‘good citizenship’ through civil participation in military service, nationalist school lessons and state rituals. In many rural areas, state corporatist organizations forged new identities and local civil organizations, such as the comunas in rural Ecuador. Culturally, new forms of mass culture and mass politics (advertising, demonstrations, campaigning, unionization) drew people into a new relationship with the political sphere (Calderón et al., 1992: 25). All of these processes significantly transformed the conditions for civil society structures and informal politics, and created a wider public awareness of the language of citizenship and rights. Geographical processes constitute social movements and reinforce the politics of social difference. Latin America’s uneven development and urban and regional bias generate the uneven distribution of resources, cutting large swathes of civil society out of development. In this context, insecurity and precarious development gains generate civil mobilization for title to housing in urban shantytowns or to agricultural land in rural areas. As mentioned above, the interactions between civil society, the state and the market are often the source of tension, negotiation and contestation especially as citizens’ livelihood depends upon stability, access to resources, and forms of recognition defined by the nation–state or forged in capitalist markets. Theoretically, these tensions are debated and negotiated in the public sphere where citizens agree responsibilities and rights. However, in Latin America, the public sphere has historically been limited or non-existent (Foweraker, 1995: 30), and in this context, citizen debate and forms of informal organization have been associated with alternative ‘counter-publics’ (Alvarez et al., 1998).The struggles of civil society actors in Latin America to establish their position vis-à-vis the state (civil, social and political rights) or the market (economic rights) has been the topic of much research. An overview of this work reveals that the social and institutional features and political identities involved in these struggles shifted slowly over the twentieth century, as the nation–state and the market were transformed. During the politically and economically nationalist period of mid-century, civil society negotiations were often channelled through union structures (many tied to the state) and state-approved local associations. By channelling civil representation, this corporatism attempted to keep separate groups of civil actors directly tied to state-controlled institutions. Nevertheless, despite rapid industrialization and modernization from the 1950s to 1970s, many groups in civil society remained outside these networks of resource distribution and political representation, giving rise to diverse forms of ‘self-help’ in shantytowns and neglected rural areas (Lehmann, 1990: 150; Scott, 1990). Self-help reflected uneven development and the actions of a state premised on social hierarchies and associated patterns of exclusion. By contrast, during the ‘lost decade’ of the 1980s and particularly under authoritarian and military regimes, civil society had few formal outlets for public debate and representation. In this context, social movements became the locus of political action among civilian actors. More recently, civil society and the public sphere have been transformed once again in the context of globalization and neoliberal reforms of the state and the market. Despite new constitutions and the rise of the ‘third sector’ of nongovernmental organizations, the nation–state has been the main referent for civil action and demands. In contrast to Western social movements that turned their back on the state’s ever-extending reach (Touraine, 1981), Latin American civilian mobilizations generally coexist and cooperate with the state and political institutions. However, as throughout this time the public sphere remained insecure and


weak, state and civil society relations were often characterized by a ‘terrible tension’ (Calderón et al., 1992: 25). The political right to participate represents an assertion of citizenship as it is a precondition for democratic decision-making, and may also entail the wish to put (new) rights on the political agenda (Foweraker, 1995). Civil society action thus ‘shifts between resistance, protest and proposals’ (Escobar and Alvarez, 1992: 4), depending on the context of the state and the market. Civil movements are often focused around ‘constellations’ of specific issues or grievances, unlike political parties’ manifestos or programmes that tend to address a wide range of issues (Scott, 1990: 16–26).

CIVIL SOCIETY MOBILIZATION IN THE 1970s AND 1980s During these decades, civil society was highly organized in what have been termed ‘new social movements’, whose expansion in numbers, confidence and geographical extent surprised leaders, public opinion and scholars alike. Paradoxically, such civilian mobilization occurred at a time when in many countries of the region military – and in some cases, highly authoritarian – regimes were in power, when ‘politics as usual’ could not occur. Military regimes, whether authoritarian or more benign, closed down political parties, disbanded unions and forms of corporatist representation, and clamped down on the public sphere through restrictions on the media, public meetings and social association. Yet in this context, civilian actors organized themselves – sometimes at considerable risk to their lives – to express their concerns regarding livelihoods, the market, the state and rights. In other words, the relationship between the spheres of civil society, the state and the market did not disappear, but was dramatically reconfigured with long-term consequences for both civil society and the state. This section first addresses the ways in which theories have approached this period. Second, the section examines a number of different forms of civil action in these decades, addressing livelihoods, rights, social identities and cultural meaning. In the final part, we discuss the role of economic transformations and growing global integration in beginning to shape civil action and its agendas. Understanding the paradox: theoretical perspectives Why did social movements emerge during the 1970s and the 1980s? Are they due to livelihood issues, to questions of opportunities and survival that exist in Latin America regardless of the regime in power? Or is this mobilization primarily due to people’s identity vis-à-vis other members of civil society and the nation–state, an identity informed by livelihoods? While these questions suggest that there are two distinct ways of understanding the paradox of civilian mobilization, recent approaches stress the equal importance of livelihood, culture and political opportunity. Resource mobilization theory (RMT) tends to stress the question of livelihood, and the structural conditions under which civilian actors mobilize. According to this approach, groups act in response to structural economic and political conditions. Recognizing that non-formal politics can be both rational and important, these approaches focus on the methods adopted by organized civilians to gain access to a particular resource or right. Also, social movements require resources and inputs from members, and leaders to make strategic decisions (Foweraker, 1995). Actors are understood to mobilize to protect economic interests and livelihood. For example, peasant farmers’ land invasions to recover fields taken by landowners are argued to relate to the threats to peasant survival caused by landlessness or subdivided plots. However, this primarily economic interpretation of livelihood is often problematic in Latin America (as elsewhere in the world), as it disregards the political and sociocultural context within which livelihoods are created, maintained and struggled over (Sheffner, 1995). First, access to resources is structured by the socially exclusionary interaction between the state, the market and civil society. Beyond individual economic concerns, civil mobilization challenges governments that systematically fail to guarantee rights to certain citizen groups for non-economic reasons. For example, Latin American women’s movements challenge legislation that restricts married women’s control over children and property. Second, civil actors’ livelihoods are embedded within cultural meanings that inform the value of different resources to social actors and thus shape their 196

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willingness to mobilize in their defence. For example, social organizations of Amazon indigenous peoples fight for access to land, not only because it is the basis of their daily livelihood and survival, but also because of its cosmological and cultural significance. The second major theoretical contribution to understanding civil mobilization is identity theory, also known as new social movement (NSM) theory. This approach stresses the identity dimensions of civil organization, arguing that the meanings invested in struggles are not economic but rather social and cultural. Accordingly, civil movements are not merely struggles over production and consumption but also crucially about meaning, communication and representation (Melucci, 1995). By documenting the meanings, life-worlds and everyday actions, people’s motivations, hopes, desires and meanings of organizations become clear (Escobar and Alvarez, 1992; Melucci, 1995; Schuurman, 1993; Scott, 1990). Stressing the macro-level exclusions of certain social categories from recognition and status, new social movement theory suggests that mobilization emerges from individuals’ and groups’ intrinsic search for social recognition and identity. As Latin American society comprises various ‘Others’, the argument goes, so these ‘Others’ seek by means of grassroots and informal organization to have their views heard, their right to self-representation acknowledged and their right to decision-making over development and livelihood secured. Evers argues that social movements are driven by the need to express an identity, a way of ‘doing society’ in which individuals/groups can realize their full ‘subjecthood’ (1985: 48). Gaining power is thus not as important as civil movements’ aim of democratizing authoritarian political cultures through the slow transformation of meanings (Alvarez et al., 1998). NSM theory has been harshly criticized for ignoring the material factors behind mobilization, and for glossing over persistent social inequalities within civil organizations (Roberts, 1997). Due to its focus on submerged identities, NSM theory tended not to define the achievements of civil action except in the broadest terms. Latin America’s diverse forms of civil society mobilization challenge both these theoretical approaches, leading to a theoretical synthesis. Current approaches to grassroots organization include a focus on the institutional and social opportunities offered by particular regimes, specific economic situations and diverse socio-cultural traditions. Analysis of ‘political opportunity structures’ replaces a purely economistic interpretation with a more contextualized, regionally and socially sensitive approach to the material conditions for civil action. Additionally, the meanings and creativity of social actors are acknowledged in recognition of political agency and the philosophical–psychological dimensions of struggle. Social movements are thus defined as a ‘collective actor constituted by individuals who consider themselves to have common interests and, for at least some significant part of their social existence, a common identity’ (Scott, 1990: 6). Alongside the growing awareness of social movements’ flexibility and multi-dimensionality comes the recognition of the geographies of civil society. Civil society is often distant politically, geographically and socially from governments and state agencies, reflected in the region’s civil society organization (Davis, 1999). Civil actors create informal geographies of identities, shaping relations of affiliation and belonging often at odds with state administrative areas (Radcliffe and Westwood, 1996). These place identities are not enclosed nor fixed, although they can often be local. Arturo Escobar (2001b) argues that the ‘defence of the local’ provides a core rationale for civilian action. The predominant pattern of action during the 1970s and the 1980s was a relatively local one, showing a cyclical pattern of activity and quiescence. However, this is not to say that groups remain limited to a local circumscribed area, as strategic alliances beyond this may be crucial. This does not prevent social actors from extending networks beyond the local in order to coordinate action, agree a list of demands and construct a regional or national sense of identity. In the 1990s Central American peasant farmers coordinated across national borders to formulate alternatives to neoliberal agricultural policy (Edelman, 1998b). Similarly, the Peruvian peasant patrols are concerned with local livelihood security such as the protection of livestock, but are also embedded within transnational networks of ideas and support, located in ‘larger networks of ideas, exchange and authority’ (Starn, 1992: 94) (Box 10.1). Moreover, ‘local’ actors are often very aware of the ways in which broader structural processes – neoliberal


reforms, regional trade agreements, and international legal provisions, among others – come to ‘map out’ in a locality. Civil actors mobilized against the privatization of water resources in Cochabamba, Bolivia, voicing their concerns that government neoliberal reforms to ‘liberalize’ the water market would lead to a transnational company taking over water required for irrigation, drinking and cleaning (Laurie et al., 2002). Although this was a ‘local’ struggle, the actors involved saw themselves affected by interconnecting local, national and international processes.

BOX 10.1 The peasant patrols of northern Peru (source: Starn, 1992) Started in the 1970s and widespread by the 1980s throughout northern Peru, the peasant patrols, or rondas campesinas, arose out of peasants’ concern over security, namely theft of farm animals and disillusionment with formal judicial procedures. Centre-left political parties as well as church catechists contributed to its formation. As rondas become embedded in the daily routines of villages, conflict resolution mechanisms and women’s rondas emerged to deal with a widening circle of social issues. However, the rondas maintained their own alternative modernities in rural highland locations, drawing on a wide and hybrid range of institutional ideas, diverse forms of cultural capital and social relations, local knowledge and forms of identity. Ronda participants identified as ronderos, as Peruvians, and as campesinos/peasants.

The geographies of public and private space are significant in Latin America in the way they designate the separation of nation–states and civil society. These geographies are not necessarily secure or fixed, as demonstrated under authoritarian military regimes in Central America and the Southern Cone countries where soldiers invaded ‘private’ domestic space to kidnap citizens. In Argentina’s ‘dirty war’, the military junta moreover issued strict rules about public and private behaviour in its efforts to create rigid control over civil society (Taylor, 1997). Hence, the boundaries between public and private have a ‘decisively political character’ (Touraine, 1981) in Latin America, as they are contested and shifting. Where the ‘private’ space of the household was unable to guarantee family members’ livelihood, these ‘private’ concerns became the focus of public action and mobilization (cf. Sheffner, 1995; Foweraker, 1995). As Latin American private spheres have long been associated with (married) women and gender divisions of labour, issues of ‘private’ survival have often prompted women’s organization in defence of household living standards. Low-income women organized through the lost decade of the 1980s and later to create community-based soup kitchens. These built on – but subtly transformed – women’s ‘domestic’ role and extended the scope of their political activities. Grassroots experiences and viewpoints: livelihood, opportunity and culture Claims to specific rights often lie at the centre of mobilization, especially in the context of failed modernization (Calderón et al., 1992). Mobilization for rights may include material and economic rights, such as secure land or housing title, agricultural extension or bilingual education.The origin of civil action in the 1960s and at its peak in the 1980s are attributed to the failure of inclusive development, high rates of poverty and social marginalization and a new politics of needs (Slater, 1998; Chalmers et al., 1997). Failure of development to grant what it promised generated interests in ‘better’ types of development and more equitable benefit distribution, combined in some cases with a questioning of the industrial, urban and technological path to development. In Mexico, austerity in the 1980s undermined the state’s ability to buy out opposition, hence boosting the number and scope of social movements. Uneven development favouring certain groups created a mismatch between urban groups in terms of access to collective consumption goods such as paved roads, water systems, adequate housing and 198

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electricity supplies. The failure of municipal and national governments to provide poor, often migrant and squatter, populations with services – a package of goods comprising developmentalist states’ promise of modernity – prompted urban civil society to demand them (Castells, 1983). Marches to government offices and self-help construction groups reconfigured the urban poor’s livelihood and sense of political worth, and inevitably contested economic and political gulfs in power, while owing much to specific – often rural – traditions of social organization (Degregori et al., 1986). Neighbourhoods became the location for personal and group networks (such as Lima’s migrant associations) linking populations with churches, rural villages with migrant paisanos (countrymen) and state institutions. These quotidian networks provided for a microstructure of organization (Evers, 1985: 44), a local social pattern through which civil society could be imagined (Melucci, 1989; Scott, 1990). By 1982 around 8,000 neighbourhood associations existed across Brazil, while in São Paulo favelas (shantytown neighbourhoods), civilian associations marched to demand assistance, forming strategic links with popular leaders. Civil action is prompted not only by uneven development, but also crucially by the ways in which people identify and understand diverse forms of discrimination. In Latin America’s hierarchical societies, rights and social recognition have been accessible to certain groups/individuals and not others – rich, not poor; urban, not rural, men, not women; whites/mestizos, not indigenous and black Latin Americans. As social movement theory notes, individuals are prompted to carry out political action when they self-identify as a group. Self-identity is not an essential core but is defined and understood within a specific historical, cultural and geographical context of ‘Othering’ and uneven access to benefits. Discriminatory meanings attached to ethnic–racial labels such as indigenous or black prompt resistance by racialized groups who contest their exclusion from public space, their lack of access to social benefits, and the inability of national societies to recognize their cultural distinctiveness (Van Cott, 1994; Minority Rights Group, 1995). Civil action thus often questions the status quo, and the exclusions and negative meanings that are associated with particular groups or places.Treated for much of Latin America’s history as non-citizens or as second-class citizens, women are just one of the groups that challenge their exclusion from rights (Dore and Molyneux, 2000; Molyneux and Craske, 2001). The association of rights with a public citizenship role came under pressure with women contesting the separation of masculine, public and political space from the ‘feminine’ domestic sphere (Dore and Molyneux, 2000). While these gendered divisions have long been breached by subaltern, peasant and indigenous groups (whose livelihoods rely upon female work and wages), the political sphere has long been defined by masculine culture and women’s exclusion (Melhuus and Stolen, 1996; Chant and Craske, 2003). Female citizenship arrived late, with voting rights conceded slowly in the mid-twentieth century, while formal representation proceeded at a snail’s pace. Ecuador granted the vote to women in 1929, while Paraguay granted this right in 1961; most countries extended female franchise in the 1940s and 1950s. Women make up between 4 and 15 per cent of parliamentary representatives in the early 1990s’ post-transition governments. Despite highly gendered patterns of formal politics, women made up the majority of participants in social movements in the 1970s and 1980s, when other political avenues were closed. For instance, women made up 99 per cent of Chilean neighbourhood associations, purchasing and cooking cheap food, and calling for housing tenure (Lehmann, 1990). In Lima’s shantytowns, women organized communal kitchens, thereby freeing themselves to earn wages (Jelin, 1990). In the shanties of Buenos Aires, Lima or Mexico City, the structural limits on women’s participation were clear – female reproductive and domestic work was increasingly difficult under conditions of economic austerity, prompting women to organize themselves. Debates about Latin American women’s civil action centre on the question of livelihood versus identity. Maxine Molyneux’s work on women’s rights and livelihood under the Sandinista regime in Nicaragua pointed to the complexities of women’s citizenship rights. In Nicaragua, women’s civic action has been explained in terms of practical concerns (livelihood issues of affordable food, education and health care, urban infrastructure) and on the other hand, strategic issues (gender


ideologies that disadvantage women) (Molyneux, 1985). In effect, however, many of Latin America’s diverse women’s groups are concerned with both livelihood and identity, both practical and strategic interests. While feminists historically demanded legislative, familial and marital changes to empower women, they are also concerned with the feminization of poverty and women’s access to resources and livelihood security. Their activism and lobbying of governments in addition to strong international linkages put Latin American feminist movements at the heart of civil and political life during the 1980s (Saporta Sternbach, 1992). Although initially urban and middle-class, feminists increasingly intersected with the popular women’s movements arising in the shantytowns (Lind, 1992). As a highly significant actor in civil society, the Church – especially the Catholic Church – played a crucial role in many forms of civil organization during the 1970s and 1980s. During these decades, the Catholic Church re-oriented towards an ‘option for the poor’ creating new forms of civil association including Bible reading and adult literacy groups. These Christian base communities (CEBs or comunidades eclesiásticas de base) often provided spaces for social actors to meet and discuss livelihood and political alternatives (Lehmann, 1990). Especially where the state had been discredited, CEBs provided an organizational focus and a repertoire of cultural meanings (about oppression, exploitation and redemption) for marginal groups (Lehmann, 1996). In Chiapas state, Mexico, during the 1970s, Catholic catechists formulated petitions for land and basic services on behalf of rural communities. The CEBs played a crucial supportive role in the early days of much citizen action, although the strength of basismo as a political credo has recently been questioned and the highly significant role of Protestant and diverse evangelical groups has been increasingly acknowledged. Given its origin in alternative public spaces and specific cultural milieus, civil mobilization often designs and operates a repertoire of actions that owe little to formal party politics or state rituals. Nevertheless, common experiences of education, migration and nationalism contribute to these repertoires while organizations learn from each other (Eckstein, 1989). In São Paulo, grassroots organizations, CEBs and independent trade unions worked together in 1970s and early 1980s under the military government (Adler Hellman, 1995). The ‘multiplicity of practices’ covers a wide range of examples (Calderón et al., 1992: 27), from colourful marches through the national territory, the use of new symbols and alternative media, systematic non-violent raids on supermarkets, to street theatre. Citizen protest often engages with power relations through geographical tactics, by transgressing the unspoken rules about who should appear where in Latin American urban and state geographies (Pile and Keith, 1997). Having been treated as ‘internal colonies’, indigenous and black peoples’ marginality is overturned by their arrival in the centre of capital cities, such as the 1992 Ecuadorian ‘March for Life, Dignity and Territory’ to Quito (Sawyer, 1997), and black movements’ demonstrations in downtown São Paulo (Minority Rights Group, 1995). Culture and identity are key to understanding civil society, as the motivations behind political actions are constructed in specific social, historical and geographical contexts. Communities are not born but are made and continually re-made as the situation changes (Melucci, 1995: 342; Foweraker, 1995: 12). However, when the state is the main interlocutor for civil society, its procedures often shape the ways in which civil society–state interaction occurs. Over much of the twentieth century, Mexico maintained a strongly corporatist state in which the ruling PRI party structure had the resources and political will to manage civil expression and demands. Yet low-income urban women’s organizations responded differentially to the resources on offer. Whereas some groups in the city of Guadalajara valued autonomy from the PRI (cf. Escobar and Alvarez, 1992), other women’s organizations welcomed the livelihood resources and political recognition that the PRI could offer via its networks (Craske, 1993) (see also Box 10.1). At its most basic, livelihood raises issues of security and the right to life. Although played out very differently across Latin America, depending on the nature of the state, the market and the specific threat to life, violence and insecurity for citizens have been major issues prompting civil action. Two contrasting examples illustrate these themes. In Central America and the Southern Cone, diverse groups of women began to demand the return of ‘disappeared’ relatives who had been abducted and 200

BOX 10.2 The Mothers of the Plaza de Mayo, Argentina Between 15,000 and 25,000 people died in Argentina in its Dirty War (1976–83) against ‘subversives’ and in defence of the ‘last bastion of Western civilisation’. With the shutdown of political activity, political activists and members of diverse organizations were perceived as a threat to stability and ‘disappeared’ after imprisonment, torture and murder by the ruling military. The Mothers of the Plaza de Mayo were established in 1977 to trace their ‘disappeared’ sons and daughters, who had been abducted by the security forces or unnamed groups. Deliberately excluding men from their organization, the women organized weekly processions around the main square in downtown Buenos Aires. Despite intimidation from soldiers, they maintained public protest in the context of a highly restricted public sphere. Over time, they initiated a public debate about the legitimacy of the authoritarian regime. After the return to civilian rule, the Madres were at the forefront of demands for the persecution of military crimes and the bringing to justice of those responsible for disappearance, continuing too in their campaigns to account for all of the disappeared (Fisher, 1993; Taylor, 1997).

Women’s movements had varied outcomes, in part due to the diversity of groups involved. Such diversity, combined with the fact that many (mostly low-income) women were reluctant to define what they did as political (Jelin, 1990), means that the achievements of women’s civil action are both difficult and contentious to define. In the Brazilian women’s movement (comprising the full spectrum of neighbourhood, consciousness-raising and feminist groups), women were engaged in ‘deliberate attempts to push, redefine or reconstitute the boundary between the public and the private, the political and the personal’ (Alvarez, 1990: 23). Low-income women extended their sphere of daily competence and involvement into community-based groups, which in some cases led them to question the prevalence of domestic violence and to gain self-esteem (see also Lind, 1992). The widespread mobilization of women in the past few decades perhaps provides a test case of the effectiveness of civil mobilization. Newly established legal rights for women and measures to deal with issues such as domestic violence reflect the demands of diverse women’s organizations. What were the achievements of social mobilization in 1970s and 1980s? Many forms of civil organization during these years were local, but that is not to deny their impact on livelihood, and the formulation of new civil society–market–state relations. Moreover, social mobilization during this period 201


killed by the countries’ military regimes. In Central America, the groups comprised mostly indigenous women, whose connections with the Catholic Church granted them a political opportunity to question the regime’s policy of genocide (Schirmer, 1993). Informed by international human rights law, civilian women such as the CONAVIGUA organization in Guatemala campaigned against disappearance and state violence. As their knowledge of the situation grew, they criticized the regime for its political violence (and lack of citizen security) and gendered violence against women. In Argentina, a violent and military state gave rise to another ‘mothers’ movement, but the distinct culture and politics of this country shaped the pattern of civilian mobilization differently to Central America (Fisher, 1993). Again, women were at the forefront of demands for the return of ‘living relatives’ in the Mothers of the Plaza de Mayo organization (Box 10.2). Here, women of diverse class backgrounds coordinated using the semi-private, ‘feminine’ spaces of teashops and children’s playgrounds (Radcliffe, 1993). Weekly parades around the Plaza de Mayo in Buenos Aires stressed the women’s maternal responsibilities and emotional ties to children. This ‘motherist’ identity chimed with the military’s de-politicized view that the family was the ‘basic cell of society’ in a strongly Catholic and ordered society (Taylor, 1997). The nature of women’s political organization is thus shaped strongly by the political and cultural context within which they emerge.


was often cyclical, moving through a pattern of greater and lesser visibility, and disappearing once their aims were met (Foweraker, 1995: 100; Alvarez et al., 1998). Under politically, socially and economically exclusionary governments, civil associations inevitably varied in their demands and achievements. While some organizations pursued political or social rights on their own terms, others chased after entitlements that were embedded in patron–client relationships with political parties or state sectors (Foweraker, 1998: 275). Institutional change, more secure livelihood, new rights and social mobility can be identified as possible material outcomes of civil organization, although subtle shifts in ‘cultural codes’ and political culture may also occur (Melucci, 1995; Alvarez et al., 1998; Sheffner, 1995). Existing within the spaces between civil and political society, social movements’ gains are highly varied and multifaceted, yet the significance of social organization for Latin America’s political culture is undeniable.

CIVIL SOCIETY AND THE TRANSITION TO DEMOCRACY This section describes social movements’ role in transitions to electoral politics, and examines their significance in transforming political cultures. In assessing civil influence on transitions, it is difficult to generalize across the region’s varied regimes, political cultures and movements. Civil action had diverse impacts on transitions to democracy, depending on the forms of organization, the regime and the nature of the transition. During transitions, social movements necessarily changed their engagement with development processes and the structures of power. Groups of civil actors impacted on political cultures in ways that undermined authoritarian regimes’ legitimacy, rejecting the closure of public spheres and holding former rulers to account. Nevertheless, civil organizations rarely had direct access to the negotiations leading to democratic transitions to electoral politics (Foweraker, 1995), which had long-term consequences for politics and civil society. Where the transition to electoral democracy was decided behind closed doors in negotiations between political elites and political parties, social movements often did not have direct access to the negotiating table (ibid.). In many countries, civil society impacted on transitions more by shaping political culture than by participation in political negotiations. In Argentina, spearheaded by the Mothers of the Plaza de Mayo, civil action democratized political culture, developed a public community and revitalized local politics in the period leading to democratic transition (ibid.). By means of constant visible demands on the military, the Mothers of the Plaza de Mayo reoccupied public space and contributed to the loss of the military’s legitimacy. In Chile, by contrast, civil protests in the early 1980s failed to shift the Pinochet regime’s timetable for return to civilian rule and isolated radical protestors. Here a ‘submerged’ civil society could not defeat a powerful regime. In this context, post-transition political roles for social movements were highly diverse across the region with some countries seeing the return of party politics ‘as usual’, while other countries created new forms of political participation. Chile’s return to electoral politics sidelined social movements as they incorporated civil leaders but not their demands, with negative consequences for popular groups’ access to decision-makers (Schuurman, 1993). Arising under conditions of political authoritarianism, social movements were potentially the basis for more democratic and participatory politics, through their attempts to re-open a debate in political culture and their efforts to make new organizational forms. In this sense, social movements acted at crucial moments like ‘schools for democracy’, focusing on political rights, an expanded notion of citizenship and making political demands on the state. Social movements’ insistence on human rights and demands for political transparency and a ‘deepening’ of democracy were often common threads (Foweraker, 1995). Nevertheless, scholarly optimism that civil organizations would be ‘schools for democracy’ has recently been tempered by recognition of persistent legacies of authoritarianism and exclusion.

CIVIL SOCIETY AND SOCIAL DIFFERENCE In the 1990s, civil society has been transformed again due to political and economic shifts that interact to re-configure social actors’ relationships to the market and the state. The extension of the market 202

New constitutions: rights The rights and identities of civil actors in Latin America have been profoundly transformed with the introduction of new constitutions, although much remains to be done to translate these ‘paper rights’ into changes on the ground. While the immediate reasons for these constitutions varied, the macrostructural context was informed by the falling legitimacy of political systems and civil action. For example, Peru’s authoritarian President Fujimori was challenged by civil protest and occupation of public spaces, while in Ecuador widespread mobilization against a corrupt government led to the formation of a constituent assembly. In other words, in the wake of widespread military governments and civil mobilization, the return to electoral democracy often forced a constitutional change. While many civil mobilizations and organizations have not contributed directly to the new constitutions, their presence and ability to express political opinions in a receptive public sphere have evidently shaped developments. In Ecuador and Bolivia mobilization by indigenous movements fought back neoliberal reform, and succeeded in protecting and extending collective land rights (Deere and León, 2001a). By contrast, in Mexico and Peru, civil society was weakly organized with the result that harsh neoliberal measures for agriculture had profound effects on peasant livelihood and security. Around the world, neoliberal reforms have been associated with recognition of ethnic citizenship, and Latin America is no exception, enacting ‘neoliberal multiculturalism’. New Andean constitutions extended cultural and territorial rights to racial groups, namely indigenous and African-descent populations, such that Bolivian indigenous groups have rights to autonomous territories and governance structures although their livelihood and security remain problematic. In Colombia, the 1991 constitution established new rights for the recognition of ethnic and religious minorities, and in 1993, the ‘70 Law’ confirmed Afro-Colombian territorial and cultural rights (Minority Rights Group, 1995). Although multicultural citizenship redraws the frontiers of citizen inclusion, the role of the state in guaranteeing social and civil rights often remains sketchy. With citizenship defined in terms of plurality and difference, the representation of social actors within the institutions of the neoliberal state has changed. Constitutional change to recognize women’s, indigenous and Afro-Latin American rights has been accompanied by new forms of administration by which to meet the needs of and channel state (and NGO and international) resources to these groups (Bebbington and Thiele, 1993). Bolivia created a body to deal with ethnic, 203


into spheres previously run by state organizations, combined with the ‘rollback’ of the state from welfare, extension services and distribution forced a re-working of the ways in which civil society actors make livelihoods and do politics. In many countries, a ‘neoliberal’ form of politics (with strong presidents and executive bureaucracies) has led to delegative or ‘partial democracies’ in which citizens’ rights are compromised by lack of participation and exclusionary political cultures. With deregulated labour markets, budget cutbacks and limited, targeted welfare systems, larger numbers of citizens are reliant upon the harsh realities of the market at a time when global economic insecurity has plunged many countries into low growth. In this context, many commentators are highly sceptical of the promise that new civil societyoriented forms of representation and distribution can guarantee citizens’ rights. During transition, hopes were raised that civil actions and new ways of doing politics would lead to more participatory, ‘deeper’ democracy. However, these hopes have often been disappointed despite civilian electoral rule, and international aid donors and political gurus’ praise for civil society groups as the solution to Latin America’s woes. As organized civil society actors become institutionalized under neoliberalism and globalization, the separation of society and the state is blurred on the ‘legal-institutional terrain linking civil society and the state’ (Foweraker, 1995: 103). Nevertheless, more civil society actors than ever before have the right to vote (Andean populations illiterate in Spanish were granted the vote in the late 1970s, affecting large numbers of poor people, indigenous groups, and women). Moreover, new constitutions introduced in the 1990s in many countries have attempted to reformulate the rights and meanings of citizenship for many groups.


generational and gender affairs, while the Ecuadorian council of indigenous and black groups provides access to policy decision-making, albeit with tensions and problems, at the heart of the state (Box 10.3). In many cases, these institutions reflect the capacity of social mobilization to shape political structures in civil electoral regimes and international support for civil society organizations. Nevertheless, institutionalization does not guarantee a change in political cultures or equal access to resources. Whereas professional women became important representatives in new state women’s agencies (such as the Chilean SERNAM), low-income women often found themselves more impoverished and politically marginal (Schild, 1998).

BOX 10.3 Ecuadorian indigenous movements move to the global stage Ecuadorian indigenous movements emerged in the late 1970s and the 1980s to call for land-title, political representation and appropriate development. The movement’s capacity to mobilize the grassroots (Zamosc, 1994), combined with its wide public legitimacy for attacks on corruption and harsh neoliberal restructuring, made the Indian movement a political actor to be reckoned with in the 1990s (Collins, 2000). Uneven development across the country – including overworked small farms in the highlands, and the oil industry’s destruction of Amazonian areas – had left indigenous people with few livelihood choices apart from assimilation, poverty or migration (Sawyer, 1997). Deploying an anti-colonial discourse, the indigenous movement reformulated Ecuadorian citizenship as a question of multiple ethnicities and plural cultures, a framework that was eventually incorporated into the 1998 Constitution (Assies et al., 2001). By means of transnational linkages to indigenous organizations, development agencies and advocacy groups, Ecuador’s indigenous people also challenged the models of neoliberal development during the 1990s (Treakle, 1998). By exchanging information about alternative models, indigenous movements combined development experiences from elsewhere in Latin America with new international legislation and multilateral agency policy to make development pro-indigenous and bring Indian populations out of poverty and into the centre of decision-making.

According to classical political theory, a citizen should and does claim a canonical set of rights regardless of class, ethnicity, religion or gender. In Latin America, as noted above, social difference and hierarchies have made it most likely that male, mestizo, urban, elite groups have fitted the ‘model’ citizen. The past 20 years of civil mobilization in Latin America, particularly among women, indigenous and poor people, have questioned this ‘model’ and introduced a multiplicity of social identities into civil and political society (Calderón et al., 2003). Indigenous and black groups have forced recognition of multicultural societies, while establishing rights to culturally appropriate development, education and government. The introduction of divorce laws, quota laws and institutional structures to oversee development for women all indicate the extent to which that mobilization has changed the political landscape in many Latin American countries. However, these rights are established at a time when the state is pulling back from social provision and when politics has become highly bureaucratic, depending on technocrats and intermediary organizations, such as non-governmental organizations (see next section). In this context, civil groups have focused on the formal political sphere although the wider political and economic context through which livelihood, identity and security are guaranteed is in considerable flux. New civil actors: institutionalisation of social movements and the ‘third sector’ Latin America has been characterized in recent years by the institutionalization of civil associations and the emergence of the ‘third sector’, a term that refers broadly to non-governmental organizations. 204

Civil action in the context of neoliberal livelihood options Under post-transition constitutional governments, civil and social rights have been downplayed, bringing into question the automatic extension of social, political and civil rights to citizens under electoral civilian regimes. In the past 15 years, economic reforms have reconfigured the relationship between political, civil and social rights. Although the state continues to have a major role in the definition and practice of rights, the combination of economic neoliberalism and public disenchantment with formal politics shifts the context within which civil society and citizens relate to, and practice, their rights (Roberts, 1997). In the early twenty-first century, how significant is social mobilization in challenging the economic and social restructuring associated with neoliberalism? Manuel Castells, among others, argues that the network society is disenfranchising large populations around the world, who organize social movements in opposition to the New World Order (Castells, 1997). With neoliberal rules of access, social movements and civil groups have entered energetically into the political arena, bringing with them repertoires and languages, while learning the new ones. According to this perspective, groups such as the Zapatistas in Chiapas, Mexico, offer potential alternatives to new forces of marginalization through the creation of a ‘project identity’ (ibid.: 65). As 205


While some commentators question whether NGOs can really be counted as a part of civil society (because they increasingly take on state functions and features), this highly significant shift in the civil society–market–state triad shapes livelihood and identity. NGOs are a highly diverse group, although they generally show a degree of solidarity on behalf of the dispossessed groups (Bebbington and Thiele, 1993). With a total of around 25,000 NGOs across the region, the density of NGOs varies across the region with the largest registered numbers in Bolivia, Nicaragua and El Salvador (Jelin, 1995: 93; Foweraker, 2001). In Ecuador, the greatest density of NGOs is found in areas with concentrations of indigenous populations. In recent years, NGOs have become brokers between civil society – especially grassroots organizations – and national/international funding for social development. NGOs generally gain the majority of their funds from the state, providing targeted social interventions at a distance. For example, in Brazil NGOs started to grow rapidly in numbers in 1985 with the beginning of a democratic transition, assisted by CEBs (at one point, nearly three-quarters of NGOs were funded by religious bodies). As neoliberal states retreat from the provision of social rights, NGOs mediate between diverse – often irregular, uneven and short-term – funding sources including nation–states, municipalities and international development agencies. International donors have been persuaded by the argument that NGOs offer a more efficient and needs-oriented service delivery role than ‘top heavy’ states, and have favoured them in funding. With this in mind, multilateral agencies fund states which in turn contract NGOs to act on their behalf, as in Peru where 90 per cent of NGO funds go via the state. What impact do NGOs have on civil actors and the public sphere? Many commentators argue that NGOs’ impact is mixed. Whereas they can provide needed social services – crucial at a time of increasing income differentials – NGOs have an ambivalent impact on civil and political society. First, NGOs are not necessarily accountable to civil society (this depends on individual NGO procedures and ideologies). Second, they are often forced to be accountable to national and international donors. For example, in Chile, NGOs are politically autonomous but act as clients of the state (Foweraker, 2001: 853). Third, competition between NGOs forces them to drop political mobilization in favour of service delivery. In Nicaragua, health NGOs now do less mobilizing of low-income women and questioning of the health service model (Ewig, 1999). Fourth, social provision is targeted at specific areas and groups in increasingly technocratic procedures in which ‘clients’ – that is, citizens – have to struggle to decide about the nature and content of the assistance offered to them (Calderón et al., 2003). Overall, NGOs are now a central feature of Latin America, mediating in diverse ways between civil society, the state and the market in ways that extend social rights in neoliberal and often disempowering ways.


the first informational guerrilla movement, the Zapatistas strategically used the resources available in new telecommunications. Other writers are less optimistic about the room for manoeuvre under neoliberalism, arguing that in the post-transition period social movements have not been shown to be successful in affecting resource distribution (Foweraker, 1995: 104). Overall, we can say that given the partial and uneven implementation of neoliberalism, restructuring opens up new avenues just as it closes down others. Two examples illustrate these mixed legacies of neoliberal livelihood and globalization. The Northern Mexican border maquila or assembly factories are one key site for neoliberal restructuring of work and social relations. In the mid-1990s, the killing of 50 women maquila workers prompted a civil organization to ‘fight the idea that women aren’t worth anything’ as citizens and workers (Wright, 2001). This campaign combined efforts to guarantee security and livelihood in light of neoliberal market pressures (e.g. changing the low value of women’s labour, re-arranging shifts), as well as cultural meanings. In our second example from Colombia, rural groups contest neoliberal destruction of ecosystems by means of organizations that similarly combine aspects of identity, livelihood and security. The PCN black peoples movement in the Pacific rainforest region organized to defend the territory and environments upon which their livelihoods rested in bio-diverse habitats with varied resources (timber, fish, agriculture, gold). Although the 1991 Colombian constitution had granted rights to black populations, these rights had to be translated into practice, by challenging logging companies and constructing new ways of articulating environmental concerns with livelihood issues. Just as neoliberal economic policies open up nation–state borders to international trade, multilateral agencies and intergovernmental bodies carry out policies that impact on civil society. The scope for citizen action to shape these processes remains relatively limited, even when international bodies are sympathetic to civil ‘participation’ (Cooke and Kothari, 2001). Although adapted to mitigate further impoverishment, structural adjustment policies are applied with little citizen participation. When the World Bank offered ‘civil society’ a place in negotiations in the 1990s, the international organizations and states were the dominant partners, while grassroots civil society remained largely excluded (Friedman et al., 2001). Nevertheless, civil action and global networking can make a difference in shaping some international negotiations. In September 2000, representatives of Ecuador’s indigenous movement had a seat at the Club of Paris discussions about the national debt, reflecting their high international profile and legitimacy (Espinosa, 2001). Globalization: new geographies of civil action? At the turn of the twenty-first century, the microstructures of everyday life and the heavily policed terrains of authoritarian regimes gave way to civil society action in a wider, multi-layered set of spaces comprising ‘informal, discontinuous and plural public spaces’ (Alvarez et al., 1998: 18). A global/local focus has become increasingly important to understand actions beyond and ‘below’ the state that shape rights, citizenship and civil action. In a deterritorialized world (where nevertheless uneven development and global inequalities deepen), nation–state borders are less of a constraint on civil action and in many cases are deliberately crossed by civil actors in order to bring about a ‘boomerang effect’ on the nation–state (Keck and Sikkink, 1998). However, the reasons for civil actors’ mobilizations often show continuity with past decades, even in shifting technological, geopolitical and economic contexts. Civil groups continue to speak of rights and citizenship, but they mobilize for these at multiple scales and spaces. International law from the United Nations and other inter-governmental bodies has during the past decades provided Latin American actors with the language and resources to press for political and social change in their own countries. One example is Latin American indigenous organizations’ use of the International Labour Organization (ILO) Convention 169 on ethnic territories to press nation–states for collective rights to land (Brysk, 2000). By establishing indigenous peoples’ right to territory, political recognition and appropriate development, the convention provided a benchmark statement through which to leverage for legal and constitutional change. In the context of 206

CONCLUSION Theoretical approaches to civil society in the 1980s broadly suggested that social movements represented a new way of ‘doing politics’, a form of politics that broke definitively with the past. However, in recent years that interpretation has been challenged on a number of fronts. First, continuities between the pre-social movement times and social movements are increasingly being investigated and documented. Unions and civil associations (for example, urban migrants associations) provided an identity and an organizational framework that many civil actors later built on in the 1970s and the 1980s. With the return of electoral democracies in the 1980s and the 1990s came the unwelcome return of clientelism and corporatism, forms of linkage between civil society and the political system that restricted full participatory decision-making and ‘substantive democracy’. Moreover, the existence of numerous political parties led to the fragmentation of civil organizations in some cases and, as described above, the institutionalization (NGO-ization) of civil association. Also, geographies and repertories of action, as in Mexican rural movements, show continuity with past organizations (Adler Hellman, 1995). The content of many civil concerns also shows continuities with the past, namely issues of security, livelihood and identity. 207


globalization, citizenship can become multi-layered, as international law, the nation–state and collective territories/local governments all shape livelihood, security and identity for civil actors. The theoretical language used to talk about civil society action in a global context includes discussion of networks, webs and transnationalism, rather than state–society boundaries (Slater, 1998). Transnationalism refers to ties of non-state actors across national borders which have become more frequent in Latin America in recent years (Radcliffe, 2001), while social movement networks have rapidly crossed national frontiers, the global North–South divide and divisions between social actors (Yúdice, 1998). International law, new communication media and transnational issue networks all contribute to the reorganization of civil society action in Latin America. The Ecuadorian indigenous movement, for example, is networked with a range of international actors, including the Brazilian Workers Party (PT), European Green parties, transnational human rights organizations and indigenous advocacy networks. The Ecuadorian indigenous movements are moreover well embedded within South–South links, having active and creative ties with indigenous organizations in other Andean countries. Technological advances have expanded the possibility of ‘activism at a distance’ (Ribeiro, 1998: 325). New technologies, especially communication technologies, have assisted the explosion of globalized civil actions although face-to-face communication and meetings remain the most important component of organizations’ decision-making. Due to regional markets’ liberalization, increased access to computers and late modernity’s emphasis on the image, more civil movements diversify their use of communication tools. The sophisticated use of new communications methods such as websites and video by the Zapatista uprising in Chiapas Mexico since January 1994 is combined with the strategic use of the photogenic figurehead of Sub-comandante Marcos (Harvey, 1998). Nevertheless, what is often forgotten in relation to the Zapatistas is their continued reliance on ‘older’ forms of communication and protest, including marches across Mexico, the reorganization of local territories and livelihoods, and the strategic use of other civil actors (including the Catholic Church) as intermediaries. Certainly transnational flows of images and ideas are made easier in a globalizing world, creating a potentially wider audience and support network for civil actors within Latin America. Transnational issue networks have become established in, and beyond, Latin America, putting pressure on states and key business actors to bring about change in human rights or environmental degradation (Keck and Sikkink, 1998). While these networks can give rise to new political cultures and new brokers (Yúdice, 1998: 370), Latin American civil society continues to have to engage crucially with states and the market, through which livelihood and security can be ensured. However, these negotiations remain problematic due to the slow pace of change in political cultures.


In relation to civil action, further questions have been raised in recent years about the exclusive focus on social movements as illustrations of citizen action. Is the Maoist terrorism of Peru’s Shining Path a social movement? Most people would say not. Does the daily, small-scale foot-dragging resistance of maquiladora workers in Mexico comprise a civil action? Again, most commentators would say not but for very different reasons. Recently, researchers have asked us to look beyond the narrow confines of social movement-type forms of civil action, in order to understand the range and complexity of actions undertaken by groups on a continuum from armed rebellion through to the hidden tactics of the marginalized (Fox and Starn, 1997). The sheer heterogeneity of civil, political and social forms defies simple categorization, especially given their diverse social and political repertoires (Scott, 1986). Third, although social movements were celebrated – and certainly in some cases, functioned – as ‘schools for democracy’, the return to electoral democracies in the 1980s demonstrated clearly that, in many ways, politics was ‘back to normal’ and that was not necessarily fully participatory nor democratic. With the return of political parties, the relation between civil society and the state was in many situations characterized – as in previous decades – by clientelism and corporatism. Achieving material goods and services in this context often comes through compromise with the state, thereby reducing the independence and autonomy of civil groups (Adler Hellman, 1995). Civil actors in their dealings with technocratic, neoliberal and NGO-ized states continue to face an uphill struggle to ensure participation, representation and accountability (Aguero and Stark, 1998). In exceptional circumstances, civil action and progressive elements in the state permit participatory oversight and decision-making, although these are restricted currently to the municipal level. In Porto Alegre, Brazil, participatory budgeting takes place with community organizations that set the priorities for municipal plans ensuring that benefits go to each neighbourhood (Foweraker, 2001). In Guamote, Ecuador, an 18-month participatory workshop defined development goals and means, led by the indigenous mayor and involving over 4,000 local people and local associations (Radcliffe et al., 2002). Globalization has advanced steadily in Latin America during the past two decades, as neoliberal economic measures open the region to global capital and make them more vulnerable to global markets. Globalization has also influenced politics with the introduction of international law and international social development bodies that strongly influence nation–states and their relation to civil society in the region. Latin America’s population is not only mostly urban, but it is now increasingly linked to global consumer patterns and media flows. Civil society action has been shaped centrally by modernity and globalization. Globalization provides civil actors with a wider range of reference points, perhaps questioning their attachment to the nation–state. Yet globalization does not guarantee livelihood and security for most Latin Americans, excluded as they are from neoliberal growth policies and from increasingly distant nation–states and institutions. Where globalization can make a difference it has been in networking Latin American civil groups and individuals with others in a similar position, and offering them a vision of what they can achieve through coordinated action. In the meantime, however, uneven geographies of global development and the continuities in Latin American political cultures restrict political participation, and undermine livelihoods for many civil society actors.

FURTHER READING Alvarez, S., Dagnino, E. and Escobar, E. (eds) 1998 Cultures of politics, politics of cultures: revisioning Latin American social movements. Westview Press, Boulder, CO. A collection of 15 papers on civil society, social movements and the state in the context of democratization, neoliberalism and globalization. Chalmers, D. A. et al. 1997 The politics of inequality in Latin America: rethinking participation and representation. Oxford University Press, London. A detailed discussion of the neoliberal regime of rights and its impact on civil society. 208

WEBSITES Ecuador’s indigenous organizations, conaie.nativeweb.org/index.html Guamote’s local government, Ecuador, www.snvworld.org/localGovernance/part%205/ Ecuador_1.htm Latin American indigenous movements, abyayala.nativeweb.org Porto Alegre participatory budgeting, www.worldbank.org/participation/sdn/snd71.pdf or www.futurenet.org/24democracy/lewit.htm Zapatistas in Chiapas, Mexico, www.ezln.org (in Spanish) or www.utexas.edu/students/nave then click on ‘About the EZLN’ icon on the left. Zapatistas Internet lists and sources, eco.utexas.edu/faculty/Cleaver/chiapas95.html

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Foweraker, J. 1995 Theorising social movements. Pluto Press, London. The best review of the theoretical literature on social movements and the role of the state in Latin America.

11 Urban livelihoods, employment and gender Sylvia Chant

This chapter provides an overview of trends in urban livelihoods and employment in Latin America between 1980 and the present. The discussion commences with an introduction to the concept of ‘livelihoods’ and a brief resumé of how low-income households in towns and cities have diversified and intensified their livelihood strategies in the wake of economic crisis and neoliberal restructuring. The second section of the chapter deals more specifically with employment, which remains the urban poor’s primary source of income (ECLAC, 2002b). Here, particular attention is given to the growth of the urban informal sector (UIS), and the informalization of urban labour markets more generally. Since women’s rising labour force participation stands out as one of the major features of adjustment in urban areas in the past two decades, both in the ‘public’ sphere of the labour market, and in the ‘private’ sphere of the home (González de la Rocha, 2000), the third section of the chapter considers the gender dimensions of urban employment and the implications of women’s rising labour force participation for household evolution and gender relations.

HOUSEHOLD LIVELIHOODS The concept of ‘livelihoods’ originated in research on poverty in rural areas, but has increasingly been used in relation to low-income groups in urban contexts. As Chapter 9 has outlined, the concept encompasses the diverse ‘capabilities, assets (stores, resources, claims and access) and activities required for a means of living’ (Chambers and Conway, 1992: 7). In turn, the ways in which capabilities, assets and activities are mobilized and pursued are referred to as ‘livelihood strategies’ (Chambers, 1995). While theoretical and policy approaches to livelihoods range from the ‘sustainable livelihoods’ framework used by the UK Department for International Development (Carney, 1998), to the ‘asset vulnerability’ framework (Moser, 1998), to the ‘capital assets’ framework (Rakodi, 1999; Rakodi and Lloyd-Jones, 2002), all share the aim of codifying the multiple resources on which household livelihoods depend. A focus on what the poor have and how they make use of it allows for a much more holistic appreciation of how survival is negotiated. Carole Rakodi’s (1999) exposition of the ‘capital assets’ approach to livelihoods concentrates on assets, which constitute a stock of capital of varying types (human, social, natural, physical and financial) which can be stored, accumulated, exchanged or depleted and put to work to generate a flow of income or other benefits (see Box 11.1). Depending on the local environment, social and cultural context, power relations within households and so on, people may manage assets differently, although generally speaking ‘households aim at a livelihood which has high resilience and low sensitivity to shocks and stresses’ (Rakodi, 1999: 318).

210

• Human capital • Social capital

– –

• Natural capital

–

• Physical capital

–

• Financial capital –

vocational skills, knowledge, access to/command over labour, health. relationships of trust, reciprocity and exchanges that facilitate cooperation, and may provide for informal safety nets among the poor (NB: there can also be ‘negative’ social capital in the form of violence, mistrust and so on). natural resource stocks such as trees, land, biodiversity (particularly relevant to rural areas). basic infrastructure and producer goods such as transport, shelter, water supply and sanitation, energy, and communications. savings (whether in cash, livestock, jewellery), and inflows of money, including earned income, pensions, remittances, and state transfers.

Household livelihood strategies and neoliberal economic restructuring Accepting that disadvantaged groups have always had to be resourceful, in the past two decades demands on their ingenuity have risen massively in Latin America, along with other regions of the South, due to recession and neoliberal economic restructuring. Features that stand out as having had a major impact on the poor include: • • • • •

losses in income through reductions in wages and job availability; rising costs of living; mounting competition in the labour market; increased occupational instability and precariousness in working conditions; and reduced social sector spending (Arce, 2002).

Assessing how these changes have affected low-income people in Latin American cities is inevitably complicated by variations in contextual factors such as local labour market conditions, pre-existing levels of national poverty, and the specific measures adopted by different countries to restructure their economies (Chant, 1996). None the less, the findings of case studies from different parts of the region indicate that the urban poor have had to make considerable on-going efforts to protect living standards. The main strategies used, and which are identified in Rakodi’s (1999) general discussion of the capital assets framework for livelihoods, are summarized in Box 11.2.

BOX 11.2 Major strategies adopted to protect household livelihoods in the context of recession and restructuring (source: Rakodi, 1999) 1 Strategies to increase resources by intensifying the use of natural, physical or human capital. This includes diversification of economic activities, starting businesses, migrating, renting out rooms, and increasing subsistence production. A particularly common strategy has been to place more people into the workforce and for households to adopt multiple earning patterns and/or increase ‘occupational density’, rather than rely on a single wage or ‘breadwinner’. Many new workers deployed into the labour force are women who were hitherto economically inactive. 2 Strategies to change the quantity of human capital. These can take two main forms. First, household size might be increased through the retention or incorporation of members. A 211

Urban livelihoods, employment and gender

BOX 11.1 Capital assets of the poor (source: Rakodi, 1999)


major motivation might be for the relative(s) in question to take on domestic chores and childcare in order to release wives and mothers into the labour force. Alternatively, households may opt for cutting consumption costs by lowering fertility, by engaging in migration, or by shedding members who are not making an adequate contribution to household well-being. The latter applies in cases where women leave husbands who fail to provide financially, and who set up on their own with their children. 3 Strategies which involve drawing on stocks of social capital. These include borrowing, seeking charity, begging, and perhaps most importantly, strengthening people’s extra-domestic links with kin and friends beyond the household unit for the purposes of securing and/or exchanging money, food, labour, and so on. 4 Strategies to mitigate or limit a decline in consumption. These encompass the avoidance of ‘luxury’ purchases or expenditure, the withdrawal of children from school, the scaling down of social engagements and obligations, the buying of second-hand clothes, and reduced spending on food and drink. Although people normally try to protect food consumption above all else, studies from several countries indicate that recession and restructuring have led to the poor eating fewer meals per day and also cutting down substantially on expensive items such as meat, milk and fresh fruit juice.

While Rakodi divides households’ strategies into four groups, they are underpinned by two main imperatives: to minimize consumption (‘expenditure-conserving’ or ‘negative’ strategies), or to maximize income (‘income generating’ or ‘positive’ strategies) (Benería and Roldán, 1987; González de la Rocha, 1991). To a large extent it is agreed that the use of such strategies has enabled the poor in Latin America to cushion themselves from the worst ravages of post-1980 recession and restructuring. In one low-income settlement in Guadalajara, Mexico, for example, increases in multipleearning coupled with the expansion of household membership between 1982 and 1985, resulted in a fall of real per capita income of only 11 per cent despite a 30 per cent drop in the wages of (male) household heads (González de la Rocha, 1988). In urban Latin America as a whole, increases in the economically active population to working age population continued rising during the 1990s, from 59.6 per cent to 61.2 per cent between the beginning and end of the decade (see Table 11.1). Four out of every ten employed persons in Latin America is now a ‘secondary worker’ (defined as a person whose earnings are less than that of the main breadwinner in the household), and the increase in socalled ‘occupational density’ within households has provided an important defensive function (ECLAC, 2002b: 97). Even if the majority of households have managed to fend off destitution in the crisis years, many have only done so at the cost of unprecedented self-exploitation and self-denial. Not only are adults working increasingly long days for lower returns, but poverty and the economic crisis have also been associated with a rising need for children to participate in income-generating activities (McIlwaine et al., 2002: 125). Moreover, there is considerable doubt that such efforts can continue in the face of worsening macro-economic circumstances. At the start of the twenty-first century, income polarization is intensifying in Latin America, and for the majority of the poor, life remains extremely arduous. Not only do the poor stand a disproportionate risk of being unemployed or engaged in lowproductivity occupations, but many live in over-crowded conditions, lack access to drinking water, and have high demographic dependency ratios through taking care of children and/or the elderly (ECLAC, 2002b: 16). In relation to Mexico, Mercedes González de la Rocha (2001) warns that persistent poverty over two decades has effectively brought the poor to their knees (Figure 11.1). While the mobilization of household, family and community solidarity served as vital resources in the past, there is a limit to how many favours people can call on from one another and how effective these exchanges 212

1990

Persons (thousands) 1994 1997 1999

Average annual rate of change (%) 1990–94 1994–97 1997–99 1990–99

Total population Urban Rural

429,775 305,352 124,524

460,791 335,804 124,987

484,133 358,904 125,229

499,872 374,553 125,319

1.8 2.4 0.1

1.7 2.2 0.1

1.6 2.2 0.0

1.7 2.3 0.1

Working-age population Urban Rural

274,619 202,454 72,165

302,852 228,358 74,494

324,685 248,478 76,208

339,680 262,354 77,327

2.5 3.1 0.8

2.3 2.9 0.8

2.3 2.8 0.7

2.4 2.9 0.8

15–64 years Urban Rural

254,569 187,968 66,601

280,102 211,517 68,586

299,741 229,732 70,009

313,203 242,187 71,016

2.4 3.0 0.7

2.3 2.8 0.7

2.2 2.7 0.7

2.3 2.9 0.7

20,050 14,486 5,564

22,749 16,841 5,980

24,944 18,745 6,199

26,478 20,167 6,311

3.2 3.8 1.5

3.1 3.6 1.6

3.0 3.7 0.9

3.1 3.7 1.4

Economically active population 167,485 (15 years and over) Urban 120,688 Rural 46,797

186,446

201,417

211,833

2.7

2.6

2.6

2.6

138,097 48,349

151,968 49,448

161,648 50,185

3.4 0.8

3.2 0.8

3.1 0.7

3.3 0.8

Employed persons Urban Rural

175,632 127,987 47,645

187,824 139,094 48,730

194,714 144,190 49,524

2.4 2.9 1.0

2.3 2.8 0.8

1.6 1.8 0.8

2.2 2.6 0.9

Over 64 years Urban Rural

159,841 114,087 45,754

Source: ECLAC (2002b: 88, Table III.1).

Figure 11.1 Low-income settlement, Querétaro, Mexico. Photograph by Sylvia Chant 213


TABLE 11.1 Latin America: key labour market aggregates, 1990–1999


are in the face of huge structural impediments to well-being. In particular, there are worries that the disproportionate burdens that have fallen on women have stretched their personal reserves to full capacity and there is no further ‘slack’ to be taken up (Moser, 1992). Gender-differentiated impacts of structural adjustment Ingrid Palmer (1992) argues that structural adjustment has worsened women’s position by intensifying two gender-based misallocations in the market: (a) unequal terms of male and female participation in employment; and (b) women’s subjection to a ‘reproduction tax’ which derives from their responsibility for a disproportionate share of unpaid labour in the home. The effects of restructuring on these misallocations among the urban poor are three-fold: 1 the informal sector becomes more crowded which, given women’s disproportionate concentration in this sector, leads to a greater fall in female income; 2 reductions in social service expenditure mainly affect reproductive work within households and ipso facto women who are primarily responsible for domestic labour and childcare; 3 the introduction or raising of user charges for health and education means that women are more likely to be discriminated against in terms of access to schooling and medical care, which has significant knock-on effects on human capital accumulation and well-being. While the implications of these gendered dimensions of restructuring are explored in more detail later in the chapter, suffice it to say here that substantial numbers of women have become ‘burnt out’ by their increasingly arduous, multiple roles and responsibilities (Elson, 1991; Moser, 1992). Although, as we shall see later, increased labour force participation can enhance women’s power and autonomy, in many respects it has merely compounded their exploitation, especially given the concentration of women in the lowest tiers of the occupational hierarchy, both in formal and informal employment (Figure 11.2) (González de la Rocha, 1994; Chant with Craske, 2003).

Figure 11.2 Home-based commerce, Puerto Vallarta, Mexico.This is often small-scale due to lack of resources. Here, the owner minds her children while selling bars of soap, boxes of matches, sweets, single cigarettes and small cupfuls of cooking oil from the side of her house in a low-income settlement. Photograph by Sylvia Chant 214

URBAN EMPLOYMENT In the past two decades, employment in Latin America has undergone radical transformation through economic globalization (see Chapters 1 and 3). According to Ward and Pyle (1995: 38) this has been characterized by three main trends: 1 a shift to export-oriented economic growth strategies under the influence of IMF and World Bank loan conditionalities; 2 the globalization of the production and marketing operations of transnational companies; 3 debt crises and recessions. Additional factors include shifts in terms of trade and technological change, and lessening intervention of the state in economic and labour matters (Berry, 1997: 3; Sheahan, 1997: 8). More recently, the rise of information and communication technologies has become significant, with fears that the technology-intensive modernization of tertiary as well as secondary activities may depress job creation in the formal sector (UNDP, 2001). While the multiplicity of macro-economic, political, institutional and technological trends makes the process of analysing the evolution of urban labour markets highly complex, a number of trajectories seem to be shared among different countries in Latin America.These include rising levels of unemployment and underemployment, deteriorating wages and working conditions, an increased supply of labour (especially that of women, and in large part due to pressures on household incomes), and mounting numbers (and proportions) of informal sector workers. Unemployment and underemployment The most troubled time for employment in the majority of Latin American countries occurred during the initial stages of the debt crisis in the early 1980s. Between 1980 and 1985, underemployment in the region grew by 48 per cent (Safa, 1995b: 33), and by 1984 open unemployment had escalated to 14 per cent of the economically active population from around 6 per cent ten years previously (Cubitt, 1995: 164). Levels for some countries at this time were even higher. During Chile’s depression of 1982–83, for example, unemployment reached 28 per cent, compared with 16 per cent in the period 1975–81 (Sheahan, 1997: 15). Even if current rates of open unemployment are less than they were, and in some countries, such as Mexico, they have been on a downward trend since the early 1990s, in general terms, the increase in labour supply has exceeded that of labour demand. Between 1990 and 1999, job supply in Latin America increased by an average annual rate of 2.6 per cent, whereas demand for workers lagged behind at 2.2 per cent (see Table 11.1). The lack of buoyancy in Latin American labour markets in the past decade results from a number of factors. One of the most significant is the reduction of state employment creation, not to mention the loss of pre-existing public sector jobs. This has arisen mainly as a result of pressure upon Latin American governments from the IMF and the World Bank to trim down their ‘unwieldy bureaucracies’ and to privatize parastatal enterprises. In Nicaragua, for example, a steep rise in unemployment (from 4.5 per cent in 1986 to 23.5 per cent in 1994) occurred with the switch from the Sandinista to the UNO government and the opening-up of the economy to global financial institutions (BulmerThomas, 1996a: 326). Within three years of Violeta Chamorro’s election to the presidency, as many as 250,000 public sector employees had been fired (Green, 1995: 56–7). In Bolivia, three-quarters of workers in the state mining company, COMIBOL, were dismissed following implementation of the 215


In the following section the changing contours of urban employment in Latin America are sketched out more generally. This is important not only because employment has been identified as ‘the main link between economic growth and social development’, but because the utilization of labour provides the main source of household income for the urban poor (ECLAC, 2002b: 99).


country’s ‘New Economic Policy’ in 1985 (Jenkins, 1997: 113). In Argentina, the privatization of five major firms which were under government control until 1989 – Argentine Airlines, ENTEL (the telephone company) and three other utility companies (gas, electricity and sanitation) – led to the slashing of the overall workforce in these companies of 100,000 to a mere 51,000 (Geldstein, 1994). In Latin America more generally, the overall share of public employment in the non-agricultural sector fell from 15.3 to 13.2 per cent between 1990 and 1995 (Thomas, 1999: 279). Formal jobs have also been lost in the private sector due to the fact that increased global competition has either forced firms to close down altogether or to introduce and/or intensify the use of subcontracting arrangements as a means of cutting costs. Indeed, practically all the increase in unemployment in Latin America in the 1990s was attributable to job losses (see Table 11.2). TABLE 11.2 Level and composition of unemployment in urban and rural areas of Latin America, 1990–99 Persons (thousands) 1990 1999

Annual rate of change (%)

Unemployed persons Urban areas Rural areas

7,643 6,600 1,043

18,118 17,457 1,661

10.1 11.4 –4.9

Laid-off workers Urban areas Rural areas

5,932 5,225 1,708

15,391 15,204 1,186

11.2 12.6 –13.8

Seeking work for the first time Urban areas Rural areas

1,711 1,376 1,335

2,728 2,253 1,475

5.3 5.6 3.9

Source: ECLAC (2002b, p. 101, Table III.6).

Numbers of unemployed persons in Latin America increased at an annual rate of 10.1 per cent in the 1990s, with the biggest rises occurring in the period 1997–99 (see Table 11.2). Unemployment rates are particularly high among the poor, with the urban unemployment rate for the poorest 20 per cent of households in the region being 22.3 per cent, as against 10.6 per cent for the population in general (ECLAC, 2002b: 22). Unemployment is also mounting among young people aged 15 to 24 years. Between 1994 and 1999, for example, youth unemployment rose from 14 per cent to 20 per cent (ILO, 2000). Moreover, despite the generally upward trend in female labour force participation (see below), urban unemployment among women during the 1990s rose from 7.7 to 12.3 per cent, as against an increase from 6.7 to 9.4 per cent among their male counterparts (ECLAC, 2002b: 106). The average duration of unemployment in Latin America has also shown signs of increase. During the second half of the 1990s, the mean length of time unemployed rose from 4.4 to 5.3 months (ECLAC, 2002b: 23). On top of this, evidence suggests that wage levels have declined for people returning to work after ‘time out’. In Uruguay, for example, which has experienced high levels of unemployment for some time, and where there is an increasing incidence of temporary labour recruitment, people who manage to return to work commonly face a 23 to 34 per cent reduction in salary. The main reasons for this are three-fold. First, difficulties in finding waged employment forces some people to resort to own-account work in the informal sector, where average hourly remuneration is lower. Second, returning to work is often accompanied by a reduction in hours worked, which depresses monthly income. Third, even where people do find full-time waged employment, they tend to be paid less than in their previous jobs. As such, episodic (and increasingly 216

Wages and working conditions in the formal sector In addition to job losses in the formal sector, the past two decades have been marked by substantial changes in working conditions, particularly in the manufacturing sector. In general terms, this has comprised a greater incidence of short-term and subcontracted labour, the restriction of trade union activities, and the introduction of policies geared to ease processes of hiring and firing. In many cases, these changes have resulted from the pressure exerted by international financial institutions to reduce ‘structural rigidities’ in the workforce and to encourage greater labour ‘flexibility’ (Tironi and Lagos, 1991; Green, 1996: 109–10). In Bolivian manufacturing, for example, there has been an increasing concentration of production in small-scale factories and workshops, and a doubling of the percentage of workers working 49 hours per week or more (Jenkins, 1997: 119). In Mexico, shoe manufacturers in the city of León have farmed out increasing amounts of production to home-based workshops and/or individual outworkers as a means of flexibilizing their operations and cutting labour costs (Chant, 1991; see Figure 11.3). The paring-down of ‘structural rigidities’ has also been accompanied by labour law revisions. The New Economic Policy in Bolivia, for example, embodied reduced protection for workers and an elimination of wage indexation leaving wage levels to be bargained within individual firms (Jenkins, 1997: 113). In Peru, legislation was introduced in 1991 which gave the right to employers to hire people on ‘probationary’ contracts, leaving them virtually no entitlement to fringe benefits or to compensation for retrenchment (Thomas, 1996: 91). This has had far-reaching implications given that the proportion of the Peruvian workforce on temporary contracts rose from 41 per cent to more than 50 per cent between the early and late 1990s (Thomas, 1999: 276). By the same token, it is important to note that such practices were by no means absent in large firms before the crisis. As

Figure 11.3 Home-based footwear production, Léon, Mexico. Photograph by Sylvia Chant 217


protracted) spells of unemployment, can seriously diminish the income and well-being of workers and their dependants. As asserted by ECLAC (2002b: 109), income reductions among people rejoining the workforce ‘may be functioning as a secondary adjustment mechanism in labour markets, where regulations and procedures regarding the hiring and firing of workers are increasingly being loosened’.


Roberts (1991: 118) maintains, with reference to Mexico, ‘ “implicit deregulation” . . . antedates by many years the present policy of explicit deregulation’. Explicit deregulation refers to the formal abandonment or erosion of legislation, whereas implicit deregulation relates to the ‘inadequate implementation or systematic bypassing’ of regulations (Standing, 1989: 1077). Wage restraints have also formed an important part of formal sector restructuring, which, coupled with inflationary costs of living, have meant negative growth rates in average real earnings in many countries in the last twenty years.The average industrial wage in Latin America, for example, fell by 17.5 per cent between 1980 and 1991, and the average minimum wage by 35 per cent (Moghadam, 1995: 122). Thomas (1996: 90–1) further notes that between 1985 and 1992, urban real minimum wages declined in all countries in Latin America except Colombia, Costa Rica, Chile, Panama and Paraguay. Wages have often been held down with the agreement of trade unions, whose bargaining strength has tended to decline with crisis and the scaling down of formal sector activity (Epstein, 2000; Gwynne and Kay, 2000: 145, 148). According to Frundt (2002: 8) two major aspects of globalization have been responsible for transforming worker rights and union viability. These are first, corporate strategies to promote flexibility and subcontracting, and second, the privatization of public sector enterprises. On top of this, Koonings et al. (1995: 123) assert that ‘endemic poverty’ poses ‘a major threat to the capacity of trade unions to organize and defend the working population’ (see also Méndez-Rivero, 1995: 158). Although the consolidation of democracy in many Latin American nations in recent years has been achieved with the active participation of unions, the same process has tended to de-link them from the state, which in some cases has deprived them of an important source of support. Chile is one exception here, where Frías and Ruiz-Tagle (1995: 141) argue that the institutional strength and stability of trade unions increased following Aylwin’s election to the presidency in 1990 and the end of 17 years of military rule. In Brazil too, the strong links of unions with powerful political factions are also observed to have provided some protection (Thomas, 1996: 91). In other contexts such as Guatemala and El Salvador, union membership may have risen following the Peace Accords, but this has not been in traditionally militant industrial unions. Instead, the bulk of new recruitment has occurred in ‘ “enterprise unions” and independent unions unaffiliated with any national labour organization’ (Frundt, 2002: 10). Another area of increase in union activity is among informal entrepreneurs (Koonings et al., 1995: 119), possibly as a means of guarding their interests as the sector absorbs increasing numbers of formal sector refugees and new entrants to the labour market. The urban informal sector Alongside the ‘informalization’ of labour occurring in large-scale industry and services, Latin America’s ‘informal sector’ of employment has undergone considerable expansion during crisis and neoliberal reform. A wide variety of criteria has been used to define this ‘unclear’ but ‘popular shorthand’, first coined back in the 1970s (Gilbert, 1998: 65). These include the size of enterprises, the level of technology used in the production process, legality as a business activity, social security coverage of workers, self- versus waged employment, and labour arrangements (Scott, 1994: 16–24; Thomas, 1995). While it is true that informal enterprises are often small in scale, use rudimentary technology and are characterized by self-employment or family labour, Roberts (1994: 6) asserts that the most generally accepted definition of the informal sector ‘is income-generating activities unregulated by the state in contexts where similar activities are so regulated’. Further noting that a number of labour arrangements in the ‘formal sector’ fit this bill and that the informal sector comprises a huge range of jobs and incomes, Roberts argues that ‘the persisting interest in the idea of an informal economy lies not in its analytic precision, but because it is a useful tool in analysing the changing basis of economic regulation’. Indeed, while 75 per cent of people in micro-enterprises in Mexico in 1989 were not covered by social security, this also applied to 17 per cent of workers in formal sector firms (Roberts, 1994: 16). The micro-enterprises referred to by Roberts were legally registered with the federal and local authorities, but since social security contributions are by far the most costly aspect of legality, then there is greater likelihood that employers will not pay. 218

1 legal recognition as a business activity, which involves registration, and possible subjection to health and security inspections; 2 legality in respect of payment of taxes; 3 legality in respect of labour matters such as compliance with official guidelines on working hours, social security contributions and fringe benefits. Only 2 to 5 per cent of self-employed people (the single largest group of the informally employed) in Latin America have access to social security. This is mainly a consequence of high costs, administrative difficulties, lack of incentives due to the eroding value of pensions, and uncertainty in occupational prospects (ibid.: 152–3). Growth and dynamics of the informal sector Referring to a wide and heterogeneous range of activities such as shoe-shining, street-selling, smallscale food production, and refuse-collecting and recycling, the informal sector is primarily an employer of low-income people. While the bulk of the sector comprises low-productivity, low-profit commercial and service activities, about one-quarter of informal occupations are in manufacturing (Bromley, 1997; Grabowski and Shields, 1996: 170-1). Although trends in informal employment need to be treated with caution given shifting categorizations of activity by different governments and regional organizations, between 1970 and 1980 the informal sector increased its share of the region’s workforce from 16.9 to 19.3 per cent (Tokman, 1989: 1067). Growth in the pre-crisis years is usually attributed to rural-urban migration and the consequent creation of a labour surplus in cities (Portes and Schauffler, 1993). From 1980 onwards, however, when increases in informal employment appear to have been even higher, labour surpluses have been less attributed to demographic dynamics than to economic and labour market transformations (Chant, 2001). In Cuba, for example, liberalization of the economy during its ‘Special Period’ dating from the collapse of communism in the former USSR and Eastern Bloc, resulted in job losses and the cessation of full employment policies (Molyneux, 1996; see also Chapter 4). By January 1996, there were over 160,000 people registered as self-employed and the proliferation of small-scale economic activities was much in evidence. While traditionally suspicious of informal sector work, the informal sector is now recognized and accepted by the state as an important part of Cuban people’s survival. In Nicaragua, too, the effects of economic embargo during the Sandinista administration combined with a war-ravaged countryside and weak industrial base meant that many people had to create their own sources of employment. By 1990, the informal sector occupied nearly half the labour force in Managua, excluding domestic servants (Roberts, 1995: 124). Such tendencies have contributed to an overall increase in informal employment in Latin American cities from 25.6 per cent to 30 per cent between 1980 and 1990 (Gilbert, 1995b), and to 48 per cent by 1999 (ECLAC, 2002b: 95). Indeed, during the 1990s, it is estimated that seven out of every ten new jobs in urban areas were in the informal sector (ibid.: 87). The main reasons underpinning the general upsurge in informal employment in Latin America in the past 20 years have been cutbacks in public sector employment, the closure of formal sector firms in the wake of increased competition provoked by lowered tariff barriers, declining labour demand in the formal sector, and increased growth of the labour force, both as a result of demographic growth per se, and pressure on household incomes (Alba, 1989: 18–21; Pelling, 2002: 235). Many family firms have also been pushed into informality due to declining ability to pay registration, tax and labour overheads, bearing out the argument that ‘informality for the self-employed is basically a household survival strategy in the face of unemployment and declining real wages’ (Roberts, 1995: 124; see also Escobar Latapí, 1988). As Thomas (1996: 99) summarizes, the ‘top-down’ informalization promoted by governments and 219


While regulation implies legality, legality itself is a multidimensional concept.Thomas (1997: 6) points out that ‘being legal usually involves complying with a number of regulations often imposed by a variety of different authorities’. More specifically, Tokman (1991: 143) identifies three types of legality with which informal sector enterprises may not comply:


employers has been paralleled from the bottom up, stemming from the need for retrenched formal sector workers and newcomers to the labour market to create their own sources of earnings. Activities and working conditions in the informal sector In light of the above, it is hardly surprising that the informal sector has become increasingly competitive during recent years. As Miraftab (1994: 468) argues: ‘Poor people have had to concentrate their daily activities with much greater intensity around the issue of survival.’ This has implied not only longer hours of work, but also the need to be extremely innovative in order to earn a living at the edges of the urban economy (Escobar Latapí and González de la Rocha, 1995).Yet although ever more creative strategies to generate income can be witnessed both in the streets and houses of Latin American cities, competition is such that, according to ILO figures, there was a 42 per cent drop in informal sector earnings between 1980 and 1989 (Moghadam, 1995: 122–3). Constraints on the health (and further expansion) of informal sector employment, are presented by lower purchasing power among the population in general and greater numbers of people needing to work (Roberts, 1991: 135). The latter is in part the legacy of high fertility in the 1960s and 1970s, and in part due to the increased participation of women in the workforce. Indeed, although there has been increased informalization of men’s work (Arias, 2000; Elson, 1999), the growth of informal activity is often argued to have hit women the hardest given their disproportionate concentration in the sector and the fact that their limited resource base confines them to the lowest productivity ventures within it (Bromley, 1997: 135; León, 2000; see Table 11.3). In towns in Guanacaste, Costa Rica, for example, where low-income women constitute around 40 per cent of informal workers, many complain that due to extremely limited resources the only way they can generate revenue is by selling small quantities of snacks such as home-made sweets, flavoured ices and pastries outside local schools or on the streets (Chant with Craske, 2003: 219; see Figure 11.2). Yet since most of their neighbours are forced to do the same, some feel it is not worth the effort, thereby contributing to the so-called ‘discouraged worker’ effect (Baden, 1993: 13). In order to get around the problems of making ends meet, many low-income women here and in Mexico are forced to engage in a variety of economic ventures, such as combining part-time domestic service with home- or community-based activities such as tortilla-making and selling, or personal services such as hairdressing (see Figure 11.4). Beyond this, it should also be noted that the informal sector is unlikely to thrive as long as the formal sector remains fragile. Detailed empirical studies in Latin America have revealed that the informal TABLE 11.3 Percentage of male and female labour force in the informal sector: selected Latin American countries Percentage of non-agricultural Women’s percentage share labour force in the informal of the informal sector in the sector, 1991/1997 non-agricultural labour force Women Men 1991/1997 Bolivia Brazil Chile Colombia Costa Rica El Salvador Honduras Mexico Panama Venezuela

74 67 44 44 48 69 65 55 41 47

Source: United Nations (2000: 122, Chart 5.13). 220

55 55 31 42 46 47 51 44 35 47

51 47 46 50 40 58 56 44 44 38


Figure 11.4 Home-based services – hairdressing, Puerto Vallarta, Mexico.The sign advertises haircuts, colouring (highlights) and perms. Photograph by Sylvia Chant

sector is linked to the formal sector in numerous (and often exploitative) ways, that enterprises with the fewest direct links with the formal sector are likely to be the least dynamic economically, and that over time, the informal sector is increasingly likely to lose its independent basis for subsistence (Roberts, 1991: 132; Thomas, 1996: 56–9). It should also be borne in mind that the formal sector has depended very much on the informal sector for its own dynamism (Gilbert, 1998: 67–9). In times of crisis, declining fortunes in the formal sector cuts off valuable sources of contracts and supplies to the informal sector. Thus, although informal activity has continued to expand during the years of crisis and restructuring (and recovery in some countries in the early 1990s), it has not been able to absorb all the job losses in the formal sector. This undoubtedly accounts for the fact that open unemployment has not only grown, but in most places has remained high, during the last two decades.

GENDER AND THE URBAN LABOUR MARKET As indicated earlier, late twentieth-century transformations in Latin American urban labour markets have been characterized by significant shifts in their gender dimensions. Not only has there been an on-going rise in women’s workforce participation, but in their overall share of employment.This partly represents the continuation of a trend which commenced early in the post-war period. Bearing in mind that women’s economic activities often fail to be captured in official enumeration due to their informal and part-time nature, between 1950 and 1980, the size of the female labour force tripled in Latin America, with an increase in women’s share of the overall workforce (including agriculture) from 18 per cent to 26 per cent (Safa, 1995b: 32). During the period 1990 to 1999, women’s labour force participation rate increased from 37.9 per cent to 42 per cent, and for the first time in the history of the region, the increase in female employment exceeded that of men (León, 2000: 9). By the turn of the century, women’s share of employment stood at an unprecedented 34.4 per cent, and in urban areas, at 35.8 per cent. (see Table 11.4). 221


TABLE 11.4 Women’s share of labour force, and key occupational and sectoral characteristics Female share of labour force (%)

Argentina Bolivia Brazil Chile Colombia Costa Rica Cuba Dominican Republic Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Panama Paraguay Peru Uruguay Venezuela

1980

1994

1999

28 33 28 26 25 21 – 25 20 27 22 25 27 28 30 26 24 31 27

30 37 34 31 35 29 – 29 26 33 25 28 32 36 33 28 28 40 33

33 38 35 33 38 31 – 30 28 36 28 31 33 35 35 30 31 42 34

Women as percentage of: legislators, professional senior officials and technical and managers workers 1991–2000* 1991–2000 – 36 – 26 38 33 – 31 28 33 – 36 24 – 33 23 28 36 24

– 40 62 52 49 46 – 49 47 47 – 51 41 – 46 54 39 54 58

– no data * data given for latest available year 1991–2000 ** data given for latest available year 1995–2001 Sources: UNDP (1995, Table A2.7), UNDP (2002, Tables 23 & 25), World Bank (1996, Table 4), World Bank (2000, Table 3).

Women’s employment by sector 1995–2001**

Agriculture

Industry

Services

– 2 19 5 0 4 – 3 2 6 14 9 7 – 2 3 3 1 2

10 16 10 14 20 17 – 20 14 25 18 25 22 – 10 10 11 14 13

89 82 71 82 80 79 – 77 84 69 68 66 71 – 88 87 86 85 85

BOX 11.3 Factors accounting for women’s rising labour force participation in Latin America 1950–2000 (source: Chant with Craske, 2003, p.207, Box 8.1). • Individual

rising literacy rates rising levels of education later age of marriage and/or first birth declining fertility rural-urban migration

• Household

changes in household structure, especially rising proportions of female-headed households increases in household poverty and the need for multiple household incomes changing ideologies of motherhood in which financial inputs to household budgets are increasingly regarded as integral to maternal obligations

• Labour Market

declining share of agriculture in overall employment growth of tertiary sector expansion of feminized occupational niches, e.g. as operatives in multinational export manufacturing firms increased competition due to neoliberal restructuring deregulation and informalization

• Institutional/Legal

increases in anti-discriminatory employment legislation introduction of employment and training programmes for femaleheaded households in some countries some increase in childcare provision for working mothers

Women’s share of the labour force was already growing before the recession due, inter alia, to ruralurban migration, rising education and lower fertility (Safa, 1995a: 16; Cerrutti, 2000b: 888), That this growth has continued in the wake of tightening labour market conditions suggests that post-1980 economic restructuring has played an important part in the process (see Box 11.3). Indeed, Humphrey (1997: 171) notes that even during the ‘lost decade’ of the 1980s in Brazil, women’s share of employment in the São Paulo Metropolitan Area grew from 33 to 38 per cent. A number of factors pertaining to both the demand and supply side of the labour market are relevant to these tendencies. 223


In a long-term perspective, the rise in female employment in the post-war period owes to numerous factors (see Box 11.3). Despite the growth of seasonal export agricultural production, especially of temperate fruits, which has led to pockets of feminized rural employment in some countries (Barrientos et al., 1999; see Chapter 12), a major reason for the relative increase in women’s share of the workforce is the general fall in demand for agricultural labour which has traditionally been a male domain (Table 11.4). In the Dominican Republic and Puerto Rico, for example, Safa (1995b) notes that the disintegration of the sugar economy has led to employment losses for men, with the shift to urban-based labour-intensive manufacturing and services having favoured female workers. Indeed, in Puerto Rico, unemployment rates have actually been higher for men since the 1950s.


Women’s employment and economic restructuring On the supply side of the labour market, numerous studies of poor urban communities indicate that pressures on household income have been the main impetus behind women’s increased involvement in remunerated work (Benería, 1991; Chant, 1994; 1996; González de la Rocha, 1988; 2000). In many cases, this is due to the declining purchasing power of male breadwinners’ wages, and in others, because men have lost their jobs altogether (see Cerrutti, 2000b, on Argentina; Moser, 1997, on Ecuador; Nash, 1995, on Uruguay). Indeed, between 1990 and 1999, the female employment rate (measured as a percentage of the female population of working age), increased by 1.3 percentage points, whereas that of men fell by 3.6 percentage points (ECLAC, 2002b: 97). In respect of the recorded ratio of the economically active to working-age population during the same period, that for women in urban areas increased from 39.5 per cent to 43.7 per cent, but for men declined (albeit marginally) from 81.4 per cent to 81 per cent. Yet, although men’s share of employment has fallen, it is important to stress that this is not because women have taken men’s jobs. Given that women have moved into expanding yet specific gender-typed segments of the labour force not previously occupied by men, ‘male and female workers remain relatively uncompetitive’ (Ríos, 1995: 143; Pearson, 1998). As further noted by Standing (1999: 600), signs of greater convergence in women’s and men’s employment (and particularly the conditions of their employment), seem to be more to do with the progressive informalization and casualization of men’s work than improvements in women’s employment. Whether or not this is perceived to be the case, however, is another matter (Chant with Craske, 2003: 217). Much of the increase in female labour force participation has occurred among wives and mothers (González de la Rocha, 1988: 214–15; Selby et al., 1990: 174). A study of Mexico based on official national statistics, for example, indicated that women aged 20–49 years, increased their labour force participation rate from 31 to 37 per cent between 1981 and 1987 (cited in González de la Rocha, 1991: 117). Over one-quarter of married women in Mexico were recorded as working in 1991 compared with only 10 per cent in 1970 (CEPAL, 1994: 15), and the highest levels of economic activity are now in the 35–39 year age cohort (43 per cent). In Costa Rica, there was only one female worker for every three men in the 20–39 year age cohort in 1980, yet by 1990, the gap had narrowed to one in two (Dierckxsens, 1992: 22). More generally in Latin America, the highest levels of female labour force participation are now among women aged between 25 and 44 years (León, 2000: 31). This means that in only two decades, the ‘early peak’ pattern of women’s employment has shifted to one where the highest part of the curve is in the middle stage of the life course. This coincides in most cases with what is conventionally thought to be the average age of marriage (or establishment of a consensual union), and the end of the reproductive cycle (Chant with Craske, 2003: 213–14). On the demand side of the labour market, the recruitment of female workers has persisted during the past two decades as Latin American countries have placed greater emphasis on strategies of export promotion (Safa, 1995b: 33; Willis, 2002: 144). This has intensified competition among firms, which have often resorted to increasing their female workforce, either directly by recruitment in industrial plants (especially common in Mexico, Brazil, Venezuela, Puerto Rico and the Dominican Republic), or on a sub-contracted piecework basis. Although, on the one hand, this may have increased income-generating opportunities for women, there are decidedly more benefits for employers. Capitalizing upon the low ‘aspiration wages’ and ‘voluntary’ labour turnover of married women, these include the cutting of production costs, saving on social security contributions and fragmentation of the workforce (Benería and Roldan, 1987; Miraftab, 1994: 469; Peña Saint Martin, 1996). In addition, it is argued that sectors and occupations which were already marked by a high degree of feminization (for example, the labour-intensive maquiladora [assembly] industry, domestic service and other lowskilled tertiary occupations) were less hard-hit by recession than sectors in which men were prevalent such as heavy industry and construction (de Barbieri and de Oliveira, 1989: 23). Upward trends in women’s employment are not confined to Latin America, and it is significant that world-wide increases in female labour force participation have occurred during a time in which 224

225


conditions of employment in general have deteriorated considerably. As Moghadam (1995: 115–16) notes: ‘The global spread of flexible labour practices and the supply-side structural adjustment economic package coincide with a decline in labour standards, employment insecurity, increased joblessness, and a rise in atypical or precarious forms of employment.’ Moreover, as Acero (1997: 72) observes, the casualization of work in the formal sector and the growth of informal activity have affected women to a greater extent than men. Indeed, despite the fact that unemployed women are more likely to be classified as economically inactive ‘housewives’, it is interesting that in general terms female unemployment has continued to be higher than men’s (Mehra and Gammage, 1999: 51; Monteón, 1995: 51; Radcliffe, 1999: 201). Although the numbers and proportion of economically active women have grown steadily, this has not been matched by an equivalent rise in female employment opportunities. During the 1990s, for example, women classified as ‘economically active’ in Latin America grew by 3.6 per cent per annum, but women’s employment rose at an annual rate of only 2.8 per cent. This helps to account for the general increase of female unemployment in Latin America from 5.1 per cent to 11.2 per cent in the 1990s, and widening gaps between levels of male and female unemployment (ECLAC, 2002b: 97). While women still tend to be restricted to a narrower range of jobs than men, and to be disproportionately concentrated in tertiary employment (see Table 11.4), Safa’s research on Puerto Rico, Cuba and the Dominican Republic reveals some diminution of occupational segregation as women’s participation increases in the professions, clerical work and the public sector (Safa, 1995b: 39; see also Cerrutti, 2000a, on Argentina; Willis, 2000, on Mexico). Another interesting development in the years of crisis and restructuring, which has gone some way towards blurring the boundaries between men’s and women’s activities in lower income sectors, is the increased use of the home as a site of production (see Bastos, 1999, on Guatemala; Miraftab, 1994; 1996, on Mexico; Pineda, 2000, on Colombia). Yet in Brazil, Humphrey (1997: 171) argues with reference to industrial employment that ‘the continuing entry of women into the labour force has not in any way undermined the gender division of labour. Gender segregation and gender inequalities remain as great as ever.’ Part of this pattern is attributed not only to the way that labour market divisions mirror gender divisions in wider society, but because ‘gendered occupations and work structures are constructed within the factory and then institutionalized and legitimated through segmented labour markets’. Indeed, for Brazil, more generally, women’s employment is still skewed to low-productivity occupations such as domestic service (Pitanguy and Mello E. Souza, 1997: 73). While gendered wage differentials in most parts of Latin America are less pronounced among younger age groups, which suggests a possible tendency towards closure of these gaps over time (see Table 11.5), there is no certainty that such a trajectory will become established in the long term. Acknowledging that there is some evidence of a ‘harmonizing down’ of male wages to more closely approximate those of women in certain areas of the labour market (Elson, 1999), the fact is that within a number of leading sectors, such as textiles and electronics, women remain locked into the least skilled jobs, and are often pushed out when levels of automation increase and give rise to greater ‘masculinization’ in export-manufacturing employment (Acero, 1997; Pearson, 2000; Ríos, 1995). In this light it is entirely possible that more women than men will end up in the informal sector, which may well exacerbate wage gaps. Evidence from Colombia points to earning differentials being greater in the informal than the formal sector, with women’s average incomes being 86 per cent of men’s in the latter compared with 74 per cent in the former (Tokman, 1989: 1071). Across Latin America more generally, the gap between men’s and women’s earnings in informal activity averages 25 per cent, compared with 10 per cent in the formal sector (Funkhouser, 1996: 1746). Leading on from this, worrying implications for pension entitlements (the bulk of which are contributory) flow from women’s disproportionate concentration in the informal sector, their lower earnings, and their general lack of employment continuity (Bertranou, 2001). In Argentina, research in low-income settlements indicates that while over half the male population have made sufficient contributions to qualify for pensions, this applies to only 15 per cent of women (Lloyd-Sherlock, 1997:


TABLE 11.5 Wage differentials in paid employment by gender and age cohort, selected Latin American countries Country

Year

Argentina** Bolivia Brazil Chile Colombia Costa Rica Dominican Republic Ecuador El Salvador Honduras Mexico Nicaragua Panama Paraguay Uruguay Venezuela

1997 1997 1996 1996 1997 1997 1997 1997 1997 1997 1996 1997 1997 1996 1997 1997

Gender wage differentials by age cohort (years)* 15–24 25–34 35–44 45–54 55 plus 98 65 80 93 92 102 97 94 100 86 90 74 81 76 79 92

92 74 72 82 85 87 87 90 85 78 73 76 87 74 71 87

77 85 65 67 73 79 90 77 85 74 66 62 73 82 64 77

63 64 56 62 64 87 84 75 91 70 72 43 73 72 60 73

66 39 60 67 60 55 67 62 73 72 84 57 50 93 55 65

* figures for wage differentials expressed in terms of female earnings as a percentage of male earnings ** data for Gran Buenos Aires only Source: León (2000: 26, Table 4).

180). In El Salvador, up to three-quarters of economically active women are not covered by social benefits (Gutiérrez Castillo, 1997: 151). Women’s disadvantage in pensions coverage is exacerbated by the fact that they tend to use more of their earnings for basic household expenditure than men, which leaves little surplus for contributions (Chant with Craske, 2003: 93, 221–2). Women’s work, gender relations and urban households While women are clearly still a very vulnerable group in the labour force, Safa (1995b: 33) argues that the crisis has heightened the ‘importance and visibility of women’s contribution to the household economy as additional women enter the labour force to meet the rising cost of living and the decreased wage-earning capacity of men’. As echoed by Radcliffe (1999: 197) for Latin America more generally: ‘the avocation of neoliberal development policies by most governments has significantly influenced the ways in which the nexus of labour–household–economy is organized, with consequences in turn for the nature of gender relations’. Some research suggests that rising levels of employment have provided an important source of prestige and power for women and have exerted democratizing influences on intra-household decision-making. In my own studies of low-income households in the Mexican cities of León, Querétaro and Puerto Vallarta, for example, there seems to be greater collective negotiation and scrutiny over financial affairs where households have moved from a single wage earner to a dual or multiple income-earning strategy, especially where women themselves figure among these workers (Chant, 1991). This echoes Safa’s research in Puerto Rico, Cuba and the Dominican Republic, where although the cultural norm of the male breadwinner remains firmly embedded in the workplace and the state, the large-scale incorporation of women into the labour force is asserted to have had positive effects on their consciousness and household bargaining power (Safa, 1995a: 58; see also Cerrutti and Zenteno, 1999, on Mexico). In turn, the ‘myth of the male breadwinner’ seems to have 226

• that women’s earnings are usually so much lower than men’s; • that women cannot necessarily control their own earnings; • women are still very much tied to childcare and domestic responsibilities. Given that there has been such little movement by men into reproductive tasks, it is not surprising that women’s labour burdens in Latin America have tended to grow in the past 20 years – as outlined by a wide variety of studies (Langer et al., 1991: 197; Chant, 1996: 298; Pearson, 1997: 677; UNICEF, 1997: 19; Safa, 1999: 16). Women’s continued (and frequently rising) burdens of reproductive labour may be partly explained by what Gates (2002) calls the ‘strategic use of gender in household negotiations’. On the basis of her research among women workers in Agua Prieta, Sonora, on Mexico’s northern border, Gates observes that women frequently negotiate their entry into waged work by making ‘offers’ (for example, of housework, or earnings) to their menfolk. In so doing, women affirm their gender identity and thereby sustain gender norms ‘even as they pursue interests that challenge gender norms’ (ibid., p.522). In light of this, Gates (2002: 523) suggests that we might be best advised to ‘reinterpret an increased burden of household labour as a calculated trade-off made in order to win practical changes’.This gender bias in household livelihood organization not only impacts upon mothers, but can also extend to daughters. In order to accommodate the labour force participation of adult women, older female children may take care of younger siblings and/or perform vital domestic tasks. As a consequence, they neglect their own education or have to leave school altogether (Moser, 1989; 1992; Dierckxsens, 1992; Rodríguez, 1993). This obviously undermines the socio-economic prospects of women in younger generations and may exacerbate future gaps between male and female education, training and employment. An additional downside of rising levels of female labour force participation is that men have not always reacted positively to sharing responsibilities for financial provision with their womenfolk. Coupled with the general insecurity and exhaustion associated with increased poverty, and unequal burdens of labour, this is commonly linked with rising levels of intra-household conflict (Benería, 1991; Geldstein, 1994: 57; Gledhill, 1995: 137; Townsend et al., 1999: 29). As Selby et al. (1990: 176) argue: 227


been challenged through women’s declining dependence on male incomes and growing economic participation in their own right (Safa, 1995b: 33).These tendencies also appear to have been important in accounting for growing numbers of female-headed households in recent decades (Chant, 1997), with many case studies indicating that levels of female household headship tend to be greater in areas where women’s rates of employment are high (Fernández-Kelly, 1983; Bradshaw, 1995a; Safa, 1995a). This is not to say that female-headed households have been absent from Latin American societies in previous historical periods (see Chant, 1997). While acknowledging these apparent manifestations of an increase in women’s ‘autonomy’, there may also be negative connotations, with discussions on these issues highlighting not only that women may be reluctant to leave their spouses (ibid.), but that within male-headed households, where most of them remain, changes in gender relations may be negligible. As observed by McClenaghan (1997: 29), for the Dominican Republic, even in households where women are the principal providers, men still tend to be regarded as ‘el jefe’ (the head). In turn, women’s roles as wives and mothers continue to be emphasized, if not reinforced. As Tiano (2001: 202) summarizes: ‘the contradictions between traditional gender norms and women’s actual behaviour creates conflicts that many women reconcile by privileging their domestic roles and viewing wage work as a means by which to perform their roles as wives and mothers more effectively’ (see also García and de Oliveira, 1997; González de la Rocha, 2000; Chant, 2002b). In a context in which men’s unemployment or forced migration tends to be associated with rising rates of conjugal instability, the fact is that even greater responsibility falls on women’s shoulders for the care and welfare of dependants (Nash, 1995: 162). Additional factors accounting for the limited impact of women’s employment on gendered power relations, as noted by González de la Rocha (1994: 141-2) in relation to Guadalajara, Mexico, are:


Male dignity has been so assaulted by unemployment and the necessity of relying on women for the subsistence that men formerly provided, that men have taken it out on their wives and domestic violence has increased . . . the families which have been riven by fighting and brutality can easily be said to be the true victims of economic crisis. Certainly, loss of employment and dependence on women’s earnings can strike an extremely discordant note at the core of masculine identities (Kaztman, 1992; Gutmann, 1996; Escobar Latapí, 1998; Chant, 2000, 2002a, b; Fuller, 2000). This, in turn, may have destabilizing effects on families, as well as play a part in provoking increased levels of community violence (see Moser and McIlwaine, 2000, 2001a, b). By the same token, men who have reacted violently towards women, can and do change, often as a result of women’s instigation (Gutmann, 1997)

CONCLUSION Reflecting on trends in employment and livelihoods in Latin America in the past 20 years, it is clear that trajectories in a number of areas have been less than positive. How some of the more negative trends – increased poverty, mounting occupational instability, and rising levels of self-exploitation among the poor – may be redressed remains problematic, not least because of diminished scope on the part of governments to intervene in labour markets and to provide social assistance (Batley, 1997; Arce, 2002). Indeed, part of the reason for current levels of vulnerability and privation among the urban poor is precisely because the progressive erosion of state services and subsidies has forced greater privatization of livelihood struggles within low-income households (Benería, 1991: 171, 176). Yet while poor households have traditionally been able to manage some self-defence by mobilizing their own (albeit limited) resources, González de la Rocha (2001) argues that persistent poverty over two decades has massively sapped people’s reserves and made such mobilization considerably less viable, not to mention less desirable (see also Molyneux, 2002). This is particularly pertinent to women, where the cumulative depletion of time, energy and income has led to a situation in which they are carrying burdens within their households that are close to unsustainable and which are seriously affecting their physical and psychological health. There is a clear need for interventions to ensure that the poor are prevented from engaging in protracted self-exploitation that jeopardizes their own chances of survival, and those of their children. In order to better guarantee the access of the poor to livelihood possibilities that do not further erode their assets and well-being, it is vital that attempts are made to ensure that adequate employment is created to absorb Latin America’s growing labour force, and that this can provide reasonable financial support for workers and their ‘dependants’, be these children, elderly relatives and so on. Here public and international pressure to encourage employers to subscribe to the ILO’s recently launched initiative to ‘Reduce the Decent Work Deficit’ may help to provoke some advances. The ‘Decent Work’ agenda has the goal of obtaining productive work for all in conditions of freedom, equity, security and human dignity. It is a goal both for individuals and for nations and is built around four strategic objectives, all of which are cross-cut by gender (see Box 11.4). While recognizing that competition in the global economy may make enterprises less willing to countenance workers’ rights, or to pay for social protection, the ILO argues that there are major economic dividends from decent work. Better paid workers tend to have higher levels of job satisfaction and productivity, and also respond positively when they are entitled to good quality jobs, profit-sharing and a decision-making voice in the workplace (ILO, 2001).

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1 Employment: This refers to job creation through sound and sustainable investment and growth, access to the benefits of the global economy, supportive public policies and an enabling environment for entrepreneurship. 2 Standards and fundamental principles and rights at work: Following on from the ILO Declaration on Fundamental Principles and Rights at Work of 1998, this objective calls for the creation of work that does not involve forced labour, exploitation, discrimination and denial of association (e.g. prohibition on the formation of trade unions). 3 Social protection: This principle is concerned with ensuring that workers have formal protection for old age, invalidity, sickness and health care, and with creating safe and dignified working conditions 4 Social dialogue: This advocates the opening of channels of communication between different stakeholders in the economy, and particularly about giving workers in the informal economy more of a voice and greater representation

Some measures could be taken to improve standards and efficiency in the informal sector which has clearly become a long-standing feature not only of labour markets in Latin America but elsewhere in the world (Pearson, 2000: 16). Moreover, the time is arguably ripe to do so. Hernando de Soto’s (1989) widely publicized arguments for championing the informal sector as an ‘engine of growth’ and ‘sector of entrepreneurship’ seem to have captured the hearts and minds of policy makers, and placed more proactive informal sector initiatives firmly on the agenda at national and international levels (Cubitt, 1995: 175; Szirmai, 1997: 208). One popular idea, for example, is the repeal of regulations and policies which obstruct entrepreneurship without serving any legitimate public regulatory purpose. Another is the scaling down or cessation of assistance to ‘favoured’ sectors such as large enterprises which has hitherto discriminated against the informal sector (Chickering and Salahdine,1991: 6; Grabowski and Shields, 1996: 172). On the supply side of the labour market, policies geared towards education and training to promote diversification, to enhance access to credit, to improve management and marketing, and to promote greater health and safety, would undoubtedly improve conditions in informal employment (Rodgers, 1989). Such initiatives are particularly relevant for groups such as ambulant traders and food vendors where women often form a large percentage of operatives (Leach, 1999;Tinker, 1997).These might be implemented along with the decentralization of policies to accord with needs and skills in different localities (Portes and Schauffler, 1993: 56), as well as the re-orientation of policies from individual firms to groups of workers as a means of utilizing the social networks and social capital which are often so vital to the successful operation of informal activity (Portes and Itzigsohn,1997: 244–5; Portes and Landolt, 2000). Aside from steps to improve the rate and quality of job creation in conventional formal and informal employment, increased facilities for vocational education in expanding spheres such as information technology could bolster income and employment prospects at both national levels and at the grassroots. On the one hand, indigenous economic activity may be enhanced insofar as the more skilled and educated the labour force, the greater its likely productivity, which, in turn, could provide an important market for goods and services (Szirmai, 1997: 90–1). On the other hand, and in view of the likely powerlessness of Latin America to resist the forces of globalization, this could attract greater foreign investment into the region. As Mitter (1997: 26–7) points out, the youth of developing country populations set against demands for new technological skills are likely to motivate Northern 229


BOX 11.4 Strategic objectives of the ILO’s ‘decent work’ agenda (source: ILO, 2001)


companies to spread information-intensive aspects of production to the South in the next few decades (see also UNDP, 2001). Acknowledging these trends, some governments in the region have already started making dedicated moves to expand technical and professional training (see, for example, MINDESP, 2001 on Bolivia). Alongside interventions in the labour market and in education and training, household livelihoods among the poor could be bolstered by other (relatively modest) investments in human capital such as primary health care, and housing and neighbourhood improvements. The latter would be especially relevant given the tendency for greater numbers of people to resort to domestic-based economic activity and flexible working. In order to arrest existing trends in women’s exploitation, attempts could be made to alleviate their household and parenting responsibilities via the introduction or extension of publicly subsidized childcare programmes, as well as by concerted efforts to encourage men to engage in parenting, housework and/or financial support, whether as resident or non-resident household members (UNICEF, 1997; Chant, 2002b; Chant with Craske, 2003). While recognizing that Latin American governments are restricted in their range of economic and social options by an increasingly competitive global economy and by international financial institutions, without due attention to the individuals and households who make up their societies, attempts to shape a more positive and equitable future for the continent are likely to be doomed to failure. While the livelihoods model represents a useful analytical framework to understand how the poor ‘get by’, care must be taken that its positive conceptualizations of people’s resources and resourcefulness do not translate into neglect of their fundamental societal needs by politicians and policy-makers. In an unequal world, the store and efficacy of grassroots ‘assets’ are by no means limitless, and for the urban poor in Latin America, especially women, this fact requires immediate recognition.

ACKNOWLEDGEMENTS My thanks go to Cathy McIlwaine for her helpful comments on an earlier draft of this chapter.

FURTHER READING Chant, S. with Craske, N. 2003 Gender in Latin America. Latin America Bureau/Rutgers University Press, London/New Brunswick, NJ. This book provides an overview of changing patterns of gender in Latin America in the past three decades, with dedicated reviews of themes that are directly relevant to this chapter.These include Chapter 3 on gender, poverty and social movements, Chapter 7 on gender, families and households, and Chapter 8 on gender and employment. Economic Commission for Latin America and the Caribbean (ECLAC) 2002 Social panorama of Latin America 2000–2001. Comisión Económica para América Latina y el Caribe, Santiago de Chile. An accessible and comprehensive overview of economic and social trends in Latin America in the last decade of the twentieth century, particularly as they relate to poverty, income inequality, employment and unemployment, social expenditure and shifts in family life and organization. The analysis is complemented by several tables, boxes, figures and appendices and is downloadable in PDF format from www.cepal.org. Portes,A., Dore-Cabral, C. and Landolt, P. (eds) 1997 The urban Caribbean: transition to a new global economy. John Hopkins University Press, Baltimore, MD. An interesting collection of case studies on a wide range of countries in Central America and the Caribbean, including Costa Rica, Haiti, Guatemala and the Dominican Republic.These are bound together by the underlying question of whether the urban informal sector is an arena of growth and entrepreneurship, or one of survival. Rakodi, C. with Lloyd-Jones, T. (eds) 2002 Urban livelihoods: a people-centred approach to reducing poverty. Earthscan, London. This book consists of a series of interdisciplinary contributions on key issues in current livelihoods debates. Examination is made of the value of a focus on 230

Roberts, B. 1995 The making of citizens: cities of peasants revisited. Edward Arnold, London. This book is a substantially revised version of Roberts’ classic text Cities of peasants, published by Edward Arnold in 1978. The main focus is Latin America, but the analysis is strongly informed by a wider global perspective. Of particular relevance to the present chapter are Roberts’ discussions in Chapter 5, which looks at employment in cities, and Chapter 7, which covers various aspects of household livelihoods. Thomas, J. 1995 Surviving in the city: the urban informal sector in Latin America. Pluto, London. This is possibly the most thorough account of the nature and behaviour of the informal sector of employment in Latin American cities in recent years. It traces the history of conceptualizations of informal sector activity and its wide-ranging characteristics. Particular attention is paid to the evolution of informal employment in the wake of urban growth, the debt crisis and economic restructuring in the late twentieth century. There is also discussion of the longer-term prospects for the urban informal sector in Latin America, and of the implications of different policy interventions.

WEBSITES Department for International Development, www.livelihoods.org, UK government website on the livelihoods approach to reducing poverty. Economic Commission for Latin America and the Caribbean, www.cepal.org International Labour Organization, www.ilo.org

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livelihoods in analysing urban poverty and in guiding policy and programme formulation in relation to development challenges such as employment, education and people’s living environments.

12 Rural livelihoods and peasant futures Cristóbal Kay

The main argument in this chapter is that the neoliberal policies followed by almost all Latin American countries since the 1980s are further deepening the exclusionary character of the region’s rural modernization and jeopardizing the livelihoods of the peasantry. The chapter begins by discussing the legacy of Latin America’s agrarian reforms. It then examines the changes in the countryside ushered in by government policies supportive of the modernization of capitalist farms within the context of globalization. The influence of these transformations on rural livelihoods and the peasantry’s future prospects under neoliberalism are subsequently analysed. A new rurality is being shaped which is characterized by a more heterogeneous agrarian structure, more complex and fluid social relations, greater significance of non-agricultural and off-farm activities, and the emergence of new social actors, especially women and indigenous people. Finally, the character of the new peasant movement, which is challenging the imposition of neoliberal policies in the countryside, is highlighted.

THE LOST PROMISE OF AGRARIAN REFORM Latin America has one of the most polarized agrarian structures in the world. By 1960 latifundios constituted roughly 5 per cent of farm units and about 80 per cent of the land; minifundios constituted 80 per cent of farm units but had only 5 per cent of the land (Barraclough, 1973: 16). The mediumsized farm sector was relatively insignificant. In explaining Latin America’s poor agricultural performance structuralists emphasized the high degree of land concentration (Barraclough and Domike, 1966) while neoliberal interpretations stressed government policy, in particular price and trade policy which allegedly discriminated against agriculture (Valdés and Siamwalla, 1988). The fact that counter-vailing policies often compensated large agricultural producers is generally ignored by the neoliberal interpretations (Kay, 2000a). For example, landlords received highly subsidized credits and benefited from cheap imports of agricultural machinery and inputs. Thus government policy was biased not so much against agriculture but against peasants and rural workers. Rural labour was largely unorganized due to legal obstacles as well as coercion. Working conditions throughout rural Latin America were exploitative and repressive (Feder, 1971; Duncan and Rutledge, 1977). Most Latin American countries implemented some sort of agrarian reform mainly in the period 1960 to 1970. But they largely failed to fulfil expectations for a variety of reasons (Kay, 2001a). Mistakes in their design and implementation contributed to their eventual unravelling. Often they were implemented in a half-hearted fashion; in other instances fierce political opposition from landlords restricted the reforms. Historical experience, as in South Korea and Taiwan, clearly shows that a comprehensive agrarian reform is a key ingredient for a successful economic development process (Kay, 2002a). Furthermore, the root causes of social and political instability will remain as long as peasants continue to be marginalized and rural poverty persists (Kay, 2001b). The neoliberal unravelling of the agrarian reform The increasing shift to neoliberal policies by governments led to counter-reforms, the privatization of the reform sector and the ending of agrarian reforms. Neoliberal land policies have changed 232

The continuing search for agrarian reform Poverty, exclusion and landlessness or near landlessness are still far too common in Latin America.The land issue has not yet been resolved and the need for agrarian reform remains in much of Latin America (Barraclough, 1994). The contemporary struggle for a piece of land by the mass of landless peasants in Brazil, spearheaded by the Movimento (dos Trabalhadores Rurais) Sem Terra (MST or the Landless Rural Workers Movement), is a clear illustration of the continuing need for agrarian reform. There has been a shift from state-led and interventionist agrarian reform programmes to marketoriented land policies. Paradoxically, such land policies have turned out to be much driven from above by the state and international agencies. Thus, future state interventions in the land tenure system are likely to be confined to a land policy which focuses not on expropriation but on progressive land taxes, land colonization, land markets, registration, titling and secure property rights. A variety of studies are indicating that such land policies have not turned out to be the promised panacea (Zoomers and van der Haar, 2000; Zoomers, 2001). However, some land titling programmes have enhanced the property rights of women (Deere and León, 2001b). While the potential benefits of clearly defined property rights may be substantial given that about half of rural households lack land titles (Vogelgesang, 1996) the economic and socio-political context under which small farmers are operating conspire against them. Peasants in the end turn out to be the losers from these land-titling projects because of their weak position in the market as well as in the political system, which is unable to protect their land rights (Carter and Mesbah, 1993; Jansen and Roquas, 1998; Carter and Salgado, 2001). The ‘market-led’ or ‘negotiated’ agrarian reform proposals of the World Bank (Deininger, 1999), resting on the principle of ‘willing seller’ and ‘willing buyer’, have so far failed to have any significant impact (Borras, 2003). The main legacy of agrarian reform is that it has hastened the demise of the landed oligarchy and cleared away the institutional debris which prevented the development of markets and the full commercialization of agriculture, albeit after the unravelling of the reformed sector. Thus the main winners have been the capitalist farmers. Although a minority of campesinos (peasants and landless 233

Rural livelihoods and peasant futures

priorities away from expropriation of estates, which typified the populist agrarian reform period, towards decollectivization and privatization, land registration and titling and land tax issues. Legislation has also been introduced in some countries facilitating the privatization of land in indigenous communities and the sale of their land. Chile was the first to initiate this process in the mid-1970s, Peru followed in a more gradual manner since 1980, Nicaragua since 1990 and Mexico and El Salvador since 1992. Some expropriated land was returned to former owners (as in Chile and Nicaragua), but most was subdivided into family farms known as parcelas and sold to members of the reformed sector who henceforth were referred to as parceleros (Jarvis, 1992). In some instances a sizeable proportion of them were unable to secure a parcel, often for political reasons and sometimes due to financial circumstances, generally joining the ranks of the rural proletariat. Nevertheless, this process of parcellization significantly increased the land area under the individual control of the peasant farm sector, especially in Peru. However, after some years many parceleros were unable to keep up their land payments or finance their farm operations and had to relinquish their land. Agrarian reform and the subsequent neoliberal unravelling of the reformed sector have thus given rise to a more complex and heterogeneous agrarian structure. It has reduced and transformed the latifundia system and has enlarged the peasant sector and the commercial middle-to-large-farm sector. Parcelization also increased differentiation among the peasantry (Murray, 2002b). Capitalist farmers have been the ones to benefit from the liberalization of land, labour and financial markets, the new drive to exports, and the withdrawal of supportive measures for the peasant sector.Their greater land, capital and technical resources, their superior links with national and especially international markets and their greater influence on agricultural policy explain why they have been more able to exploit the new market opportunities than have peasant farmers.


rural labourers) gained some benefits, for the majority the promise of agrarian reform remains unfulfilled (Thiesenhusen, 1995; Bretón, 1997).

GLOBALIZATION, NEOLIBERALISM AND AGRICULTURE The major force shaping the rural economy and society in Latin America in the post-agrarian reform era has been the process of neoliberal globalization. There has been a shift in the past two decades from a state-led inward-directed development strategy, spearheaded by a process of importsubstitution-industrialization, to an outward-oriented development strategy largely relying on primarycommodity exports (see Chapters 3 and 4). According to the neoliberal policy-makers Latin America’s agricultural sector was to be one of the main beneficiaries of this opening to world markets due to the region’s comparative advantages in this sector as well as the elimination of the discriminatory policy measures against it. Thus it was expected that agricultural exports, in particular, would thrive (Krueger et al., 1990). The neoliberal policy shift has certainly had major consequences for agriculture but not always in the way neoliberals expected. The neoliberal turn has had a major impact on rural livelihoods (see Chapter 9). It has modified the agricultural production pattern as well as the rural social structure in Latin America. It has largely been the capitalist farmers and particularly transnational agro-industrial capitalists who have been able to take advantage of, and benefit from, the new opportunities opened up by the liberalization of markets and globalization. The financial, organizational and technological requirements for agricultural intensification and export production have been largely beyond the reach of the peasant economy (David et al., 2000; Rubio, 2001). Nevertheless, through agribusiness contract farming, some smallholders have been able to participate in the production of agro-industrial commodities for export or for high-income domestic urban consumers (Schejtman, 1996). Although the neoliberal discourse promised the creation of a level playing field through its market reforms, the situation so far has revealed that the ‘real markets’, in contrast to the ‘abstract markets’ of the neoliberal literature, have continued to favour capitalist farmers and disadvantaged peasants (Ruben and Bastiaensen, 2000). The neoliberal integration of some peasants into the global agro-food complex has accentuated the socio-economic differentiation process (Teubal, 1995). Some peasants have been able to prosper through capital accumulation and expanded reproduction thereby evolving into ‘capitalized family farmers’ (Lehmann, 1982) or ‘capitalist peasant farmers’ (Llambí, 1988). Others have become ‘proletarians in disguise’ – formal owners of a smallholding but tied to, and dependent on, agribusiness and earning an income similar to the average rural wage. Another category is that of ‘semiproletarians’ whose principal source of income is no longer derived from farming the household plot but the sale of their labour power for a wage. Furthermore, a significant proportion of peasants have been ‘openly’ and fully proletarianized by depending completely on the sale of their labour power for a wage (Kay, 2000b). Agriculture’s loss of competitiveness, non-traditional exports and heterogeneity While agriculture’s share in the total Gross Domestic Product (GDP) in Latin America had been declining in the decades before the neoliberal turn, it has remained relatively stable at about 8 per cent during the 1980–2000 period. Agriculture’s average yearly growth rate was 2.0 per cent in the 1980s and 2.6 per cent in the 1990s, which compares unfavourably with the 3.5 per cent achieved by the sector in the 1950–80 period (ECLAC/IICA 2002: 27). Thus the neoliberals’ promise of a new agricultural dynamism has so far remained unfulfilled (Spoor, 2002). However, agricultural exports performed better, growing at an average yearly rate of 3.3 per cent in the 1980s and 6.4 per cent in the 1990s (ECLAC/IICA 2002: 115). Non-traditional agricultural exports (NTAEs) such as soybeans and fresh and processed fruits were particularly dynamic, while most of the traditional export products like coffee, sugar, bananas and cotton recorded below average rates of export growth. 234

Changes in rural labour and livelihoods Agriculture’s neoliberal transformation has led to significant changes in rural labour and livelihoods. The percentage of the agricultural economically active population within the total economically active population declined from 35 per cent to 21 per cent in the 1980–2000 period (ECLAC/IICA, 2002: 49). The modernization of the latifundio and their transformation into capitalist farms have led to a significant reduction in their labour force as well as to new forms of labour exploitation and subordination. The main tendency has been towards a greater flexibilization of rural labour (Lara Flores, 1998; Garriacca, 2001) and greater diversification of rural livelihoods (Bebbington, 1999; Reardon et al., 2001). For an analysis of similar transformations of urban labour and the rise of the informal sector, see Chapter 11. The following five major changes in rural labour and employment, which had a major impact on rural livelihoods, can be highlighted: • replacement of tenant labour by wage labour; • growth of temporary and seasonal wage labour; 235


Subsistence crops, especially those produced by peasant farmers, performed poorly due to unfair international competition (markets distorted as a result of subsidies to farmers in the EU and the USA), the withdrawal of government support (such as cheap credit) and changes in urban consumption patterns. But the shift to, and rapid expansion of NTAEs, were unable to compensate for the sluggish growth, or even decline, of the traditional agricultural commodities, largely destined for the domestic market. Although agriculture continues to provide a major share of Latin American foreign exchange earnings, its contribution has been declining. Agricultural exports accounted for about 51 per cent of total exports in the 1970s but only 35 per cent and 26 per cent in the 1980s and 1990s respectively (Spoor, 2001: 146). In only exceptional cases, such as Chile, has the share of agriculture in total export earnings risen. Latin America has also lost competitiveness within the international market despite the greater dynamism of agricultural export commodities as compared to agricultural crops for the home market. While in 1990 Latin America’s agricultural exports contributed 12 per cent of total agricultural imports by developed countries, this declined to 6 per cent by the end of the decade (ECLAC/IICA 2002: 193). This loss of competitiveness of Latin America’s agriculture can also be gauged by the sharp rise in agricultural imports. While during the ‘lost decade’ of the 1980s agricultural imports declined by an average yearly rate of 0.9 per cent, due to the downturn in the economy, they rose sharply during the 1990s growing by an average 8.6 per cent annually (ibid.: 117). As a consequence the proportion of agricultural imports to exports has risen from about 40 per cent in 1980 to over 60 per cent in 2000, thereby reducing agriculture’s net contribution to Latin America’s foreign exchange earnings (García Pascual, 2003: 13). In some countries the increasing reliance on food imports might endanger food security, especially in periods of foreign exchange crisis. Neoliberal policy has widened the technological gap between capitalist and peasant farmers (Ocampo, 2001), thereby further accentuating rural heterogeneity (David et al., 2001). It is difficult, if not impossible, for peasant farmers to adopt new technology that is largely capital-intensive, such as mechanization. Such technology is not only beyond the financial reach of peasants, but often it is also inappropriate for small-scale agriculture and the inferior soils of peasant farms. Furthermore, chemical fertilizers, pesticides and herbicides are too expensive for peasant farmers, especially since the government’s withdrawal of subsidized credit and technical assistance programmes. In addition, the harmful environmental consequences of fossil fuel-based technology are increasingly being called into question. The capital-intensive (and often import-intensive) nature of this technology is also inappropriate for Latin American economies, as it requires too many scarce capital resources (such as foreign exchange) and displaces labour.


• increasing feminization of rural wage labour; • ‘urbanization’ of rural workers; • growing importance of non-farm employment and incomes. The decline of tenant labour and rise of wage labour Tenant labour used to supply most of the latifundios’ labour needs. With modernization of the latifundios, tenant labour became increasingly more expensive than wage labour for landlords, as the rent income received from tenants (sharecroppers, labour-service tenants, or others) became lower than the profits landlords could earn by working the land directly with wage labour. Mechanization, which was attractive because of the availability of government-subsidized credits, turned direct cultivation by landlords into a more profitable activity than tenancy. Tenant labourers thus became waged labourers and many migrated to urban areas (Chase, 1999). Landlords also employed fewer tenants for political reasons so as to reduce the internal pressure for land reform. The growth of temporary and seasonal wage labour Within the shift to wage labour, there has been a marked increase in the proportion of temporary, often seasonal, wage employment. In many countries permanent wage labour has declined, even in absolute terms, while in almost all countries temporary labour has greatly increased. In Brazil, it is estimated that permanent wage labour has fallen to a third of rural wage labourers; the remaining two-thirds are being employed on a temporary basis (Grzybowsky, 1990: 21). In Chile, the shift from permanent to temporary labour has also been dramatic. While in the early 1970s, approximately twothirds of wage labour were permanent and a third temporary, by the late 1980s these proportions had been reversed (Falabella: 1991). This growth of temporary labour is partly connected to the expansion of agro-industries that export seasonal fruit and vegetables and is particularly evident in those Latin American countries that export these products.This has led to the increasingly ‘casualization’ or precarious nature of rural wage labour. Temporary workers are generally paid by piece rates, are not usually entitled to social security benefits and have no employment protection (see Figure 12.1). These changes in employment practices towards more casual and flexible labour enable employers to increase their control over labour by reducing workers’ rights and bargaining power (Newman and Jarvis, 2000). Their introduction has been facilitated by regressive changes in labour legislation, introduced often by the military governments but continued by their neoliberal civilian successors. The expansion of temporary wage labour therefore represents a deterioration in the conditions of employment. This casualization of rural labour has contributed to the fracturing of the peasant movement. Although seasonal labourers can be highly militant, they are notoriously difficult to organize due to their diverse composition and shifting residence. Thus, the shift from permanent to seasonal labour in the countryside has generally weakened peasant organizations, making it difficult for them to negotiate improvements in their working conditions either directly with their employers or indirectly by pressurizing the state. The feminization of rural wage labour Associated with the expansion of temporary and/or seasonal wage labour is the marked increase in the participation of women in the labour force. In the past, rural women worked as day labourers, milkmaids, cooks or domestic servants on the landlord’s estate. They also found seasonal wage employment during the labour-intensive harvests on coffee, cotton and tobacco farms. With the rising commercialization of agriculture and the crisis of peasant agriculture, an increasing proportion of rural women have joined the labour market (Lara Flores, 1995). This has resulted in a renegotiation of gender relations within the household (Barrientos et al., 1999: 124). The rapid expansion of new export crops such as fruits, vegetables, and flowers, however, has opened up new employment opportunities for women (Figure 12.2; Collins, 2003). Agro-industries largely employ female labour since women are held to be more readily available, more willing to work 236

Rural livelihoods and peasant futures Figure 12.1 Man and machete, Liberia, Costa Rica. Casual agricultural labourers are expected to provide their own tools.The machete is used in a wide range of tasks including cane cutting and pasture clearance. Photograph by Sylvia Chant

on a seasonal basis, accept lower wages, and are less organized and, according to employers, are better workers for activities which require careful handling. Any permanent employment, however, tends to be the preserve of men. Although they are employed in generally low-skilled and low-paid jobs, aside from being temporary, for many young women these jobs provide an opportunity to earn an independent income and to escape (at least partially and temporarily) from the constraints of a patriarchal, peasant family household. Even though the terms of their incorporation are unfavourable, this does not necessarily imply that gender relations have remained unchanged. Furthermore, with the rural women’s rising incorporation into the formal labour market they have begun to exercise increasing influence in the affairs of peasant organizations and, in some instances, have even established their own organizations (Stephen, 1993). In Mexico, about 25 per cent of the economically active rural population are employed in fruit and vegetable production and half of them are women. In Colombia, over 70 per cent of the labour employed in the cultivation of flowers for exports and about 40 per cent of coffee harvesters are women (ECLAC 1992: 103). In Chile, about 70 per cent of temporary workers in the fruiticulture export sector are women being employed mainly in the fruit packing plants. In Ecuador, in 1991, an estimated 69 per cent of workers in NTAE production were women (Thrupp, 1996: 125) and 237

Latin America Transformed Figure 12.2 Seasonal female labour in one of Chile’s fruit-packing plants.The boom in fruit exports in Chile has created a large market for temporary labour, employed mainly during the harvest season (March to May in applegrowing regions).The gender division of labour is marked: men pick the produce in the fields; women work in the packing plants. Photograph by W. Murray

currently about half of those working in the flower industry are women (Korovkin, 2003: 27).The rapid expansion of NTAEs, in which female labour is a key ingredient, has occasionally extracted high environmental and health costs, as these activities are accompanied by an intensive use of chemical fertilizers, pesticides and herbicides which pollute the environment and create dangerous health hazards (Stewart, 1996: 132). The ‘urbanization’ of rural workers An additional dimension to the growth of temporary wage labour concerns the geographical origins of the workers so employed. An increasing number of rural workers come from urban areas due to the lack of urban employment opportunities and improved transport facilities between urban and rural areas (see Figure 12.3). In many Latin American countries over a quarter of the economically active agricultural population currently reside in urban areas. In Brazil about half of temporary workers employed in agricultural activities are of urban origin. They are known as ‘bóias frias’ (‘cold luncheons’), as they go to work with their lunch box containing cold food, and ‘volantes’ (‘fliers’ or floating workers) who reside on the periphery of cities or towns and fluctuate between rural and urban employment. About three-quarters of female volantes are employed in the coffee-growing industry and when there is no agricultural work, they tend to look for employment in the urban areas largely as domestics (ECLAC, 1992: 98). The growing presence of labour contractors, who hire gangs of labourers from small towns and cities for work in the fields, means that the direct employer is not always even the farm owner or manager. Increasingly, rural residents have to compete with urban labourers for agricultural work, and vice versa, leading to more flexible labour markets and reducing the rural–urban divide, at least in the labour market. 238


Figure 12.3 Truck bringing cane workers home from a day in the fields, Liberia, Costa Rica. Large-scale farming enterprises send trucks to low-income settlements or to known roadside locations where recruitment of labour is done on the spot. Generally speaking, pick-up is in the early morning (around 5 a.m.), and drop off between 3 and 4 p.m. Labourers are often paid on a piece rate basis, e.g. for the metreage of cane cut. Photograph by Sylvia Chant

Rising importance of rural non-farm employment and incomes Rural non-farm employment (RNFE), or rural non-agricultural employment (RNAE), refers to employment by rural household members in the non-farm or non-agricultural sector, i.e. in manufactures (such as rural industry and agro-industrial processing plants) and services (such as rural tourism and commerce). Employment can be self-employment or wage employment for an employer. Rural non-farm income (RNFI) or rural non-agricultural income (RNAI) is the income derived from the RNFE or RNAE such as non-farm rural wage income and non-farm rural self-employment, sometimes called business income. RNFI/RNAI can also include urban-to-rural and international remittances as well as pension payments to retirees (Ellis, 2000: 11-12). It is relatively recently that the increasing significance of RNFE in rural livelihoods has become evident. While in 1970 in Latin America 17 per cent of the rural population had their principal occupation in non-farm activities, this rose to 24 per cent in 1981 (Klein, 1992). Agricultural employment stagnated or declined during this period, while RNAE increased significantly. This shows that secondary and tertiary activities in the rural sector have been more dynamic than primary activities, at least in terms of employment. Many of these secondary and tertiary activities are derived from agriculture such as food processing, packaging, and marketing of agricultural produce. Thus dynamic agriculture is likely to lead also to a dynamic rural non-farm sector. Subsequent studies have shown that this shift to RNFE and RNFI has even accelerated further in recent decades. While in the early 1980s RNAI accounted for 25 per cent to 30 per cent of total rural income by the second half of the 1990s this proportion rose to above 40 per cent (Berdegué et al., 2000: 2). A far higher proportion of rural women are engaged in non-farm jobs than men. While in most countries this share varied between 20 per cent and 55 per cent for employed men, in the case of employed women it varied between 65 per cent and 90 per cent (Reardon et al., 2001: 400). 239


It is important to stress that non-farm employment has a different meaning for rural households according to their income level. For poor peasant households RNFE is a key mechanism to retain access to their small plot of land and to maintain a subsistence income. Meanwhile, for rich peasant households, it is a way to accumulate more capital. This capital can be used for expanding the farm enterprise by buying more land or to increase its productivity by investing in machinery, fertilizers, upgrading their labour and management skills through further education, and so on. Poor peasants depend to a greater degree on non-agricultural income than rich peasants but in absolute terms this amount is much lower in the poor households than in the rich households (Berdegué et al., 2000: 3).

PEASANT FUTURES: A PERMANENT SEMI-PROLETARIAT? The increasing globalization of Latin America’s rural sector is having a profound impact on the peasantry. How are these major transformations affecting the development of the peasant economy, especially in the wake of the increasingly widespread and entrenched neoliberal policies? Can the peasant economy provide adequate productive employment and rising incomes? Will peasants be able to continue farming by increasing their competitiveness or will they become a mere supplier of wage labour to the capitalist farm sector? Or, will they become fully proletarianized by having to sell their land, give up farming and depend on wage employment and income for their subsistence? Challenges facing the peasantry: diversification of rural livelihoods The peasant household farm sector is still a significant sector within Latin America’s rural economy and society. Indeed, some authors have celebrated the persistence of the peasantry contrary to those who predicted their disappearance (Edelman, 2000; Barkin, 2002). The peasant economy has certainly not faced a unilinear decline and has shown a remarkable capacity for survival in the face of the challenges of neoliberal globalization. Peasants have had to change their livelihood strategies in order to survive (Bebbington, 2000), as well as engage in new forms of social mobilization and politics (Otero, 1999; Bernstein, 2000). Nevertheless, their future is uncertain (Bryceson et al., 2000). It is estimated that peasant agriculture in the 1980s in Latin America comprised four-fifths of farm units, possessed a fifth of total agricultural land, over a third of the cultivated land, and over two-fifths of the harvested area (López Cordovez, 1982: 26). The peasant economy accounted for almost twothirds of the total agricultural labour force, the remaining third being employed by capitalist farms. Furthermore, peasant agriculture supplied two-fifths of production for the domestic market and a third of the production for export. Their contribution to food products for mass consumption is particularly important. At the beginning of the 1980s, the peasant economy provided an estimated 77 per cent of the total production of beans, 61 per cent of potatoes and 51 per cent of maize. In addition, the peasant economy owned an estimated 24 per cent of the total number of cattle and 78 per cent of pigs (ibid.: 28). While the peasantry is far from disappearing, it is not thriving either, since their relative importance as agricultural producers continues to decline. According to de Janvry et al. (1989b), the Latin American peasantry is experiencing a double squeeze. First, they face a land squeeze. By failing to acquire additional land to match their increased numbers, the average size of peasant farms has decreased.This decline of the peasant sector mainly concerns the small-scale peasantry (minifundistas) which accounts for about two-thirds of peasant farm households. Their average farm size decreased from 2.1 hectares in 1950 to 1.9 hectares in 1980. The remainder of the peasant sector retained an average farm size of 17 hectares, partly through the implementation of redistributive land reforms (de Janvry et al., 1989a: 74). Second, peasants face an employment squeeze as employment opportunities have not kept pace with the growth of the peasant population and as they face increased competition from urban-based workers for rural employment. Peasants have responded to this double squeeze on their livelihoods by seeking off-farm sources of income, meaning incomes generated within agriculture other than own-account farming such as 240

Persistence of rural poverty Agricultural modernization in Latin America, with its emphasis on capital intensive farming and the squeeze on the peasant economy, means that rural poverty remains a persistent and intractable problem. Structural adjustment programmes and stabilization policies of the 1980s had a detrimental impact on poverty, although more in the urban than rural sector (see Chapter 5). But the proportion 241


seasonal agricultural wage labour on capitalist farms agriculture, and/or non-farm sources of income. Furthermore, the proportion of the economically active rural population that is engaged in nonagricultural activities, largely as wage labourers, is rising faster than those engaged in farm employment as discussed earlier. These trends mean that an increasing proportion of total peasant household income originates from wages, whereas income from their own-farm activities often comes to less than half the total (de Janvry et al., 1989a: 141). These processes mean that peasants have had to increasingly diversity their assets and livelihood activities in order to survive and to improve their living standards (Zoomers, 1999; see Chapter 9). These assets, as described by Bebbington (1999: 2029) and Ellis (2000: 8), include natural capital (land, water, trees), physical or produced capital (tools, machines and land improvements such as irrigation canals), human capital (education and health), financial capital (cash or money), and social capital (social networks and associations). Only the richer peasants, who are a minority, have been able to use this process of rural livelihood diversification as an accumulation strategy, thereby increasing their wealth. For the majority of the Latin American peasantry, this livelihood diversification has entailed seeking a variety of wage labour activities as a survival strategy (Rubio et al., 2002; Korovkin, 2003). This is the case for the small-scale peasantry who can be characterized as semi-proletarian as over half of their household income is derived from off-farm sources, principally from seasonal agricultural wage employment on commercial farms or from non-farm wage work. As the small-scale peasantry is the most numerous, it can be argued that this process of semi-proletarianization is the main tendency unfolding among the Latin American peasantry. It is less marked in those few Latin American countries where land reforms significantly increased peasant access to land. For the richer peasantry rural nonfarm income is far more important than farm wage-employment income. Furthermore, the poorer peasantry due to their lesser human capital engages principally in casual farm wage employment, as entry requirements are lower (Reardon et al., 2001: 402). This double squeeze on the peasant economy has forced many peasants to migrate, feeding the continuing and high rate of rural out-migration (Salman and Zoomers, 2002; see Chapter 5). Some peasants migrate only temporarily as part of their livelihood strategy to ensure the survival of their household through the remittances. But this migration can vary from some months to a few years, and even become permanent. Increasingly migration has become transnational. The most notorious case is the migration of Mexican rural labour to the USA. But transnational migration within Latin America has also become more common over the last couple of decades, as in the case of Bolivian peasants working as rural labourers in Argentina (Aparicio and Benencia, 1999). In a few cases this migration results in significant remittances which allow some investment on the peasant farm and expansion of farm income. However, as Reardon et al. (2001: 402) argue, the importance of migration income for rural households is far less than has been assumed, even in the case of Mexico. In short, Latin America’s peasantry appears to be trapped in a continuing process of semiproletarianization and structural poverty. Their access to off-farm sources of income, generally seasonal wage labour, enables them to cling to the land, thereby blocking their full proletarianization. This process favours rural capitalists as it eliminates small peasants as competitors in agricultural production and transforms them into cheap wage labour. Semi-proletarianization is the only livelihood strategy open to those peasants who wish to retain access to land for reasons of security and survival or because they cannot find alternative employment, either in the rural or urban sector, which secures them a minimum standard of living.


of people in poverty still remains higher in rural as compared to urban areas. Adjustment policies exacerbated poverty as government expenditure on social welfare, subsidies for basic foods and other essential commodities and services were cut back (Altimir, 1994). Some governments reduced this negative impact by subsequently targeting welfare payments more closely and by introducing poverty alleviation programmes. In the 1990s, rural poverty started to decline but only very slowly. While 65.4 per cent of rural households in Latin America were below the poverty line in 1990, this had fallen to 63.7 per cent in 1999 (ECLAC, 2002c: 212).The corresponding data for extreme poverty or indigence are 40.4 per cent and 38.3 per cent, respectively. Only in a few countries did rural poverty decline significantly, like in Chile from 39.5 per cent in 1990 to 23.8 per cent in 2000, and rural indigence fell from 15.2 per cent to 8.3 per cent, respectively (ibid.: 211). The main cause of rural poverty is structural, being related to the unequal land distribution and the increasing proportion of semi-proletarian and landless peasants. Contributory factors for the persistence of rural poverty are the neoliberal policies that further an exclusionary pattern of rural development marginalizing the peasantry. Tackling the root causes of poverty will require major land redistribution and rural investments, raised employment opportunities and improved agricultural productivity, particularly of smallholders. Particularly promising for reducing rural poverty are also policies that promote rural non-farm activities, but this should not be done at the expense of policies promoting agricultural development (López and Valdés, 2000). With the right mix of policies, farm and non-farm activities should reinforce each other by developing their linkages (Reardon et al., 2001). Only by such an assault on various fronts will it be possible to alleviate rural poverty significantly. Latin America’s poverty is directly related to the unresolved agrarian question. Governments can no longer afford to neglect the rural poor. State, market and civil organizations: what future for the peasantry? Neither the state-driven ISI development strategy (1950s to 1970s) nor the neoliberal market-driven policies since the 1980s have been able to resolve the peasant question. Rural poverty, inequality and exclusionary rural development still persist. It was only during the brief land reform interlude that sections of the peasantry began to emerge from their marginalized situation only to see their hopes for a better future vanish with the counter-reform and neoliberal project. However, these past upheavals have created new opportunities as well as constraints. Calls for new thinking for new policies for rural development practices are multiplying. Such voices are seeking to find new ways of combining state action with market forces and civil organizations so as to make a fresh attempt to resolve the agrarian question (de Janvry et al., 1995). More radical voices seek to create a new rurality which puts at the centre of rural development the peasantry and the rural proletariat (Giarracca, 2001; Pérez and Farah, 2001; Barkin, 2002). What, then, are the prospects for a peasant path to rural development? It is well known that access to capital, technology, and domestic and foreign markets, as well as knowledge and information systems, are becoming increasingly important relative to access to land in determining the success of an agricultural enterprise. Even though in recent decades some peasants managed to gain access to land through agrarian reforms, this by no means secures their future survival. The widening technological gap between the capitalist and peasant farm sectors have prompted those involved with the peasants’ well-being to urge international agencies, governments and non-governmental organizations (NGOs) to create more ‘peasant-friendly’, appropriate and sustainable technologies. Such a policy, however, runs the danger of relying exclusively on a technological fix, while the sustainability of peasant agriculture depends on wider social and political issues and particularly a favourable macro-economic context. In short, a viable peasant road to rural development raises questions about development strategy and ultimately about the political power of the peasantry. In the 1990s, concerned scholars and institutions have become increasingly vociferous in pointing out the adverse impact of Latin America’s neoliberal agricultural modernization on the peasantry. As opposed to the ‘concentrating and exclusionary’ character of this process, they call for a strategy that 242

Reconversion and non-traditional agricultural exports (NTAEs) The key to the development of peasant farmers and their transition to ‘capitalized peasant farms’, especially in these days of privatization, liberalization and globalization is to enhance their market competitiveness. For this purpose some governments in Latin America are beginning to design policies for the ‘reconversion’ of peasant farming. In a broad sense, reconversion aims at enabling and improving peasant agriculture’s ability to adapt to its increasing exposure to global competition and to enter into the more dynamic world market. This is to be achieved through a series of specific peasant programmes with the aim of raising productivity, enhancing efficiency and shifting traditional production and land-use patterns to new and more profitable products thereby increasing the peasants’ competitiveness (Figure 12.4) (Kay, 2002b). Governments and NGOs concerned with promoting the development of peasant farmers proposed a series of measures to facilitate their participation in the lucrative agricultural export boom. It was almost exclusively capitalist farmers who initially reaped the benefits of the thriving NTAE business as they had the resources to respond relatively quickly to the new outward-looking

Figure 12.4 Inside a smallholder’s greenhouse, Peumo, Chile, 1996. Smallholders in Chile are becoming more specialized and technical: here carnations are grown for national markets but only family labour is used.The smallholder benefits from being a member of a local cooperative both for technical and marketing assistance. Photograph by C. Kay 243


includes the peasantry in the modernization process (Murmis, 1994). This would be part of the democratization of rural society and some authors speak of ‘democratic modernization’ to highlight this link (Chiriboga, 1992). Currently, suggestions are being made with a view to ‘changing production patterns with social equity’ in Latin America and for the ‘productive reconversion’ of agricultural producers so as to meet the challenges of an increasingly global world economy in the new millennium (ECLAC, 1990). To forward these aims, special government policies in favour of the peasantry are proposed to reverse the past bias in favour of landlords and rural capitalists. The achievement of broad-based growth requires proactive state policies so as to overcome market failures and biases against the peasantry.


development strategy of the neoliberal trade and macro-economic policy reforms. In view of the dynamism of NTAE sector, it was thought that a shift in the production pattern of peasant farmers to these products would spread the benefits of NTAE growth more widely and ensure their survival. However, experience has been rather mixed. To analyse the impact of NTAE growth on smallholders and rural labourers, Carter et al. (1996: 37–8) argue that this depends on three factors: 1 whether small-scale units participate directly in producing the export crop and enjoy the higher incomes generated from it (the ‘small-farm adoption effect’); 2 whether the export crop induces a pattern of structural change that systematically improves or worsens the access of the rural poor to land (the ‘land access effect’); 3 whether agricultural exports absorb more or less of the labour of landless and part-time farming households (the ‘labour-absorption effect’). They examine the cases of agro-export growth in Paraguay (based on soybeans and wheat), in Chile (based on fruit), and in Guatemala (based on vegetables). Their findings reveal that only in the case of Guatemala was there a broadly based growth as both the land access and net employment effects were positive, while the opposite happened in Paraguay, resulting in exclusionary growth. The Chilean case had elements of both as the net employment effect was positive but the land access effect was negative.Thus, in Chile, the fruit-export boom has been partly exclusionary, as many parcelero peasant farmers have sold part or all of their land as they were squeezed by the export boom (Murray, 1999), and partly inclusive, as the shift from traditional crops to fruit-growing increased labour demand (Schurman, 2001). Even if a larger proportion of peasant farmers were to adopt the new export crops, it is far from certain that this would ensure their survival. Thus, the much-fancied NTAE rural development policy of many Latin American governments cannot be considered as a panacea, especially if no complementary measures are taken to create ‘level playing fields’ (Carter and Barham, 1996). The Chilean experience is illustrative in this regard (see Chapter 6). First, there has been a low adoption rate of NTAEs by small-scale farmers due to financial, technical, risk, and other factors. Second, even those who did switch to NTAEs were far more likely to fail as compared to capitalist farmers, as they were less able to withstand competitive pressures due to their disadvantaged position in marketing, credit, technology, and other markets. As a consequence of rising debts, many are forced to sell their land often to larger farmers or transnational fruit companies (Murray, 2002c). Such an on-going process of land concentration is also happening in other Latin American areas in which NTAEs are taking hold. Food import substitution (FIS), diversification and sustainable development An almost forgotten alternative or additional possibility to NTAEs for peasant farmers is to enhance their comparative advantage in staple food production and potentially in some import-competing commodities. This can be achieved through a programme of ‘food import substitution’ (FIS) as suggested by de Janvry (1994). More radical proposals call for the redevelopment of the peasant economy through an ‘autonomous development’ strategy that is seen as the key for sustainable development in rural areas (Barkin, 2002). For an autonomous development strategy to succeed, major supportive policies by the state are required, such as specifically targeted protectionist measures to counteract the distortions in the world food market arising from subsidies to farmers in developed countries (Valdés, 2002). Import-substitution in staple foods has the advantage of not only saving valuable foreign exchange but of enhancing food security, employment, and possibly a more equitable income distribution, especially if it is peasant farmers who undertake this FIS (Teubal and Rodríguez, 2002). The expansion of peasant food output has also the advantage of being more ecologically friendly as they use less chemical inputs as compared to capitalist farmers and also relative to NTAEs. Instead of viewing 244

Nongovernmental organizations (NGOs) A new relationship has to develop between the state and civil society. The state should devolve some of its powers, initiatives, financial resources and activities to local governments and civil organizations such as NGOs, producer and consumer organizations, trade unions, women and ecological associations and political parties. These should play an increasing role in policy formulation and implementation. NGOs are known to be particularly able to establish close working relationships with grass-roots organizations and their constituency. Such increased participation of individuals and civil organizations in economic, social and political affairs is likely to strengthen the democratic processes. By creating a more participatory framework, it might be possible to establish mechanisms for regulating and governing the market for the benefit of the majority in society. In some instances, governments in Latin America have already began to subcontract certain activities, such as technical assistance for peasant farmers to NGOs, as well as giving greater powers and resources to local administrative agencies (see Chapters 9 and 10). It is too early yet to assess the significance and impact of such initiatives. However, NGOs face a dilemma when they come to depend too closely on government resources and appear to be implementing government policy, especially if this of a neoliberal kind. They might lose grassroots support and thus their legitimacy (Bretón 2002). But if NGOs are in turn able to influence government policy by making it more sensitive and friendly towards peasant, gender, indigenous and ecological issues, then this closer relationship is only to be welcomed. Generally, NGOs have limited resources and this constrains the coverage of their activities to a limited number of beneficiaries (North and Cameron, 2003). In those countries where the state has been drastically downsized, NGOs have often been used as a palliative to overcome the abdication of social responsibility by the state. Thus, the closer links between state and NGOs can be a mixed blessing (Bebbington and Thiele, 1993). The key agrarian question: assets and power The increasing competitive gap between peasant and capitalist farming due to agriculture’s unequal modernization limits the survival of the peasant producers and perpetuates rural poverty. The neoliberal slogan of ‘getting prices right’ is certainly not a panacea for rural development (Binswanger et al., 1995). A major step in tackling the agrarian question requires a redistribution of assets as well as the empowerment of peasants and rural workers. Although agrarian reforms are no longer on the political agenda, except in Brazil, the problem of land concentration and landlessness remains. Land policy reforms are far from dead as a broadly based and sustainable development strategy requires a fairer distribution of land assets. However, access to finance and knowledge are increasingly important assets in today’s globalized world. This calls for government policies that facilitate peasant access to these other two crucial assets through market reforms, human resource development, and special credit and technical assistance programmes. NGOs and the private sector can implement some of these projects. Governments have to give greater priority to rural diversification, education and infrastructure that are targeted particularly at smallholder communities. 245


NTAEs and food production as being in conflict or as alternatives, they can be seen as complementary. In Schejtman’s (1994) view, it is possible to envisage a positive correlation as those peasants who are able to go into lucrative agro-export production can use their increased incomes, knowledge and market experience derived from NTAEs to invest in raising productivity of their traditional food crops. Similarly, the search by peasant farm households for incomes derived from non-agricultural activities can, under certain circumstances, enhance the productive capacity of the farm’s agricultural activities. However, if such a search for additional incomes arises out of distress (where the peasant household is fighting for its survival), it is unlikely that such a positive interaction between farm and non-farm activities can be achieved. In such a case, the peasant household might remain in a state of semiproletarianization or become fully proletarianized – landless labourers relying on wage labour.


Such policy reforms have little chance of succeeding unless peasants and rural workers develop their own organizations such as producer and community associations, cooperatives and trade unions. It is only through the creation of a counter-vailing power by peasants and rural workers that they will be able to shape the future to their advantage rather than having to continually accept the disadvantages of the past and present. While undoubtedly the state, political parties and NGOs can provide the necessary supportive role; the development of such organizations depends on the determination of peasants and workers themselves. Whether or not these proposals will be adopted is an open question, but there are grounds for some optimism as new indigenous, ecological and peasant movements have emerged which are contesting neoliberal policies. This will be discussed in the next section.

THE NEW PEASANT MOVEMENT: INDIGENOUS AND ENVIRONMENTAL DIMENSIONS The neoliberal project has certainly not gone unchallenged by peasants in most of Latin America. One of the most significant events which symbolizes the new character of the peasant movement has been the 1994 rebellion in Chiapas, the most southern and indigenous region of Mexico (Burbach, 1994). The uprising was led by the Zapatista National Liberation Army (EZLN) and was fuelled by a variety of factors (Harvey, 1994). Some of the major causes were the exclusionary impact of Mexico’s agricultural modernization, the government’s repeal of the land reform legislation in 1992 and the desire of the insurgents for greater control over their livelihoods and for a certain degree of autonomy (Collier, 2000; Rus et al., 2001; Stavenhagen, 2003). Also fears that Mexico’s neoliberal integration into the North American Free Trade Agreement (NAFTA) would marginalize them further influenced events (de Janvry et al., 1997). Mexico’s peasant farmers cannot compete with the large-scale mechanized maize and cereal farmers from North America unless special protective and developmental measures are adopted in their favour (Barkin, 1994; Collier, 1999). Since the neoliberal free-market onslaught in the 1980s the peasantry has re-emerged as a significant force for social change not only in Mexico but also in Bolivia, Brazil, Colombia, Costa Rica, Ecuador, El Salvador and Paraguay, among other Latin American countries. The peasantry is striking back and it would be a serious mistake to dismiss these new peasant and indigenous movements in Latin America as the last gasp of rebellion (Petras, 1997;Veltmeyer et al., 1997).These new movements are shaping new class and ethnic identities in which the protagonists are affirming their own history and capacity to make history. The confident assertions, from opposite political spectrums, on ‘the end of history’ (Fukuyama, 1992) and the death of the peasantry (Hobsbawm, 1994: 289) are proving to be premature (Edelman, 1999). In Brazil, the principal protagonist in the countryside has been the MST, which is the largest peasant movement in Latin America with a membership of more than 500,000 peasant families (Robles, 2001: 147). It has spearheaded over 1,500 land invasions of large estates demanding their expropriation (Meszaros, 2000). Some 350,000 families were involved in these mobilizations under the leadership of about 20,000 MST activists (Stedile, 2002: 85). The land occupations come as no surprise as inequality is particularly acute in Brazil where only 4 per cent of farm owners control 79 per cent of the country’s arable land (Veltmeyer et al., 1997: 181). Through direct actions, which also involve blocking highways and sit-ins at local offices of the state’s agrarian reform institute (INCRA), the MST has managed to force the government’s pace on expropriations. The MST has been instrumental in establishing over 1,300 rural land-reform settlements, largely organized as cooperatives, throughout Brazil since its foundation in 1984 (Navarro, 2000: 37). An estimated 350,000 families have been settled on these cooperative farms and more than 100,000 additional families not in the MST have received land from the government as part of the land reform programme that arguably would not exist without the MST (Wright, 2003: 1). The MST has greatly contributed to the democratization of rural life, especially in the settlement areas. In this struggle there have been many casualties as fazendeiros (landlords) and their hired 246

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gunmen took the law into their own hands, generally with impunity. Many peasants also died or were wounded in clashes with the military police. By 2000, over 1600 persons had been killed in land conflicts since 1984 but only about 250 of these were MST members (Cadji, 2000: 30; Branford and Rocha, 2002: 251). Nevertheless, as land settlements have increased, murders in the countryside have declined sharply (Margolis, 2002: 26). To what extent the left-of-centre government of President Luis Inácio ‘Lula’ da Silva, which took office in 2003, will be able to give a new impetus to land reform remains to be seen. In the past couple of decades there has been a resurgence of Indian ethnic identity movements which has revitalized and changed the character of social movements in the countryside (see Chapter 10). The new strength of indigenous movements is reshaping state–society relations and enhancing indigenous rights, cultural diversity, decentralization and democracy (Assies et al. 2001; Bengoa, 2000; Korovkin, 2001; Sieder, 2002; Wilson et al., 2003). Ethnic and environmental issues have become also increasingly important political concerns as the fate of the tropical rainforest and the fate of the indigenous peoples have become more intertwined. Environmental movements have become struggles for social justice as native groups were being displaced and their livelihoods threatened through the actions of companies exploiting the natural resources through logging, mining, oil extraction, building of dams and deforestation for pastureland and cattle raising. The ensuing conflicts between these companies, cattle ranchers and the local population, which often led to casualties, activated human rights groups in defence of the victims. This coalition of indigenous, peasant, environmental and human rights organizations became one of the major forces in the fight for social justice (Kaimovitz, 1996). In the case of Chiapas, with its large Mayan population, the linkage of the indigenous question to environmental concerns also gave the uprising wider support and strength. In Brazil, the building of the Transamazon Highway in the 1970s led to large-scale deforestation and expansion of pastureland as big capital was lured by tax rebates, subsidies and cheap credit to Amazonia. This led to a major migration of settlers, largely from impoverished north-eastern Brazil, to the tropical forest areas that contributed to the environmental deterioration. This expansion of grazing and mining encroached on lands used by indigenous groups and rubber tappers in what Dore (1995: 262) has called the most extensive enclosure movement in history. This sparked off the rubber tappers movement as well as the actions of indigenous groups in defence of their livelihoods, which brought the Amazon environmental issue to world attention. The assassination in 1988 of ‘Chico’ Mendes, the leader of the Amazon rubber tappers movement, provoked an international outcry. His murder led to strong national and international pressure that prompted the government into action by acceding to some of the rubber tappers’ demands with the establishment of extractive reserves and other ‘productive conservation’ schemes (Hall, 1997). These projects attempted to reconcile the conservation of the forest with its sustainable use in supporting local livelihoods (Hall, 1996). In Ecuador, major social mobilization took place in the 1990s and was organized by the Confederation of Indigenous Nationalities of Ecuador (CONAIE). During an entire week in 1990, tens of thousands of Indian peasants blocked highways, organized marches in various capitals and seized government offices (Zamosc, 1994). Their protest was brought about by the economic recession resulting from the structural adjustment package. In a second major mobilization in 1994 the protest was directed specifically against the introduction of neoliberal policies, especially the new so-called ‘Agrarian Development Law’.This law threatened the communal lands of indigenous groups, facilitating their privatization and ultimately favouring their transfer to capitalist farmers through the market mechanism. Thousands of indigenous communities, representing all of the country’s ethnic nationalities, small farmers, trade unions, and popular organizations joined this protest and international environmental and human rights organizations offered their support (Picari, 1996). Ecuador’s indigenous movement took centre stage in January 2000 when a thousand protestors, mostly indigenous people from the highlands, under the leadership of CONAIE occupied the National Congress building demanding a change of government and policy (Collins, 2000). Although the


occupation lasted only one day, it, together with subsequent uprisings, paved the way for the election of Army Colonel Lucio Gutiérrez, who had been one of the key figures in the protest movements, as President in 2002. Although Gutiérrez’s government might not be able to satisfy all the demands of the indigenous people, it is the most pro-indigenous government yet in Ecuador’s history. In Bolivia, an historic ‘march for dignity and territory’ took place in 1990. Hundreds of people from lowland indigenous groups ‘trekked from the Amazon rainforest through the snow-capped Andes on route to the capital city to protest about logging on indigenous lands and to demand legal rights to these lands’ (Albó, 1996: 15). They framed their demands not just in terms of rights to resources but also in terms of indigenous rights, thereby broadening its support from civil society.This historic march and subsequent mobilizations resulted in reforms of the Constitution in 1995 declaring Bolivia to be a multiethnic state. It also led to the enactment of a series of new laws such as: the Law of Popular Participation (1994), which gives legal recognition to community associations and facilitates administrative decentralization; the Forestry Law (1996), which allows indigenous groups to log commercially on collectively held land; and the Agrarian Reform Law (1996), which enhances the territorial rights of indigenous peoples (Roper, 2003). This new peasant movement in Latin America differs from past social movements in the countryside for various reasons and the following four can be highlighted: 1 Ethnic groups have a far greater presence than in the past. There is also a greater degree of ethnic consciousness and, in some cases, even demands for national autonomy, expressed in selfgovernment and territorial sovereignty (Ross, 1997b: 35). While governments have not yielded to the claim for national autonomy, countries like Bolivia, Ecuador, Colombia and Brazil have changed their respective Constitutions recognizing the multi-ethnic character of the nation and including provisions which recognize the linguistic, cultural, social and territorial rights of the various indigenous groups. 2 Owing to the social transformation of the peasantry the movement has acquired a more urbane and international dimension. This has been helped by the more fluid relationships between urban and rural sectors, the greater mobility of rural populations, the improvements in rural education and the more pervasive influence of the media. Leaders have become more adept at promoting the movement’s objectives by making skilful use of the media and internet thereby reaching a wider audience both nationally and internationally. To the ‘globalization from above’ they have been able to generate a ‘globalization from below’, bypassing national governments and creating international pressure on them as well as on other international organizations by appealing to the foreign constituency (Kearney and Varese, 1995). 3 The peasant movement has achieved a greater degree of autonomy from political parties and the government. While this is partly a result of the greater maturity achieved by the movement through past struggles, it has also been made possible by the political vacuum resulting from the crisis of the left-wing parties. The world crisis of socialism could not fail to weaken socialist organizations and often led to left-wing parties adopting elements of the neoliberal agenda. The weakening of the landlords’ former dominance over the peasantry in countries with radical agrarian reforms has also opened up new political spaces for the peasantry as well as new social actors. 4 Peasant movements have developed a variety of links with NGOs that have made important contributions in creating and strengthening grassroots organizations in the countryside. International NGOs have also provided a useful vehicle for raising world-wide support for the new movement’s causes, especially if these concern ecological, gender, social justice and human rights issues. Women have also achieved a far greater presence in these new peasant movements, although still less than their relative importance would warrant. Women have figured especially prominently in some of the indigenous and human rights movements. This new character of the social movement in the countryside does not mean that traditional concerns have vanished with the transformation of the peasant movement. Thus, demands for better 248

CONCLUSION Latin America’s rural economy and society have been transformed in recent decades as a consequence of neoliberal reforms and globalization. Latin America’s agriculture is now further enmeshed with the new world-food regime. Transnational agribusiness has further consolidated its dominance. This form of modernization has benefited only a minority of the rural population and excluded the vast majority of the peasantry. The beneficiaries are a heterogeneous group, including agro-industrial firms, capitalist farmers, and some capitalized peasant households. The losers are the semi- and fully proletarianized peasantry, the majority of rural labourers whose employment conditions have become temporary, precarious and ‘flexible’. The boundaries between rural and urban have become ambiguous.The massive rural out-migration has partly ‘ruralized’ the urban areas (especially the shantytowns), and the countryside is becoming increasingly urbanized. Urban and rural labour markets have become more closely interlinked. The land market has become more open and competitive enabling urban investors and international capital to gain greater access to agricultural land. Competition among agricultural producers has intensified due to a more fluid situation in the commodity, land, capital and labour markets. While the rural economy is less important today than in the past, it still retains critical significance in most Latin American countries. To ignore the agrarian question of unequal access to land, rural poverty, and exclusionary modernization, is ill advised. Rural poverty remains widespread, and discrimination against the peasantry and indigenous communities is still pervasive. The continuing promotion of agricultural, forestry and fishery exports further depletes natural resources contributing to ecological deterioration. Although the shift from a state-centred inward-directed development process to a neoliberal market-oriented and export-oriented model has weakened the power of traditional peasant organizations through the fragmentation of rural labour, new social conflicts have erupted in the countryside. A new peasant and indigenous movement has emerged in the countryside which is contesting the neoliberal globalization policies. Thus, it will be politically difficult for governments to continue to impose the neoliberal model regardless of the consequences for rural people. A radical shift to a post-liberal development strategy is required. This change has to be shaped by the creative 249


wages and working conditions, land, improved prices for peasant products and greater and cheaper access to credit and technical assistance continue to be made. But new organizational forms and ways of mobilization have emerged. Also new issues have arisen, such as the environment, and some issues have become either less prominent or have acquired a different meaning. The land question has acquired a new connotation with the conflicting territorial claims made by capitalists, small settlers and indigenous groups as well as by the new ecological concerns. The new peasant and indigenous movements are not struggling for a mythical past and utopia. They do, however, reject contemporary modernity with its current neoliberal and globalization processes as this is exclusionary and often threatens their survival, whether physically, socially or culturally (Edelman, 1999; Wise et al., 2003). Such modernity is regarded as reckless, hypocritical and bigoted (Zamosc, 1994). Instead they are struggling for a different modernity which rests on their own emancipatory project that includes greater control over their lives, more security and a better standard of living (Petras and Veltmeyer, 2001b). Thus, the challenge for the new movements is to use the current processes of modernization for their own interests and, where possible, to develop their own alternatives. Peasants have to increase their ability to master their own environment as well as to participate on more favourable terms in the global environment (Bebbington, 1996). This requires weaving new alliances and strengthening old alliances with other social groups as well as reshaping relations with the state, which still principally serves the interests of capitalists and is still a major actor despite neoliberal globalization (Petras and Veltmeyer, 2002). The agrarian question has yet to be resolved in Latin America (Brass, 2003).


interaction between civil society and an activist but democratic state, in which the new peasant and indigenous movement must have a crucial role so as to ensure that market forces are harnessed for a participatory, inclusive and egalitarian development process.

FURTHER READING Bebbington, A. and Thiele, G. 1993 Non-governmental organizations and the state in Latin America: rethinking roles in sustainable agricultural development. Routledge, London and New York. A sympathetic, yet critical analysis, of NGOs active in the rural sector in Latin America. Brass, T. (ed.) 2003 Latin American peasants. Frank Cass, London. The most up-to-date analysis currently available on the impact of globalization and neoliberalism on the Latin American peasantry and their struggles. Deere, C. D. and León, M. (eds) 2001 Empowering women: land and property rights in Latin America. University of Pittsburgh Press, Pittsburgh, PA. A pioneering and comprehensive study on gender and land issues in rural Latin America. de Janvry, A. 1981 The agrarian question and reformism in Latin America. The Johns Hopkins University Press, Baltimore, MD. Although written a quarter of a century ago this is still a classic text on Latin American agrarian development. Giarracca, N. (ed.) 2001 ¿Una nueva ruralidad en América Latina? Consejo Latinoamericano de Ciencias Sociales (CLACSO), Buenos Aires. Top Latin American rural specialists examine Latin America’s rural transformations in the neoliberal period and discuss whether they can be characterized as a ‘new rurality’.

WEBSITES Consejo Latinoamericano de Ciencias Sociales, www.clacso.org/wwwclacso/espanol/ html/publicaciones/catalogo.html, for downloading the text by Giarracca mentioned above and other useful publications. Food and Agriculture Organization of the United Nations, www.fao.org/regional/ LAmerica, the regional office for Latin America and the Caribbean. It has many documents on rural development, food security, natural resources and agricultural trade and is a rich source for statistical data. From the website of the FAO’s sustainable development unit www.fao.org/sd/ it is possible to download the articles published in the journal Land Reform, Land Settlements and Cooperatives (www.fao.org/sd/Ltdirect/landrf.htm). Inter-American Development Bank, www.iadb.org/sds, website of the Sustainable Development Department has a link to the Environment and Natural Resources Unit which has information on agriculture, rural development, the environment, forestry, water and so on. Inter-American Institute for Cooperation on Agriculture, www.iica.int, has much information on Latin America’s agriculture. LANIC, http://info.lanic.utexas.edu/la/region/indigenous, this website specializes in indigenous peoples in Latin America. The LANIC website in general has useful search facilities for rural development issues. World Bank, www.worldbank.org/landpolicy, this particular site has many documents on land policy issues.

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4 LATIN AMERICAN FUTURES


13 The alternatives to neoliberalism Robert N. Gwynne, Cristóbal Kay

The neoliberal policies introduced throughout most of Latin America in the past two decades opened a new development era which could be referred to as the globalization phase succeeding the earlier import-substitution phase. There is nothing inevitable about this phase, as it is the outcome of powerful struggles between different social forces in the world system, in general, and within Latin America, in particular. This globalization reveals the defeat of the socialist project and the triumph of capitalism in Latin America, which had been challenged in a variety of ways by the Cuban revolution of 1959, Allende’s Chilean road to socialism in the early 1970s and by the Sandinista revolution in the 1980s. While Chile’s and Nicaragua’s attempts at socialist transformation failed, Cuba’s is barely surviving and no longer inspires those forces seeking a progressive alternative to the neoliberal project. While neoliberalism can point to some successes, especially in its ability to become the dominant ideological force among economic policy-makers, it has so far been unable to resolve Latin America’s endemic problems of vulnerability to external forces, social exclusion and poverty and has even aggravated them. This chapter first intends to evaluate the current political economy of Latin America, including how individuals and groups are contesting elements in terms of their livelihood strategies. Finally, it will discuss the possibilities for political economy alternatives for the twenty-first century.

THE NEOLIBERAL MODEL EVALUATED Macro-economic reform The neoliberal model has maintained a certain influence largely due to the macro-economic stability that it has provided. Most Latin American countries are now characterized by single digit inflation. Only those countries that have avoided adopting the neoliberal model (such as Venezuela) are still dogged by high inflation. In addition, the technocracies of most Latin American governments have organized some incentives for entrepreneurship. As a result, there has been a growth in the significance of the private sector and not only large but also medium-sized enterprises The outward-oriented model achieved growth in direct foreign investment in most countries, at least until the peak years of 1999 and 2000. Through the decade of the 1990s there was a new impetus for exports, although these were largely based on primary resources and their processing rather than based on manufacturing exports (Figure 13.1). Manufacturing exports have only grown substantially in Mexico and Brazil. The model still suffers from low savings rates; this problem has been a factor in explaining the various financial crises over the last decade. In terms of the public sector, the tax base is relatively low and tax evasion high. As regards the private sector, sweeping reform to private pension funds has been associated with a significant rise in the savings rate in Chile (Barrientos, 1996). Other countries have not followed the example and the Chilean pension funds have suffered heavily from declining stock values since the mid-1990s. High interest rates on their own do not seem to have changed savings habits in most of Latin America. Indeed, greater access to credit in the wake of financial liberalization has appeared to fuel consumerism and high indebtedness (Sklair, 1994). As a result, Latin American 253


(a)

(b) Figure 13.1 The results of foreign direct investment in Chilean agriculture. Italian investment (through Masterplant) has created this highly mechanized nursery between Curico and Talca in the Central Valley.Trays of seeds are prepared mechanically (see Figure 13.1a), spend five days in very humid conditions and then are carefully prepared for market (in this case for large numbers of Chilean tomato farmers) in state-of-the-art greenhouses where growing conditions are rigorously controlled (Figure 13.1b). Photographs by Robert N. Gwynne 254

Labour markets transformed The neoliberal model argued that stability would produce rapid growth in production and employment. Contrary to these predictions, the generation of employment has fallen short of expectations. Labour has suffered much more heavily than holders of capital during economic restructuring. The adoption of an outward-oriented economic policy was normally associated with large increases in unemployment in key industrial sectors. The privatization of state firms was also characterized by a significant loss of labour. Growth in export-oriented sectors took much longer to generate adequate employment opportunities. This created the need to radically restructure labour markets in order to lower wage costs, to have a more flexible hiring and firing system for employers and to lower employers’ non-wage costs (as in employers’ insurance contributions). Employers were further able to reduce costs by adopting short-term contracts and by subcontracting more of their supply of parts and services (Thomas, 1996). This increased the importance of informal arrangements in productive activities as discussed particularly in Chapter 11. The state has also tried to reduce the power of trade unions in order to reduce worker protection and lower labour costs (as in Chile and Peru). Increased employment of female labour (particularly in areas of agricultural exports and assembly industries) has been another feature (see Chapters 11 and 12). Labour has increasingly suffered reduced bargaining power with the acquiescence or indeed active support of the state. These processes have often been perceived as the necessary prerequisites to produce a more flexible labour market and to create more competitive labour conditions for employers in the international market place. Overall, labour has become more vulnerable and insecure due to the growth of short-term contracts, the shift to more competitive labour markets and the decline of social security. Unless workers are skilled and/or possess a marketable knowledge, they are destined for either low wages or even worse underemployment and periods of unemployment. Social impacts of reform The transformations of labour markets introduce the wider theme that neoliberal reform has been associated with negative effects in such social areas as income distribution and poverty.These negative effects can be seen in the impact of neoliberal reforms in at least five areas of the labour market (Bulmer-Thomas, 1996b): 1 Unemployment rate: trade liberalization, fiscal and labour market reform have combined to substantially increase unemployment during the economic crisis and the process of economic restructuring. Those companies unable to compete with foreign firms in the domestic market lay off workers, governments drastically reduce the numbers of civil servants and short-term contracts make temporary unemployment more common. 255

The alternatives to neoliberalism

economies still depend heavily on external finance, either in the form of private capital flows or foreign investment. By making Latin American economies more closely integrated into the global economy, the neoliberal model has also made them more dependent on, and hence vulnerable to, global economic shifts. As with the structuralist arguments of the 1950s, Latin American economies are still concerned about the wide fluctuations in world prices for primary commodities. With the volume of resource exports growing rapidly since the end of the twentieth century, particularly in small countries, their potential vulnerability is being accentuated. Furthermore, although neoliberal economic policies have provided reasonable rates of economic growth once they have become firmly established, this has been associated with increasing inequality. Within the framework of market-oriented economics, benefits have been concentrated within the more successful entrepreneurs and executives of the private sector. Entrepreneurs specializing in exports and finance and large national companies that have been able to successfully restructure have been some of the main beneficiaries of the reforms.


2 Real minimum wage: labour market and fiscal reforms have normally operated to reduce the minimum wage in real terms – both to save government spending on social provision and to maximize employment during economic restructuring. Although the real minimum wage declines during the economic crisis, it can subsequently increase once economic growth becomes more sustained (as in Chile since the late 1980s). 3 Real wages: trade liberalization, fiscal and labour market reform have all tended to exert downward pressure on real wages – as companies face more competition from overseas firms, as governments increase wages and salaries at lower rates than inflation and as greater flexibility enters the labour market. Again, a distinct sequencing can be found with real wages declining during the first phase of economic restructuring but with slight increases occurring once the labour market subsequently tightens. 4 Wealth effects: the impact of fiscal reform, the liberalization of trade and domestic capital markets and increased inflow of foreign capital has been to substantially increase the wealth of the top two deciles of income earners – the capitalist class in general and entrepreneurs in particular. 5 The urban informal sector. This corresponds to that part of the urban economy that is small-scale, avoids regulation and covers a wide variety of activities (see Chapter 11). During the phase of economic restructuring, the informal sector tends to expand as more enterprises wish to enter the unregulated sector (Figure 13.2). However, subsequently, it can decline as it becomes easier for small-scale enterprises to comply with the more limited regulations required of a deregulated formal sector. It has been argued (de Soto, 1989) that the urban market does offer opportunities for many (as in petty commerce). However, as Thomas (1996) and Roberts (1995) point out, these are basically survival strategies and enterprises will normally remain with low levels of capital accumulation and therefore income. Increased subcontracting from larger firms to smallscale informal enterprises would be one example of such trickle-down mechanisms operating. Thus, the social impacts of neoliberal reform are both considerable and substantial, although it is important to indicate a certain sequencing – normally a period of drastic change (increased unemployment, declining wages) followed once economic growth picks up by a period of gradual improvement. Does this period of gradual improvement reduce inequalities as well? It is difficult to

Figure 13.2 The informal sector in action. Selling coca leaves on the street for local consumption in Cuzco. Weighing, packaging and retailing functions combined. Photograph by Laura Maynard 256

Poverty and the changing social provision of the state One of the strongest criticisms against the neoliberal model has been its inability to tackle poverty (Figure 13.3). Indeed, there has normally been a substantial increase in poverty as structural adjustment policies (the shock treatment) have been enforced. After the debt crisis of the 1980s, there was discussion of a social debt, society’s debt to the poor and underemployed (between 30 and 50 per cent of the population of most countries). There was the idea that this debt had to be paid alongside that of the foreign debt. However, whereas many countries have arranged the latter debt, the social debt continues. The poor are characterized by poor health and high infant mortality rates. When epidemics break out, as with cholera in Peru in the 1980s, it is the poor with their low levels of sanitary infrastructure that most suffer. The social debt remains high and even the Inter-American

Figure 13.3 Elderly beggars, Quinché, Ecuador. Photograph by Sylvia Chant 257


judge at present. In the longest historical surveys of the relationship between neoliberal reform and inequality (Altimir, 1994; Scott, 1996), there is a tendency for improvement after the crisis of economic restructuring – during which income distribution becomes considerably worse. Even so, it is the upper two deciles that have performed consistently well during economic reform, due to the great advantages enjoyed by those owning capital and earning high salaries due to business skills.The middle four deciles tend to be relatively static or even declining, while the lower four deciles remain with low and declining percentage proportions of national income. In short, given the limited evidence available all that can be concluded at present is that the neoliberal reforms have not significantly changed the high levels of income inequality and may well have aggravated it. This is particularly the case in those countries that have failed to implement major social expenditure programmes as these have shown to have a positive impact on income distribution (Stallings and Peres, 2000: 129–52). In states that have shifted from authoritarian to democratic governance, there is greater evidence of integrating social policies into neoliberal reform packages with the objective of achieving greater social equity – or neoliberalism with a human face as it has been called. The democratic transition in Chile after 1990 saw a significant shift in social priorities, as tax increases were directed to pay for greater spending on social welfare, education and health. However, there seems to be less commitment to social policies in other countries experiencing neoliberal reform.


Development Bank (DB, 1996) emphasized the need to rebuild the continent’s social infrastructure and social services. In general, the state has tried to reduce its long-term commitment to social provision and to create more market-driven forms of social support. Notable here is the case of pension reform in which the private sector takes control of workers’ contributions, the investment of those contributions and the delivery of social and pension benefits (Barrientos, 1998). This reduces the fiscal burden and shifts resources from the state to the private sector, giving greater opportunities for the private sector to invest. The private sector has also been encouraged to invest in the health and education sectors. However, this has normally been associated with two-tier systems of social welfare with only the upper and wealthier middle classes able to afford the high costs of private schools and health provision. The poorer majority is left to fend for itself within an under-funded and low-quality public service. With the reduction of social welfare provision from the state, there is an increased role for non-governmental organizations (NGOs) in helping with skills and livelihoods for the poor both in rural and urban areas. However, overall, inequality of access to social welfare has become a characteristic of the new economic model. Are there contradictions to the neoliberal model? The operation of neoliberal reforms can be seen as a contradictory process. It is achieving economic growth in certain countries but with increasing income inequality, more exclusion and less social protection. This is taking place within a Latin American continent that has shifted to democratic frameworks. However, as Gills and Rocamora (1992) argue, in the transition from authoritarian to democratic regimes in Latin America institutions have failed to broaden popular political participation in a meaningful way. In these elite democracies, social reform agendas that could have established the basis for broader popular participation and greater social equity have been abandoned (Veltmeyer and O’Malley, 2001). Indeed, Green (1995: 164) argues that the application of the new economic model ‘has ripped the heart out of democratization, turning what could have been a flowering of political and social participation into a brand of “low-intensity democracy”.’ Many question how the economic model can be orchestrated within democracies in which large numbers of the electorate are not enjoying the benefits of economic growth. Is democracy sustainable under such conditions? Or does the continuation of the economic model rely on technocratic governments? Does the model rely on the necessity for economic growth and the increasing integration within global consumerism? Has neoliberalism become responsive to local needs? Some neoliberal policies have tried to become closer to local needs by decentralising powers and functions from the central state. Reforms to local government (Nickson, 1995) have tried to provide services more responsive to local needs and with clearer local targeting. These reforms have attempted to increase efficiency while legitimating the reduced state at the local level. NGOs have in the past helped in this process. However, NGOs have tended to be captured by the state during the democratic transition. Although there are some positive factors in this (qualified personnel moving into democratic local government), there are also substantial negative factors. These include: much reduced budgets and staff; lack of alternative perspectives; losing a certain degree of autonomy due to reliance on public funding (as opposed to international organizations); being not that closely linked to local needs. However, the realities of decentralization in many countries that have attempted it (such as Chile and Bolivia) are more akin to deconcentration – the shifting of functions down to the local scale but not many powers of decision-making (Angell et al., 2001). In this way, deconcentration has been more closely linked to the idea of maintaining a small state but being able to provide cheaper and more efficient social services at the local scale without any increased resources. Despite the earlier social consensus surrounding it, largely due to its success in controlling inflation, the neoliberal model has increasingly been contested, particularly in the social area. Peasant movements in Southern Mexico and Ecuador, movements representing the urban poor in squatter 258

ALTERNATIVES TO NEOLIBERALISM Democratization and neoliberalism In the past two decades in Latin America, globalization has been intimately linked with the shift to neoliberal policies. During this period, the governments of most of the countries of mainland Latin America have integrated their national economies more closely with the global economy. The neoliberal model has restructured Latin America’s political and economic system, creating new interest groups, particularly in finance capital and exporting firms. In addition, it has become apparent that a closer relationship with the global restricts the internal room for manoeuvre of Latin American states. Opening up to the global economy has been a disciplining force for both capital and labour in Latin America. Mistaken policies, or those policies perceived as mistaken by international capital, are penalized, such as through a rapid withdrawal of finance capital. The more global framework for Latin American economies coincided with a shift from authoritarian governments (still significant in the 1980s) to democratic governance so that at present virtually all Latin American countries have governments elected through the ballot box. Thus, the Latin American state has transformed itself into a democratic system at the same time as reducing its direct influence over the economy (through privatization and deregulation) and cutting the size of the public sector through fiscal reform. To a certain extent the shift to a more representative and participatory political system may have obscured the negative social impacts of neoliberal reform (Haggard and Kaufman, 1995). Increased unemployment and poverty, an even more unequal distribution of income and a further rise in the informal sector have resulted. The technocratic components of democratic governments have attempted to explain or justify this in two ways. First, there is the argument that the negative social impacts reflect a short-term adjustment to new conditions and will be soon turned around. Unemployment and poverty will increase as the economy adjusts to new external realities and as the country forges a more competitive economy. The main problem with this argument is that adverse social impacts have not been restricted to the short term. As Sylvia Chant emphasizes in Chapter 11, the decreasing access to resources by the huge numbers of urban poor has become a long-term trend. It must be remembered that extreme inequality has long been a feature of virtually all Latin American countries. In two such apparently very different countries as Brazil and Guatemala ‘the top 10 per cent of the population amass almost 50 per cent of national income, while the bottom 50 per cent scrape up little more than 10 per cent’ (IDB, 1998: 1). The second justification concerns the ‘lack of alternatives’ argument. Latin American governments point to the political economy of neoliberalism becoming the basis for policy in other areas of the world that are identified as ‘competitor’ regions in the world economy – Eastern Europe and East Asia, in particular. It becomes paramount, according to Latin American Treasury ministers, to ‘modernize’ their economies in order to make them more competitive in world markets, so that they can better take advantage of global forces (Foxley, 1996). More recently, the need to modernize the Latin American state (Bresser Pereira and Spink, 1999) has been emphasized, particularly in terms of improving the technical competence of civil servants and improving the policy-making capability of the state. This leads one to consider the need for institutional reform in Latin America. In order to make Latin American countries more competitive in a globalizing world, neoliberal reform cannot simply be about making economies more market-oriented. The Chilean case shows that substantial and critical institutional reforms have to take place over a long period of time for a country to become more competitive and less prone to international crises. Institutional reform in Chile has stretched over a period dating from 1964 and has emerged from a wide variety of political ideologies. 259


settlements and ecological movements taking up environmental issues at the local scale provide examples of this.


Reforms to landholding, to the ownership of national mineral wealth (notably copper), to health and personal pensions, to financial institutions and to taxation have been notable examples that have occurred under governments of widely different ideologies. Chile is also regarded as having a much lower level of corruption than any other Latin American country (The Economist, 2003c). Martínez and Díaz (1996) argue that it is the combination of these profound institutional reforms with market-oriented neoliberal policies that lie behind Chile’s sustained economic success since the mid-1980s. The future relationship of the state with the process of economic change is thus a key issue. The ideological shift to limited government involvement in the economy may not produce the modernized, competitive economy that is anticipated from neoliberal reform. If this is the case, sustained economic growth will not occur – which is seen as the prerequisite for governments to address the social debt and begin to rectify the highly unequal patterns of income distribution. There is also the question of the relationship between economic integration, neoliberalism and globalization. For year 2005, it is planned that the Americas will be one large free-trade zone. This will involve integrating the USA, the dominant economy of the early twenty-first century, with a large number of much smaller and highly diverse countries in Latin America and the Caribbean. In geopolitical terms, it will be necessary to resolve the problems inherent in a strong centre–periphery pattern that will characterize economic integration of all the Americas (in contrast to other schemes which have dealt with parts of the Americas, see Chapters 3 and 4). The need for Latin American theories In view of the crisis of socialism and neoliberalism’s failure to address the social question, it is imperative to develop an alternative development paradigm that is able to tackle the problems mentioned. While it is beyond the scope of this book to develop this alternative paradigm, it is our view that a useful starting point is to build upon Latin America’s contribution to development theory while considering other contributions as well. These are principally the structuralist and dependency theories. Latin America’s structuralist theory, sometimes referred to as the centre–periphery paradigm, was mainly developed by staff working in the United Nations Economic Commission for Latin America (ECLA) during the 1950s and 1960s under the inspired leadership of Raúl Prebisch. Some time ago ECLA changed its name to Economic Commission for Latin America and the Caribbean, hence ECLAC. In Spanish, the acronym remained CEPAL – Comisión Económica para América Latina y el Caribe. Meanwhile, Latin America’s dependency theorists, writing mainly in the late 1960s and 1970s, were more widely dispersed throughout a variety of institutions all over the region. Both theories grew out of a critique of existing development paradigms, which these authors saw as being unable to uncover, let alone deal with, Latin America’s problems of underdevelopment and development. While structuralism argued in favour of an inward-directed development policy largely through importsubstituting industrialization, dependency theory proposed a new international economic order and, in one of its strands, a transition to socialism as a way out of underdevelopment. Structuralism might provide more relevant ideas for thinking about alternative development strategies for those with a more pragmatic bent while for those with a more radical mind and long term (and possibly utopian) vision might find the ideas of dependency theorists more appealing. Structuralism and the structuralist strand within dependency sought to reform capitalism both internationally and nationally while the neo-Marxist version of dependency strived to overthrow capitalism as socialism was seen as the only system able to resolve the problems of underdevelopment. Given the collapse of the East European socialist system and China’s transition from a planned to a market economy, the dependency’s socialist alternative is unable to command much support in the less developed world, while the structuralist view of reforming the capitalist system is seen as a more feasible option for those searching for an alternative to the existing neoliberal model. 260

It is important to emphasize that the neoliberal model has evolved – from an often narrow and economistic interpretation to the so-called ‘Washington Consensus’ (Williamson, 1990) and on to a more social democratic interpretation in Chile (Ffrench-Davis, 2002) and Brazil (Bresser Pereira, 1996; Cunningham, 1999). Indeed, some form of convergence between neoliberalism and structuralism seems to have occurred in some parts of Latin America. There is a reappraisal of the structuralist theories of the 1950s and 1960s and an emergence of a neostructuralist position since the late 1980s. For some key writings on neostructuralism, see Rosales (1988), Ffrench-Davis (1988, 2000), Sunkel and Zuleta (1990), Fajnzylber (1990a), ECLAC (1990, 1992a, 2002a), Lustig (1991) and Ramos and Sunkel (1993). For a comparison between neoliberalism and neostructuralism, see Sunkel (1994), Bitar (1988) and Muñoz (2001). For a critical assessment of neostructuralism, see van der Borgh (1995) and Harris (2000). It could be argued that neostructuralism has gained some influence on government policy in Latin America, such as with the Concertación regimes of Chile since 1990 and during the presidency of F. H. Cardoso in Brazil (1995–2002). Given that Fernando Henrique Cardoso is considered as one of the key figures of dependency theory, it is useful to evaluate his own record when in government. As a dependency writer, Cardoso preferred to speak of ‘analysis of concrete situations of dependency’, rather than of a theory of dependency, as he was sensitive to the differences between dependent countries as well as being sceptical of grand theories. He also coined the term ‘dependent development’ as in his view dependent countries could develop and were not condemned to a process of ‘development of underdevelopment’ as argued by André Gunder Frank, who was seen by some, especially in the English-speaking world, as the key figure in the dependency movement. While Frank continued his life as an engaged academic, Cardoso, as has been noted, moved into politics, becoming president of Brazil from 1995 to 2002. While Frank has remained a fierce critic of capitalism and globalization, Cardoso is viewed by some analysts as having embraced both neoliberalism and globalization. As Birdsall and Lozada (1996: 17, emphasis in original) forcefully put it: ‘Far from wanting to get out of the international economic system, Latin America is taking all the steps necessary so as not to be left out. Brazil’s Fernando Henrique Cardoso, once a leading proponent of dependency theory and now a champion of market reform, exemplifies this shift.’ Cammack (1997: 242), ironically observes, that ‘Cardoso the sociologist remains the most acute critic of Cardoso the president’ and once in power he ‘has stripped the social democratic promise from his project, and reduced it to a recipe for the consolidation of neoliberalism in practice’. Indeed, for Petras and Morley (1990: 145–56, 1992: 159), this metamorphosis is symptomatic for most Latin American left-wing intellectuals who, in their view, have retreated from Marxism to liberal/social-democratic views. ‘Cardoso even said, in front of the television cameras, “Forget everything I have ever written.” ’ (Branford, 2003: 75). Nevertheless, Cardoso has insisted several times that he is not a neoliberal. In his view, globalization requires that the state be reformed by intervening less but more effectively and by privatizing those state enterprises that can be run more efficiently by private capital. In Cardoso’s (2001: 246) view, this does not conflict with the traditional ideals of the left, although it seems paradoxical. He (2001: 257) defends himself against these charges by arguing that ‘the timing and motivation of the politician are essentially different from those of the social scientist. The politician cannot wait for the sedimentation of knowledge in order to act. Should he do so he will be overcome by events.’ He argues that globalization cannot be avoided, offers opportunities, and although it conditions government action there is room for manoeuvre. Most left-wing critics agree with Branford’s (2003: 76) view that ‘by 1990 Cardoso had been completely converted to neoliberalism’. But in the view of another Brazilian analyst: ‘It becomes abundantly clear that policy developments in Brazil during Cardoso’s administration are home-grown, the product of the country’s unique situation and modus operandi, having little in common with neoliberalism per se or its ideology’ (Cunningham, 1999: 82). 261


Neostructuralism and Cardoso


However, Cardoso (2001: 248) does admit that his views have changed: When I wrote my books on dependency theory, the underlying hypothesis was that the international process of capitalism adversely affected conditions for development. It did not prevent development, but made it unbalanced and unjust. Many considered economic inward-orientation was a possible form of defence against the alternative of an international integration regarded as risky and dangerous. This view has changed. We have to admit that participation in the global economy can be positive, that the international system is not necessarily hostile. But we should work carefully to seize the opportunities. Successful integration into the global economy depends, on the one hand, on diplomatic articulation and adequate trade partnerships, and, on the other, on the individual homework of each developing country based on a democratically built consensus. Thus, Cardoso maintains that it is possible to make globalization work for national development. Whether he successfully accomplished such a challenging task during his presidency is doubtful. For critics like Cammack, Petras and Morley, Rocha, and Theotonio dos Santos (1998; 2002b) Cardoso certainly has not succeeded. Indeed, many analysts conclude that previous state-led economic performance was clearly superior to Cardoso’s market-led record. By forgoing his earlier dependency analysis, he under-estimated the global as well as the domestic political realities that greatly limited and undermined his development project. Paradoxically during his two-term presidency, having been reelected in 1998, Brazil’s dependency has deepened while economic growth remained disappointingly low. According to Branford (2003: 76): By the time Cardoso ended his eight years in government, international capital had taken over huge areas of the Brazilian economy and the country was caught in a foreign debt trap of unprecedented proportions. Unemployment – and crime – had reached record levels. Indeed, the country had become more dependent than ever on international financial capital leaving the country at the mercy of speculators, and more vulnerable to external shocks, thereby further eroding Brazil’s capacity for independent and sovereign decisions. It is ironic that the foremost theoretician and critic of dependent development should have brought about as president of Latin America’s biggest economy a profound denationalization and its highest dependence ever on transnational corporations and international financial institutions. As a theoretician he should have foreseen the contradictions of his project, which were to scupper his desired goal of enhancing Brazil’s autonomy as a key regional power in the global scene. ‘Thus, once Cardoso was in power, the question of dependency and development was turned on its head’ (Rocha, 2002: 10). Neostructuralism as an alternative Thus, to characterize the policies pursued by the Cardoso government as neostructuralist would be going too far, even though this might have been their intention (Petras and Leiva, 1994; Cammack, 1997). Subsequently, with the election of President Lagos in 2000 in Chile the neostructuralist dimension of Chile’s Concertación government has gained more prominence. Then, with the election of Luiz Inácio ‘Lula’ da Silva, to the presidency of Brazil in 2002 a shift to neostructuralist policies might happen in view of his priority to fight poverty and his land reform programme. Some authors have dismissed neostructuralism as being merely the human face of neoliberalism and its second phase (Green, 1995: 189) or a variant of neoliberalism (Harris, 2000; Petras and Veltmeyer, 2001a), which can be characterized as ‘neoliberal populism’ (Demmers et al., 2001). Leiva (1998: 35) argued that neostructuralism can be seen as a logical continuation of the neoliberal model: neostructuralism’s historical opportunity appears once it is necessary to consolidate and legitimise the new regime of accumulation originally put in place by neoliberal policies. Neoliberalism and neostructuralism, therefore, are not antagonistic strategies, but rather, due to their differences, play complementary roles ensuring the continuity and consolidation of the restructuring process. 262

263


Neostructuralism, despite recognizing the asymmetries in the world system, sees the need to keep on being part of that system. It is certainly true that there has been a shift of structuralism towards neoliberalism as it has taken on board some elements of neoliberalism but at the same time it has retained some of the core structuralist ideas – hence, the label neostructuralism. Furthermore, there are differences, some of which have already been mentioned when discussing the contemporary relevance of structuralism and dependency theories in Chapter 1. These differences concern mainly their respective views on the relationship between developed and developing countries as well as between state, civil society and the market.To what extent these differences are significant enough for arguing that neostructuralism constitutes a distinctive enough alternative to neoliberalism is open to debate. The neoliberal view is that further liberalization of the world economy is required and that this will benefit the developing countries considerably. In contrast, neostructuralists, as well as dependency writers, view the world economy as a hierarchical and asymmetric power system which favours the centre countries and the TNCs in particular. They are thus more sceptical about further liberalization, believing that it will act to enhance the inequalities between and within countries; powerful global groups located in developed countries ensure that the benefits of global liberalization will be channelled in their favour. As for the relationship between state, civil society and the market, neostructuralists give a more important role to the state in the process of social transformation and are eager to involve the disadvantaged groups of society in this process, particularly as it has tended to exclude them. Meanwhile, neoliberals desire a minimalist state, putting the market at centre stage as they believe it to be the most effective transformative force; the less constraints that are put on the free operation of the market, the better for the national economy, society and polity. Neostructuralism should not be interpreted as the structuralists’ surrendering to neoliberalism but rather as an attempt to come to terms with the new reality of globalization and to learn from the successful development experience of the East Asian NICs. In this sense, structuralism is showing an ability to adapt to changing historical circumstances rather than remain frozen in the past. Despite the shortcomings of neostructuralism, it appears as the only feasible and credible alternative to neoliberalism in present historical circumstances. The neostructuralists’ interpretation of the East Asian NICs experience also differs from that of the neoliberals. While neoliberals hail it as a model of free-market economics, neostructuralists emphasize the key role that the state played in their development process.The main lesson neostructuralists take from the East Asian NICs is the need to selectively integrate into the world economy and create competitive advantages through well-designed and flexible industrial policies (Fajnzylber, 1990c). Such industrial and export policies try to continually exploit niches in the world market and shift upstream to more skill-intensive, technologically advanced and higher value added products (see Figure 13.1). Policies to improve the knowledge base of the economy and above all the national technological capability are seen as crucial for achieving sustainable long-term growth. Thus, the importance of education is stressed, as well as improving state capacity and income distribution, and reforming the unequal land tenure system as these factors were key ingredients in the success of the East Asian NICs (see Kay, 2002a). Neostructuralism gives more importance to market forces, private enterprise and foreign direct investment as compared to structuralism but argues that the state should govern the market through strong regulatory bodies. In neostructuralist thinking the state plays a less pivotal role in development than it did under import substitution industrialization, as the state no longer undertakes direct productive activities through public ownership of industrial or other enterprises.The ability of the state to direct the economy is limited as protectionism and subsidies are used only in a restricted and sporadic fashion. The imperative of achieving and maintaining a macro-economic balance is recognized, as now price stability and fiscal stability are seen as conditions for growth, which was not necessarily the case in the past. Another key element of neostructuralism is its greater concern for


equity and poverty reduction, requiring special action by the state and involving collaboration with NGOs. The position with regards to the world market is much changed as export orientation rather than import substitution is now the strategic direction that the economy has to take. But this shift towards world markets by the neostructuralists is framed within a strategy of ‘development from within’ as argued by Sunkel (1993: 8–9): It is not demand and markets that are critical. The heart of development lies in the supply side: quality, flexibility, the efficient combination and utilization of productive resources, the adoption of technological developments, an innovative spirit, creativity, the capacity for organization and social discipline, private and public austerity, an emphasis on savings, and the development of skills to compete internationally. In short, independent efforts from within to achieve self-sustained development. [emphasis in original] The world market is not seen as a panacea. But domestic transformations in the country’s productive structure and institutions are seen as essential for self-sustained development. These transformations should be driven internally according to national priorities.The greater the internal capacity for change, the greater the likelihood that the country will be able to take advantage of the possibilities offered by globalization and improve its ability to limit any possible negative effects of globalization. Another key element in neostructuralism is the achievement of competitive advantages in certain key productive areas in the world market by selective liberalization, integration into the world economy and an export-oriented industrial and growth policy. Neostructuralists are keen advocates of ‘open regionalism’ which they hope will enhance Latin America’s position in the world economy while at the same time reducing its vulnerability and dependence, see ECLAC (1994; 1995). Previous attempts at regional integration in Latin America, such as the Latin American Free Trade Association (LAFTA) and the Andean Pact were more inward-looking as they were an extension of a domestic ISI strategy to a regional level (see Chapter 3). Instead, commercial integration through ‘open regionalism’ is seen as complementing the outward-orientation by increasing international competitiveness and exports (Sideri, 1997). Neostructuralist writings in recent years from the ECLAC stable have attempted to deal with globalization phenomena (ECLAC, 2002a). It is argued that globalization in the current neoliberal phase, far from leading to convergence as asserted by neoliberals, reproduces and sometimes exacerbates four major asymmetries: 1 in technical progress with the extreme concentration of innovation and technological capability in the centre or core economies and largely under the control of TNCs; 2 in financial vulnerability as peripheral or developing countries are far more exposed to external shocks than in the past due to greater financial dependence with its associated volatility; 3 trade vulnerability has intensified as a result of fluctuations in demand levels and terms of trade, partly due to the continued deterioration in commodity prices; 4 in the economic mobility of factors of production. While the neoliberal reforms have greatly enhanced the mobility of capital, the mobility of labour continues to be restricted. This asymmetry skews the distribution of income in favour of capital, and places labour at a disadvantage, especially in the periphery or developing countries due to their surplus of labour. To overcome these asymmetries, the neostructuralists (ECLAC, 2002a) propose a global agenda that includes measures to do the following: • enhance the transfer of technical progress from the centre to periphery countries; • promote the development of institutional, social, human and knowledge capital so as to strengthen endogenous growth in countries of the periphery; • ensure adequate participation in decision-making at the international level; 264

The neostructuralists have renewed their equity commitment and added a new focus to their analysis with their emphasis on citizenship (ECLAC, 2001). In this study the neostructuralists lament that globalization and neoliberalism have eroded social cohesion and solidarity as well as collective action for the common good. The neoliberals’ emphasis on market relations has fragmented and individualized society. Neostructuralists thus propose to reconnect the individual to society by developing citizenship that implies a reciprocal commitment between public institutions and the individual. For this purpose the state should promote education, employment, health and social security among the citizenry. The enhancement of social cohesion implies the individual’s participation in public life and in the decision-making processes which affect livelihoods and the country’s future.The increasing alienation of the people from politics has to be reversed. It also calls for the abolition of discrimination due to sex and race and reduction of the gap between the included and excluded individuals or groups. It is only by strengthening citizenship that it is possible to gain sufficient social cohesion and political legitimacy to undertake the major transformations required for achieving equitable and sustainable development. Chile: from neoliberalism to neostructuralism? Chile is the first and most aggressive neoliberal reformer in Latin America and probably in the world. It had the best economic performance over the last quarter century in Latin America (UNDP, 2002: 190–3). In the year 2000 Chile was ranked 38th out of a total of 173 countries in the human development index which measures not just economic performance but also life expectancy and educational achievements (ibid., p. 149). Within Latin America only Argentina was ranked higher (34th) but since the deep crisis of 2001–2 it has fallen well below Chile’s ranking. But is Chile’s relative economic success the result of the neoliberal reforms? This is indeed an issue for debate. Readers will find throughout the text many references to the Chilean case (for example, in Chapter 3) allowing them to form their own opinion. The initial set of reforms, from the military coup on Chile’s 11th of September in 1973 until the economic crisis of 1982–83, was indeed cast within a highly doctrinaire and authoritarian neoliberal mould. Thereafter, the government shifted to a more pragmatic set of neoliberal policies that introduced some economic controls and social policies. With the democratic transition since 1990 the ‘Concertación’ governments have attempted to shift to a ‘growth with equity’ or neostructuralist set of policies. The Concertación governments continued to build upon the economic success of the Pinochet dictatorship, achieving even higher rates of economic growth while at the same time halving poverty, largely as a result of substantial increases in social expenditure (Stallings, 2001: 46–53). In 2001 only Uruguay had a lower level of poverty than Chile in Latin America (ECLAC, 2002c: 39). However, the Concertación governments have so far failed to deliver on equity. Chile still has one of the worst income inequalities in Latin America (ibid., 227–8). Thus, the achievement of greater equity continues to be Chile’s main challenge. Despite Chile’s economic success there exists a high degree of insecurity among the population as revealed by the pioneering studies of the Chilean office of the United Nations Development Programme (UNDP, or PNUD in Spanish). Human security refers to objective conditions as well as to the subjective experiences of people. The survey found widespread feelings of concern in all the six dimensions of human security it measured: delinquency, employment, social provision, health, information and sociability. Also ‘fear of the other, fear of social exclusion and fear of meaninglessness were expressed’ (Kirby, 2003: 121). A surprising finding of a subsequent UNDP survey is that over half 265


• gradually lower the barriers to labour migration, particularly from countries of the periphery to those of the core; • decrease financial volatility; • reduce the sizeable production and export subsidies of agricultural commodities in the centre or core economies.


of the people interviewed felt insecure economically and three-quarters expressed negative sentiments about the current economic system. What is less surprising is that mainly individuals of a lower socio-economic level and rural people expressed such views (PNUD, 2002: 257–8). Perceptions do matter. For example, Chile has the lowest rate of homicide and one of the lowest levels of crime in Latin America and yet Chileans express a great fear of crime (Dammert and Malone, 2003: 85).This reveals that the fear of crime is an expression of the economic and social insecurities felt by many Chileans, especially by those left behind by the rapid process of modernization. The 1998 UNDP Chile report (PNUD, 1998) provoked a debate among some members of the ‘Concertación’ coalition of political parties. One group, labelled the ‘autoflagelantes’ (‘self-flagellators’ or ‘self-chastisers’), argued that the people’s feelings of unease, anxiety and insecurity could not be brushed aside as an inevitable but transitory outcome or byproduct of the country’s rapid process of modernization as had been done by the other group, the ‘autocomplacientes’ (the ‘self-satisfied’ or ‘selfcongratulatory’). The autoflagelantes were far more self-critical and demanded that the government pay greater attention to economic inequality, vulnerability and social justice (see Chapter 8). Both groups continued to stress the need for growth (Van der Ree, 2003). Is it possible to achieve growth with equity in today’s globalizing world? The Chilean case has so far shown how difficult it is to attain both goals, especially without shifting more decisively towards a new national and international political economy. Outstanding problems to be addressed In our view, there are four major issues that need to be addressed by policy-makers and society at large in contemporary Latin America: • Inequality in its various dimensions, such as income, and access to resources such as land, finance, technology, education and social services. Also inequality arising from discrimination on the grounds of ethnicity, gender and class. By addressing these inequalities, a major source of poverty will be removed. • Vulnerability and insecurity that have been exacerbated by the neoliberal transformation and globalization. The economy and individuals are more vulnerable to changes in the world market conditions due to the increased exposure of the region to international trade and the volatility of international capital. The power of TNCs and international financial institutions over policy-making and the domestic economy has greatly increased. Similarly, social groups (such as industrial and rural workers), households and individuals have to deal with far greater insecurities than in the past as the state has dismantled many of the protective social regulations and provisions. • Lack of an alternative development project to tackle inequalities, vulnerabilities and insecurities. For this reason, it becomes necessary to develop ideas as widely as possible for an alternative project that begins to deal with these deeply embedded problems. This implies deepening democracy, as this project cannot be constructed from above but needs to build upon demands and proposals emanating from below. It implies a political system that is able to forge a consensus and to implement a transformative project that requires good governance and state capacity. These problems cannot be resolved in the short term and thus a long-term vision has to be forged, but one which clearly sets out a sequence and a timeframe for dealing with these problems. Lula’s ‘Campaign against Hunger’ may be seen as one step in this direction. • The exclusionary globalization process in which a minority are the winners but the majority are the losers. The paradoxical character of neoliberal globalization is that while it incorporates a few groups, regions and economic sectors to the benefits of globalization, it at the same time excludes many groups, regions and productive sectors, thereby worsening their situation. To change this state of affairs requires a radical reform of the global system. The restructuring of the relationships of Latin America to the global system will require reforming various international institutions, such as the WTO, the IMF and the WB. It will also require creating new institutions so as to forge a 266

It is thus not surprising that the neoliberal model is being contested, at the theoretical level but particularly by social movements. The indigenous movements in Chiapas in Southern Mexico, in Ecuador and in Bolivia, the landless peasant movement in Brazil, movements representing the urban poor in squatter settlements and ecological movements taking up environmental issues at the local scale provide examples of this socio-political contestation. The neoliberal model is also being contested at the theoretical level with increasing force. One of the most influential critics has been Joseph Stiglitz (2002), given that he was Chief Economist at the World Bank until his resignation in 2000 and is a Nobel Laureate in Economics. In Latin America the neoliberal paradigm has increasingly been criticized from a variety of perspectives but the main theoretical challenge continues to be from a neostructuralist perspective. Charles Gore (2000) detects the emergence of a latent ‘Southern Consensus’ which he views as the convergence between neostructuralism and the distinctive analysis of the United Nations Conference on Trade and Development (UNCTAD) of the East Asian development experience and the world economy in its annual Trade and Development Reports since 1994. Alternative paradigms have not yet managed to gain hegemony, although it is possible that if the ‘Lula’ government succeeds in its transformative project, this may further their influence. What is no longer in doubt though is that the neoliberal paradigm no longer commands the influence it once had. It has already been reshaped in recent years, with a shift in emphasis to social policies and a gradual appreciation that the neoliberal recipe needs to be adapted to different national contexts – one size does not fit all. Latin America’s outstanding problems call with increasing urgency for an alternative political economy to contemporary neoliberal globalism. It remains to be seen if a possible Southern Consensus can emerge and begin to tackle the key outstanding problems of poverty, social exclusion and equity.

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more egalitarian international system in which the developing countries have as much a voice as the developed countries in designing the reformed international system. The construction of such a new inclusionary globalization will be greatly facilitated if the various Latin American countries are able to forge a common project. This might at first be a minimalist project and achieved in the first instance by building upon existing regional associations like Mercosur, the Andean Community, and the Central American Common Market as well as developing linkages between the subregional groupings of countries.

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310

Index

actors civil 193, 194, 195, 196–8, 202, 203, 204–5, 207, 208 external 149 foreign 189 institutional 193 local 197–8 social 193, 194, 196–7, 200, 202, 203, 207, 232 state 142, 146, 152, 155 Africa-Caribbean-Pacific (ACP) countries 75, 76 agriculture 51, 58, 60, 73, 75–6, 77, 78, 83, 84, 97, 100, 105, 109, 110, 117, 120–9, 146, 178, 179, 182, 186, 203, 223 assets 245–6 competitiveness 83, 234–5, 243, 246, 249 exports 74, 75–6, 77, 83, 122, 124–8, 234–5, 236–8, 243–5 and globalization 122, 126, 232, 234–40 non-traditional agricultural exports (NTAEs) 83, 122, 124–8, 234–5, 236–8, 243–5 power 245–6 reforms 232–3, 234–40, 242, 244, 245, 246 subsidization 265 agroindustry 51, 58 Allende, Salvador 147, 253 Alliance for Progress 145–6 Amazon 120, 129, 130, 131, 133, 197, 204, 247 amnesty laws 160–1 Andean Community 39, 40, 41, 267 Andean Group 67 Andean Pact 264 Andean region 9, 11, 90, 98, 99, 140, 185–8, 189, 203, 207 anti-globalization movements 5 Argentina 8, 12–18, 27, 28, 32, 37, 39, 40, 45, 48, 55, 57, 58, 63, 95, 96, 97, 98, 100, 101, 103, 115, 144, 146–50, 152–5, 158–60, 163, 164, 168, 169, 190, 198, 201, 202, 216, 225, 241, 265 aristocracy 147 Asia 9, 10, 11–12, 16, 19, 32, 44, 51, 52, 111, 253, 267 assembly plants 82

see also maquilas assets 176–8, 181, 183, 184–5, 186, 210–12, 241, 245–6 Association of Caribbean States (ACS) 67, 88 asymmetries 6, 7–9, 10–13, 41, 56, 78, 79, 89, 146, 263, 264 authoritarian regimes 34, 141–55, 158–63, 167–8, 193–6, 198, 202, 259 autocomplacientes 266 autoflagelantes 158, 266 Aylwin, Patricio 218 Aztecs 94 Bahamas 84, 88 banana exports 74, 75–6, 77, 234 Barbados 39, 77 barrel children 87 Belize 87 biodiversity 118–20, 128, 129 Bishop, Maurice 74 black Latin Americans 200 black market 85, 86 Bogotá, Colombia 95, 100, 111, 112, 113, 115 Bolivia 8, 12, 27, 39, 42, 50, 51, 57, 117, 122, 124, 166, 178, 198, 203–5, 215–17, 241, 246, 248, 267, 1857–91 boom and bust economies 45, 86, 123 bracero programme 1942 106 Brady Plan 47 Brazil 8, 10, 12–14, 17–19, 27, 28, 31, 32, 35, 37, 39, 44, 50, 51, 57, 58, 60, 61, 63, 69, 95, 97, 98, 121, 128–31, 133, 134, 136, 144, 146–8, 150–3, 155, 157, 160–2, 164, 167, 168, 180, 183, 194, 199, 201, 205, 208, 218, 223, 225, 233, 236, 238, 246–8, 253, 259, 261–2, 267 Britain 43, 76, 84 see also United Kingdom British Virgin Islands 84 Brundtland Commission 129 Bucaram, Abdalá 167, 168 Buenos Aires, Brazil 93, 94, 95, 101, 199, 201 bureaucratic-authoritarianism 147–9 Bush Administration 90 business confidence 45, 46

campesinos 233–4 Canada 39, 86, 87, 108 capital 146, 167, 240, 255, 259 cultural 176, 183 financial 187, 210, 211, 241 flight 45 foreign 46, 84, 146, 262 formation 51 human 176, 181, 182, 183, 184, 186, 187, 210, 211–12, 230, 241, 264 institutional 264 knowledge 264 mobility 12–13, 14, 20, 84, 264 natural 176, 183, 210, 211, 241 produced/physical 176, 181, 183, 210, 211, 241 social 176, 181, 182, 183, 186, 187, 210, 211, 212, 229, 241, 264 switching 178 capitalism 23, 24, 84–6, 142–5, 148, 260, 262 consolidated 150 dependent 73–4, 91 failure in Latin America 26 and globalization 5, 6 political crisis of 25 triumph 253 capitalist farms 232, 233, 234, 235, 240, 241, 243–4 capitalists 19, 20, 142, 143, 152, 256 Caracas 95 Carajás 130 Cardoso, Fernando Henrique 16, 164, 261–2 Caribbean 3, 8, 9, 10, 11, 39, 41, 173, 190, 260 see also Central America and the Caribbean Caribbean Basin Initiative (CBI) 67, 74, 83 Caricom (Caribbean Community) 39, 40, 75, 87–8, 89–90 Carifta 39 Castro, Fidel 85 Cayman Islands 10, 84 Central America 9, 11, 37, 39, 41, 95, 98, 99, 100, 144, 150, 157, 167, 181, 185, 197, 198, 200–1 Central America and the Caribbean (CA/C) 67–91 Central American Common Market (CACM) 39, 40, 87, 88–90, 267 311

Index

centre-periphery 7–9, 11, 13, 26, 63, 78, 260, 264, 265 centre/core 123, 263, 264, 265 Chamorro, Violeta 215 Chávez, Hugo 37, 142, 157, 167 Chiapas, Mexico 107, 108, 124, 267 Chicago Boys 125 childcare 227, 230 Chile 8, 10, 13, 15, 16, 19, 27, 28, 31–4, 36–7, 39, 41–3, 49–52, 55, 57–60, 63, 69, 96, 97, 102, 104–6, 109–11, 115, 120, 122–8, 130, 131, 144–8, 150, 152, 155, 157–66, 168, 179, 184, 190, 199, 202, 205, 215, 218, 233, 235, 236, 242, 244, 253, 257, 259–62, 265–6 China 10, 44, 86, 260 Christian base communities (CEB) 200, 205 Christianity 149 see also Protestantism; Roman Catholic Church Cisne Dos, Ecuador 181, 183 citizenship 194–5, 196, 199, 203, 206–7 civil society 149, 150, 159, 161, 162, 163, 164–5, 174, 178, 193–208, 242–5 definition 194 and globalization 190, 193, 194, 206–7, 208 and neoliberalism 193, 194, 197–8, 203, 205–6, 208 neostructuralist view of 263 weak 33–4 civilization 24–5 class 90, 142–4, 145, 146–7 see also aristocracy; elites; peasants alliances 147, 152–4 capitalist 19, 20, 142, 143, 152, 256 middle 19, 20, 25, 142, 143, 144, 145, 146, 147, 152, 153, 162 tensions 142–3, 146–7, 148, 151, 152 upper 148, 152, 153, 162 working 19, 20, 25, 81, 146 clientelism 33, 207, 208 cocaine/coca 90, 111, 122 coffee 179, 234, 236, 238 collective land rights 203, 206–7 Collor de Mello, Fernando 162, 167 Colombia 28, 32, 37, 39, 49, 50, 51, 57, 58, 73, 87, 88, 89, 95, 97, 99, 100, 104–6, 111–14, 115, 122, 144, 146–7, 149, 150, 154, 155, 181, 184, 187, 190, 203, 206, 218, 225, 237, 246, 248 colonialism 24, 34 communications technology 79, 100, 207, 215 comparative advantage 19, 126, 136, 244 competitive advantage 264 competitiveness 6, 61, 83, 91, 234–5, 243, 246, 249, 259, 260 Concertación regime 15, 158, 167, 261, 262, 265, 266 Confederation of Indigenous Nationalities of Ecuador (CONAIE) 184, 247 conflict 124, 134, 142–3, 151, 227–8, 246–7 see also land struggles 312

conservation 128, 180, 206 constitutions 203–4, 248 consumerism 9, 13–14, 27, 32, 120, 162–4 consumption, minimization 212 contagion 12 control 124 copper 51, 58, 120, 123, 124, 126, 147 corporatism 195, 207, 208 corruption 162, 166–7, 169, 203 Costa Rica 37, 39, 51, 60, 80, 87, 89, 117, 121, 132, 144, 155, 166, 167, 175, 178, 181–2, 185, 218, 220, 224, 246 cotton 234, 236 Council for Mutual Economic Assistance (CMEA) 84 Counter-Reformation 29, 31 criminality 167, 266 Cuba 73, 74, 84–6, 87, 90, 96, 97, 146, 219, 225, 226, 253 cultural change 22–38 cultural difference 194, 198–202 cultural institutions 28 cultural resistance 31 culture 78–9 da Silva, Luiz Inácio 13, 18–19, 37, 157, 164, 247, 262, 266, 267 debt 187 crisis (1980s) 12–13, 18, 27, 45–7, 48, 49, 67, 76–7, 89, 97, 102, 103, 105, 106, 108, 111, 113, 115, 159, 215, 257 foreign 77, 118, 159, 262 forgiveness 47 social 158–9, 257–8, 260 socialization of private 45–6 ‘Decent Work’ agenda 228–9 deconcentration 258 deforestation 128, 247 democracy 37, 91, 141–55, 157–69, 193, 202, 257, 258, 266 and civil society 202, 207 consolidated 149–51, 152, 153, 169, 218 disenchantment with 166–7 and neoliberalism 259–60 and the peasantry 243, 246, 247 Schumpeterian view 169 technocratic 164–6, 168, 169, 259 democratic governance 17, 18, 19 democratization 31, 151, 153, 259–60 denationalization 6 dependency 262 economic 46, 69–74, 75, 76, 91, 124 export 120–2, 136, 255 financial 12–13 geopolitical 73 technological 13–14 dependency theory 11–14, 17, 19, 146–7, 148, 154–5, 173, 174–5, 176, 260, 261 depoliticization 159–62, 163, 167, 169 Depression 25, 43, 46 deregulation 218 deterritorialization 87 development 141–55 see also sustainable development associated dependent 146 from within 264

and livelihoods 175–9, 185–8 socialist routes 73–4, 84–6 uneven 63, 65, 195, 198–9 dictatorships 27–31 see also authoritarian regimes; military regimes disappeared persons 200–1 ‘discouraged worker’ effect 220 discrimination 199, 265 see also racism diversification 244–5 Dominica 69, 76, 81, 82 Dominican Republic 77, 82, 87, 88, 223, 225, 226, 227 drug economy 90, 104, 111, 112, 113, 122, 150, 167 Dutch disease 123 East Asia 9, 10, 11–12, 16, 19, 44, 51, 52, 263, 267 Eastern Europe 10, 16, 219, 260 economic crisis 43–9, 84–6, 142, 143, 146, 148, 152–3, 193, 194, 210, 211–14, 215, 218, 265 growth 43, 44, 45, 47, 48, 50–2, 58, 63, 65, 85, 86, 95, 96, 98, 105–6, 110, 111, 115, 118, 120, 126, 129, 131, 133, 136, 137, 143, 144, 147, 151, 234, 255, 258, 260, 262, 266 integration 39–41, 45, 46, 59, 78, 91, 102, 148, 260, 262 reform see neoliberal economic reform spaces 57–63, 65 stability 17, 97, 164, 165–6 Economic Commission for Latin America (ECLA) 26, 260 Economic Commission for Latin America and the Caribbean (ECLAC) 166, 260, 264 ecosystems 120, 127, 136, 206 Ecuador 8, 27, 39, 51, 55, 76, 96, 100, 120, 149, 151, 153, 157, 166, 167, 168, 179, 181, 183–5, 187, 190–1, 195, 199, 200, 203–8, 237–8, 246–8, 258, 267 education 184, 186, 194–5, 214, 229–30 El Salvador 8, 39, 72, 87, 89, 97, 100, 161, 205, 218, 226, 233, 246 elites 30, 144, 145, 149, 150, 151, 152–3, 154, 155, 175 employment 59, 60, 210–30, 255 see also labour conditions 91, 217–18, 220–1, 228–9, 232 neoliberal reforms 52, 54–6, 57 squeeze 240 state 19, 56, 215–16, 219, 255 urban 215–28 enclave economies 123–4 energy 99, 122, 123–4, 128, 130 Enlightenment 24, 29, 31, 34, 194 entrepreneurs 20, 43, 45, 56, 146, 158, 176, 229, 253, 255, 256 environment 120, 128, 180, 206, 267 browning of 131 movements 246–9, 259, 267 and sustainable development 117, 118, 127, 128–32, 136, 137

families 99 see also households farmers 85, 232 capitalist 232, 233, 234, 235, 240, 241, 243–4 large 127, 233 medium 127, 232, 233 parceleros 233, 244 small 83, 124, 126–7 feminism 200 fertility 96, 113 firms 57–9, 65 see also transnational corporations fishing 51, 60, 117, 118, 123, 128 flower industry 100, 179, 237, 238 food import substitution (FIS) 244–5 food security 124 forestry 51, 117, 120, 123, 130, 132 plantation 60 France 88 free market (laissez-faire model) 31, 123, 150, 151–2, 159, 176, 194, 195, 202–3, 205, 207, 242–5, 263 see also neoliberal economic reforms Free Trade Area of the Americas (FTAA) 39, 41, 88, 89 fruit industry 124–8, 179, 234, 236, 237, 244 Fujimori, Alberto 18, 162, 167, 168, 203

Index

equity 36, 145, 265, 267 see also asymmetries; inequalities ethnic rights 203–4, 206 see also indigenous peoples; racism Europe 22, 23, 24, 25, 26, 29, 43, 74, 75–6, 87, 95, 97, 112, 145, 147, 188, 190 see also Eastern Europe European Economic Community (EEC) 88 European Union (EU) 7, 10, 69, 75, 76, 78, 123, 150 exchange rates 13, 48, 50, 123 exclusion 36, 267 export processing zones (free zones) 82 exports 10–11, 13, 24, 31, 57, 58–9, 60–1, 63, 65, 67–8, 69, 73, 75–6, 77, 78, 80–3, 84, 88–90, 97, 100, 102, 104–5, 109, 110, 113, 114, 115, 120–3, 130, 179, 182–3, 215, 253 agricultural 74, 75–6, 77, 83, 122, 124–8, 234–5, 236–8, 243–5 competitiveness 50 dependency 120–2, 136, 255 diversification 51, 52 growth 9, 51–2, 54, 59–60 industrial 121 manufacturing 60, 61–3, 105, 253 mineral 105, 111 non-traditional (NTE) 19, 60–1, 78, 81–3, 89, 91, 117–18 non-traditional agricultural (NTAE) 83, 122, 124–8, 234–5, 236–8, 243–5 trade reform 51–4 volumes 43, 44 extinction 118–20 extractive reserves 133, 134

functional dualism 174 fusion effect 33

hyperglobalist thesis 6 hyperinflation 44–5

García, Alan 166–7 GATT 123 gender issues 210, 211, 212, 214, 216, 220, 221–8, 230 see also women genocide 201 global economic integration 39–41, 45, 46, 59, 78, 91, 102, 148, 260, 262 global village concept 77–9 globalization 3–20, 23, 39, 49, 67–91, 141, 144, 146, 215, 229–30, 253, 259, 261–5 and agriculture 122, 126, 232, 234–40 and civil society 193, 194, 206–7, 208 constraints/opportunities 14 differentiation of 7–9 inclusionary 266–7 inequalities of 6, 7–8, 11, 102, 110 and livelihoods 173, 179–80, 181, 188–91 and place formation 179–80 resistance to 5, 157, 163–4, 166 and rural livelihoods 232, 234–40, 248, 249 and sustainable development 117, 135 and urbanization 94, 98, 110, 112, 114, 115 and worker rights 218 gold mining 120, 189 governance 17, 18, 19 grassroots politics 193–208, 232, 246–50 Grenada 74, 76 Guadalajara, Mexico 106, 212, 227 Guatemala 8, 37, 39, 60, 69, 72, 74, 87, 89, 96, 122, 149, 161, 166–8, 201, 218, 244, 259 guerrilla movements 111, 205–6 see also Zapatistas Gutiérrez, Lúcio 37, 157, 248 Guyana 39, 74, 77

identity 30–1, 199–200, 205 Baroque 31 and modernity 22–38 oppositional 26 personal 32 identity theory 197 ideological traditionalism 33 ‘IMF riots’ 185 import substitution industrialization (ISI) 13, 14, 17, 67, 88, 89, 97, 101, 102, 103, 104, 105, 106, 109, 111, 112, 113, 115, 148, 159, 242 imports 10, 50, 51, 52, 69, 75, 77, 84–5, 235, 244–5 Incas 94, 189 incomes 212, 237, 241 see also wages distribution 41–2, 56–7, 108, 259, 260, 265 polarization 109, 110 independence 23, 87 Indians 24, 30, 34, 35, 37, 188–9, 204, 247 indigenista 25 indigenous peoples 131, 133, 134, 166, 169, 184, 185, 188–9, 197, 201, 203, 204, 205, 206–7, 208, 232, 233, 246–50, 267 individualism 32 industrialization 13–14, 24, 25–7, 31, 43–4, 58, 74–5, 77, 82, 96, 110, 121, 136, 148 see also import substitution industrialization inequality 6, 7–8, 11, 57, 78, 79, 80, 102–4, 107–8, 110, 113–15, 124, 126–7, 159, 166, 193, 195, 242, 246, 255, 256–8, 259, 260, 263, 265, 266, 267 see also asymmetries inflation 15, 44–5, 148, 253 informal sector 36, 97, 174, 175, 210, 214, 218–21, 225, 229 information technology 215, 229–30 institutionalization 204–5, 207 institutions 178 see also international financial institutions intellectuals 25, 30 Inter-American Development Bank (IADB or IDB) 47, 166, 257–8 interest rates 46, 77 interests 142 international development agencies 80 international financial institutions (IFIs) 9, 16, 217, 262, 266–7 International Labour Organization (ILO) 55, 206 International Monetary Fund (IMF) 15, 16, 45, 46, 47, 77, 88, 89, 97, 104, 150, 158, 165, 190–1, 215, 266 investment 10, 45, 50–1, 52, 58, 78, 85, 90, 104, 105, 124, 126, 253, 255, 263 inward-orientation 17, 43–5, 46, 56, 61, 63, 262 see also import substitution industrialization

Haiti 8, 72, 77, 80, 82, 87, 88, 168 health care 214 hegemony 9, 73–4, 78, 84, 91 Helms-Burton Amendment 1996 73 Hispanic culture 25, 26 Honduras 8, 39, 77, 87, 89, 96, 167 Hong Kong 11 households 223, 226–8 Human Development Index (HDI) 70–1, 72, 76 human rights 37, 91, 159, 160–1, 166, 168, 194–6, 203–4 civil 194, 205 ethnic 203–4, 206 material/economic 198 political 2–5, 194 property 233 social 194, 205 women’s 196, 199–201, 203–4, 206, 233 workers’ 228–9 hustling 86 hyper-politicization 161

313

Index

Italy 95, 100 Jamaica 39, 74, 77, 82, 83–4, 86, 87 Japan 9, 11, 61, 78, 106 labour 58, 127, 147 see also employment casualization 236 laws 217–18 low cost 61 markets 16, 55–6, 221–8 mobility 6, 7, 11, 48, 89, 98, 99, 264 neoliberal reform of 16, 54–6, 57, 255 reproductive 227 rural 232, 235–40 seasonal 235, 236, 237, 241 as social actor 142, 152 and the state 143, 152, 153 temporary 235, 236, 238 tenant 235, 236 ‘lack of alternatives’ argument 259, 266 Lagos, Ricardo 262 land 182, 183–4, 233 collective rights 203, 206–7 hunger 131, 133 invasions 183–4, 196, 246 reforms 147, 183 squeeze 240 struggles 183–4, 196, 197, 203, 206–7, 233, 242, 246, 246–7, 249 landlessness 180, 233, 242, 246–7, 267 latifundia system 232, 233, 235, 236 learned hopelessness syndrome 36 legalism 34–5 liberalism 30 Lima, Peru 95, 101, 175–6, 179–80, 199 liquidity 12 literature 24–5, 27, 28–9, 32 livelihoods 173–91, 193–208 asset-based framework 176–8, 181, 183, 184–5, 186, 210–12, 241 cultural issues 177, 180–1 definition 181 dependent 174–5, 176 politics 177, 180–1, 183–5 rural 232–50 strategies 175–9, 210, 211–14, 253 transnational 207 urban 210–30 vulnerability 264, 265, 266 living standards 41–2, 100, 102, 114 local 23, 115, 181, 197, 258 Lomé Conventions 75 lost decade 27–31, 97, 195, 223 ‘Lula’ see da Silva, Luiz Inácio macondism 28–9 malnutrition 99 manufacturing 10, 13, 58, 59, 60, 61–3, 82, 83, 88–9, 90, 101, 102, 105, 105–6, 109, 110, 123, 253 maquilas (assembly factories) 61, 106–7, 179, 206, 208 Marshall Aid Plan 46 Marxism 26, 146, 148 see also neo-Marxism Mayan people 94, 247 media 78–9 mediazation 28 314

Menem, Carlos 164 Mercosur 11, 39, 40, 41, 67, 123, 267 mestizaje 25, 35 metals markets 120, 122, 123, 124, 130, 188–9 see also copper Mexico 8, 9, 10, 12, 14, 28, 31, 39–65, 67, 69, 72, 82, 86–90, 94, 96, 97, 99, 100, 102, 104–9, 111, 115, 121, 123, 124, 132, 136, 149, 150, 151, 155, 157, 159, 162, 179, 185, 198, 200, 203, 205–8, 212, 217–18, 220, 224, 226–7, 233, 237, 241, 246, 253, 258, 267 Mexico City 95, 101, 102, 106, 108–9, 115, 199 micro-enterprises 59 migradollars 87, 241 migration 79, 87, 182, 183, 190–1, 194–5 barriers to 265 European to Latin America 95–6 from Latin America to the USA 96–7, 100, 108, 182, 190, 191, 241 illegal 11 rural-urban 95, 96, 98–100, 103, 114, 236, 238, 241 transnational within Latin America 241 military coups 27, 36–7, 104, 125, 161, 167, 168, 265 military regimes 146, 148–9, 152, 153, 158, 159–61, 163, 164–5, 167, 193, 194, 195, 196, 198, 200, 201, 203 mineral economies 105, 111, 122, 123, 124, 128, 130 minifundia system 232 mining 117, 120, 123–4, 128, 188–9, 215–16 modernity 3, 22–38 ambivalence of 28–30 as external 31 Latin American 23–38 oligarchic 24–5 subordinate/peripheral 22 modernization 157–9, 163, 167, 169, 174, 193, 242–3, 249, 259, 260 modernization theory 26, 144–6, 147–8, 149–51, 154 Montserrat 84, 88 morality 33 Mothers of the Plaza de Mayo 201, 202 Movimento Sem Terra (MST) (Landless Rural Workers Movement) 180, 233, 246–7 multiculturalism 203 nation-state 6, 11–12, 15, 16, 19–20, 193, 195, 196, 198, 205, 206–7 nationalism 195 natural resources 117–22, 128–9, 136 non-renewable 118, 120, 128 renewable 60, 120, 128 needs 118, 119, 258 neo-indigenismo 30 neo-Marxism 6, 260 neoliberal economic reform 15–16, 17–18, 39–66, 67–91, 104, 105, 110, 111, 114–15, 150, 151–2,

155, 157–9, 162, 163, 164, 165–6, 169, 175, 181, 185, 197–8, 203, 205–6, 208, 253–60 aggressive/cautious reformers 48, 50 agricultural 232–40, 242, 244–8 consolidation 50, 59 debt crisis 76–7 economic spaces of 57–63 historical context 43–6 impacts 50–7 income polarization 109 and place formation 179 problems 52–7 stages of 50 and sustainable development 122, 124–5, 128, 132, 136 neoliberal multiculturalism 203 neoliberal populism 27, 148, 151, 165, 174, 175 neoliberalism 14–20, 31–2, 67–91, 173, 181–3, 189 alternatives to 253, 259–67 and civil society 193, 194, 197–8, 203, 205–6, 208 contradictions to 258–9 crisis 157–69 cultural effects 157–69 and democracy 259–60 development model 80–4 evaluation 253–9 historical context 43–6 hyperglobalist thesis 6 implementation 27 and labour 16, 54–6, 57, 255 and Latin American modernization 24 migratory response to 87 political base 18–19 resistance to 157 and rural livelihoods 232–3, 234–40, 242, 244, 245, 246, 249 social base 17–19 socio-political impacts 157–69, 255–7 success of 16–17, 31 and urban livelihoods 210, 211–14, 218, 219, 224–6 neostructuralism 261–6 Netherlands 182 Netherlands Antilles 84, 88 New Economic Model (NEM) 97, 101–2, 107, 108, 115 New Economic Policy (Bolivian) 216, 217 new peasant movement 232, 246–50 new social movement (NSM) theory 197 New World Order 205 newly industrializing countries (NICs) 9, 10, 11–12, 44, 263 Nicaragua 37, 39, 72, 74, 77, 81, 87, 89, 96, 112, 121, 149, 161, 166, 199–200, 205, 215, 219, 233, 253 non-governmental organizations (NGOs) 132, 133, 134, 135, 159, 173, 185–8, 190, 193, 195, 204–5, 205, 242, 243, 245, 246, 248, 258, 264 North America 9, 10, 22, 23, 25, 26, 28, 29, 35, 39, 41, 67, 78, 147, 188, 190, 246

occupational density 212 offshore finance 10, 45, 84 oil 51, 58, 120, 122, 124, 147 open regionalism 264 Operation Bootstrap 74–5 opium 111 Ortega, Daniel 74 outward-orientation 47–63, 67, 80, 91, 111, 253, 255, 264 see also neoliberal economic reforms; New Economic Model ownership 124 Panama 87, 88, 218 Panama Canal Zone 73 paradox of plenty 120, 137 Paraguay 37, 39, 51, 149, 168, 199, 218, 244, 246 parceleros 233, 244 participation 132, 143, 144, 154, 193, 199, 202, 206, 208, 258, 264, 265 peasants 147, 151, 181, 182, 185, 186, 196, 197, 198, 203, 232–50 economy 175, 234, 240–6 patrols 198 proletarianization 234, 240–6 social movements 28–9, 232, 246–50 pensions 225–6, 253, 258 Pentecostal movement 37–8 Pérez, Carlos Andrés 167 periphery 8, 9, 11–12, 63, 79, 120, 137, 144, 264, 265 see also centre-periphery; semiperiphery Peru 15, 16, 18, 27, 35–7, 39, 50, 51, 55, 57, 58, 98, 101, 122, 124, 147, 149, 151, 153, 155, 161, 162, 166–8, 175–6, 179–80, 182, 185, 186, 189, 198, 203, 205, 208, 217, 233, 257 petroleum 77, 121, 128 pharmaceuticals 74–5 Pinochet, Augusto 19, 34, 104, 110, 125, 158, 160–1, 202, 265 place formation 179–80 Plan Piloto Forestal, Quintana Roo 132 plantations 60 polarization 109, 110, 114 political see also grassroots politics agency 173 base of neoliberalism 18–19 economy 3, 16, 117–37, 141–3, 144, 146, 147, 148, 151–5, 173, 175, 176, 178, 182, 253, 259 fatigue 161 indifference 167 instability 36–7, 153 legitimation 162–4 sociology 144–6 political parties 18, 147, 153, 154 pollution 118, 120, 127, 128, 129, 131 poor 37, 159

see also poverty livelihoods 174–5, 176, 181, 182–4, 186–7 organizations for 173 urban 199, 210–14, 216, 219–20, 226, 228, 230 popular culture 28, 32 economy see informal sector politics 25, 27, 148, 151, 165 religiosity 31 population 41, 42 Central America and the Caribbean 69, 70–1 growth 96, 101, 107, 109–10, 112–13, 117, 136 and sustainable development 117, 136 urban 93, 94, 95, 96, 101, 107 Portugal 94, 95 Positivism 24 postmodernism 31–2 Potosí, Bolivia 188–9 poverty 36, 56–7, 80, 150, 169, 174–5, 176, 181, 212, 218, 228, 253, 257–8, 264, 265, 267 see also poor feminization 200 rural 96, 97, 103–4, 108, 110, 113, 115, 131, 133, 135, 175, 232, 233, 241–2, 245 and sustainable development 129, 131, 133, 135, 136–7 technocratic approach to 166 urban 95, 97–8, 99, 100, 102–4, 108, 109, 110–11, 113–15, 174–5 power 142, 245–6 preservation 128, 131 prices 7, 122–3, 127, 255 primary products 9, 10, 13, 19, 24, 31, 52–3, 60–1, 73, 75–6, 77, 78, 83, 84, 102, 105, 109, 111, 113, 118, 120–32, 136, 137, 179, 253, 255 see also natural resources private sphere 198, 199, 210 privatization 15, 58, 218 productivity 58 proletarianization 234, 240–6 property rights 233 protectionism 43, 49, 50, 52, 123 Protestantism 190, 200 pseudo-modernity 29 public sphere 15, 48–9, 57, 80–1, 98, 182, 195–6, 198, 199, 205, 210, 214, 228, 242 Puerto Rico 73, 74–5, 90, 223, 225, 226 race 24, 25 see also ethnic rights; indigenous peoples racism 24, 199 masked 35–6 rainforests 247 ranching 120, 129, 133 Reagan, Ronald 67, 74, 81 ‘real marvellous’ 27 realism 25 magic 27, 32 recession 27, 123 reconversion 243–4

regional integration 39–41, 89, 264 regional trading blocks 87–90 regionalism 123 religion 37–8 see also Christianity fundamentalism 30 resource mobilization theory (RMT) 196–7 revolution 146, 151 risk-aversion strategies 12 Roman Catholic Church 24, 27, 29, 30, 31, 33, 34, 35, 159, 189–90, 200, 201 Romanticism 24 rubber tappers 247 rule of law 149, 150, 153–4, 155, 160 rural areas 126–7, 131, 135, 136, 178, 179, 181–2, 183, 185–8 livelihoods 232–50 migration 95, 96, 98–100, 103, 114, 236, 238, 241 poverty 96, 97, 103–4, 108, 110, 113, 115, 131, 133, 135, 175, 232, 233, 241–2, 245 rural non-agricultural income (RNAI)/rural non-farm income (RNFI) 239 rural non-farm employment (RNFE)/rural non-agricultural employment (RNAE) 236, 239–40 St. Kitts and Nevis 87 St. Lucia 69, 76 St. Vincent 69, 76 Samper 111 Sandinista regime 81, 89, 199–200, 215, 219, 253 Santiago, Chile 63, 100, 109, 110, 161 São Paulo, Brazil 95, 100, 101–2, 199, 200 savings 45, 253 scepticism 6–7 secularization 31, 37 security 124, 265–6 self-help 195 semi-periphery 8, 9 semi-proletariat 234, 240–6 service industries 59, 109 shantytowns 195, 199, 200, 258–9, 267 ‘shrinking world’ 78 silver mining 124, 188–9 Singapore 11 slavery 35, 98 social capital 176, 181, 182, 183, 186, 187, 210, 211, 212, 229, 241, 264 cohesion 265 conflict 124, 134, 142–3, 227–8, 246–7 debt 158–9, 257–8, 260 difference 194–6, 202–7 exclusion 36, 267 expenditure 15, 48–9, 57, 80–1, 98, 182, 214, 228, 242 hierarchies 194 mobility 163 order 148, 152 policy 48 question 25 vulnerability 266 315

Index

see also United States of America North American Free Trade Area (NAFTA) 10, 11, 39, 40, 41, 61, 67, 82, 89–90, 104, 106–7, 108, 115, 123, 246 North Atlantic region 74, 76

Index

social movement theory 1999 social movements 173, 178, 181, 183, 189, 190, 195–208, 246–9, 267 ecological 259, 267 institutionalization 204–5, 207 new 196–202 peasant 28–9, 232, 246–50 of the urban poor 258–9 social sciences 26 socialism 26, 73–4, 84–6, 161, 248, 253, 260 solidarity 36 South Korea 9, 11, 51, 61, 232 Southern Cone 39, 94, 95, 148, 161, 198, 200–1 Southern Consensus 267 Soviet Union (USSR) 10, 16, 84, 219 Spain 29, 31, 34, 73, 86, 87, 94, 95, 96, 98, 100, 182, 188–9, 190 spatial segregation 110–11 squatter settlements 195, 199, 200, 258–9, 267 state 141–3, 165, 178 see also nation-state authoritarian capitalist 143 autonomy 151, 152 bureaucratic-authoritarian 148 and civil society 193–6, 198, 200, 202–3, 204, 205, 207, 208, 245 crisis 147–8 democratic capitalist 142, 143, 146, 148, 149–50, 151, 152–3, 154 and the economy 43–4, 47, 58, 63–5, 67–8, 131 employment 19, 56, 215–16, 219, 255 form 141–2, 143, 146–7, 148, 149–50, 151, 152–3, 154 and labour 255 and land use 233 modernization 43–4, 145, 151, 259 neostructuralist view of 263, 265 and the peasantry 242–5, 246 reduction in the roles of 159, 203, 204, 257–8, 259, 261, 263 and sustainable development 131, 132, 134 state managers 141, 142, 143, 144, 152–3, 154, 155 street vendors 179–80 strikes 142 structural adjustment programmes (SAPs) 12, 98, 102, 158, 159, 165, 167, 168, 181, 206, 241–2 structuralism 11–14, 17, 19, 260 structure reform 39–65 rigidities 217 subsidies 265 sugar 84, 86, 147, 234 Surinam 39, 88 sustainable development 117–37, 176, 244–5 Taiwan 9, 11, 51, 232 tariffs 43, 49, 50, 52 tax exemptions 74–5 technocracy 17–18, 164–6, 168, 169, 253, 259

316

technology 13–14, 58, 79, 100, 207, 215, 229–30, 235 telenovelas (soap operas) 28, 32 television 27, 28, 32, 162 tenant labour 235, 236 Tequila crisis 1994 108, 115 textile industry 74, 82, 113 third sector 193, 204–5 see also non governmental organizations tourism 85, 86 trade dependency 69–73 embargos 73 liberalization 16, 49–50, 51–4 surplus 74 vulnerability 264 trade unions 61, 81, 200, 207, 218, 246, 255 trading blocks 7, 87–90 traditional societies 33, 145 training 229–30 Transamazon Highway 247 transformationalist thesis 7 transnational corporations (TNCs) 6, 9, 10, 14, 16, 45, 47, 50, 54, 58, 59, 60, 61, 65, 67, 77, 88, 122, 124, 126, 130, 146, 198, 215, 249, 262, 263, 264, 266 transnationalism 87 networks 207 transport 100, 113 Trinidad and Tobago 39, 77 tripolar world 9–11 truncated convergence 8 Turks and Caicos Islands 84 uncertainty 45, 50 under-development 146–7 underemployment 215–17 unemployment 54, 55–6, 97, 102, 215–17, 255 unequal exchange theory 13 United Kingdom (UK) 69 see also Britain United Nations Conference on Trade and Development (UNCTAD) 267 United Nations Development Programme (UNDP) 265–6 United Nations Economic Commission for Latin America (UNECLA) see Economic Commission for Latin America; Economic Commission for Latin America and the Caribbean United Nations (UN) 134, 150, 166, 206, 260 United States of America (USA) 5, 9–11, 14, 24, 25, 32, 39, 41–2, 45, 46, 52, 58, 61, 67, 69, 72–5, 78–9, 81, 83–8, 90, 91, 96–7, 100, 106, 108, 112, 123, 133, 144, 145, 149, 150, 152, 157, 165, 168, 182, 189, 190, 191, 241, 260 see also North America urban areas 174–5, 181, 182, 183, 186–7, 198–9 employment 215–21

labour market 221–8 livelihoods 210–30 poverty 95, 97–8, 99, 100, 102–4, 108, 109, 110–11, 113–15, 174–5, 258–9 urban informal sector (UIS) 210, 214, 218–21, 256 urbanization 93–116, 104–14 of affluence 109 and civil society 195 explanations for 95–8 and globalization 94, 98, 110, 112, 114, 115 and poverty 95, 97–8, 99, 100, 102–4, 108, 109, 110–11, 113–15 rural-urban migration 95, 96, 98–100, 103, 114, 236, 238, 241 successes of 93, 94 Uruguay 8, 27, 39, 95, 96, 98, 103, 115, 123, 144, 146, 148, 154, 155, 158, 159–60, 216, 265 Venezuela 8, 16, 28, 37, 39, 45, 88, 89, 98, 121, 123, 124, 142, 144, 146, 147, 149, 151, 153, 154, 155, 157, 161, 166, 167, 168 violence 24–5, 111–13, 131, 161, 167, 182 intra-household 227–8 state 201 volantes 238 voting 143, 167, 169, 199, 203 vulnerability financial 12–13, 264, 265, 266 social 266 trade 264 wages 57, 216–18, 225–6, 227, 236 see also incomes minimum wage 256 real 256 Washington consensus 12, 15, 16, 18, 47–9, 54, 97, 157, 261 water supply 120, 127, 128, 198 wealth 109, 143, 154, 256 windfall profits 122–3 wine industry 179 women 33, 198, 199–200, 232 labour 127, 206, 210, 211, 212, 214, 216, 220, 221–8, 230, 236–8, 239, 255 rights 196, 199–201, 203–4, 206, 233 rural 236–8, 239 and social movements 200–1, 248 urban 98, 99, 210, 211, 212, 214, 216, 220, 221–8, 230 World Bank 5, 8, 12, 16, 46, 47, 50–1, 77, 80, 88, 89, 94, 102, 104, 111, 130, 133, 134, 150, 158, 165, 166, 189, 206, 215, 233, 266, 267 world systems theory 174 World Trade Organization (WTO) 69, 76, 150, 266 Zapatistas 108, 185, 205–6, 207, 246

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