Populism of Democratic Consolidation

The Divide in Latin American Leadership

By
Dilma Rousseff receiving a Hugo Chávez picture from Nicolás Maduro
Populism of Democratic Consolidation : The Divide in Latin American Leadership - Riordan Roett

Abstract

As a result of different experiences of the processes of political liberalization and market-oriented reforms over the past few decades, there is a clear divide in styles of political leadership in Latin America today. Consolidated democratic regimes have been generally successful, addressing social concerns while maintaining responsible fiscal policies. on the other hand, economic and political instability have plagued those countries where populist regimes have mobilized marginal groups through the use of anti-elitist rhetoric. for these populist states, the example of their successful Latin American neighbors may offer guidance for a future transition to a different style of political leadership based on responsible fiscal management and social progress.

Introduction

Some decades ago, the issue of leadership in Latin America fell into two categories: weak civilian regimes or military dictatorships. The latter began to disappear in the 1980s, the process ending with the peaceful transfer of power from the armed forces in Chile to a civilian coalition in 1990. Since that time, the leadership challenge has been between left-of-center, fiscally responsible governments—such as those in Brazil, Uruguay, Chile, and Peru—or populist regimes that are generally fiscally irresponsible—as have been seen in Venezuela, Ecuador, and Argentina. In a few cases—such as Chile, Mexico, and Colombia—governments have been centrist or right-of-center but with a commitment to fiscal responsibility.

Background

Post-World War II Latin America found itself challenged by the existing international economic order. Raúl Prebisch, a prominent Argentine economist who was to become director of the Economic Commission for Latin America and the Caribbean (EClAC), argued that the region was peripheral to the industrial centers of the world economic system. Moreover, it was highly dependent on commodity and mineral exports, with the prices and demand for those products determined by these centers. He lobbied successfully for Latin America to pursue policies of import substitution industrialization (ISI). Programmed for a limited but unspecified period of time, ISI would allow the countries of the region to substitute for expensive imports from the center by producing products of comparable quality at home. The difficulty was the word “quality;” the goods produced were inferior to those previously imported. Furthermore, ISI quickly became a bewildering pattern of large public bureaucracies, corruption, multiple exchange rates, and frequent currency crises. And a critical component of ISI was the growth of powerful urban labor movements that looked to the State for constant wage increases, social security benefits, and other prerequisites, which became increasingly burdensome on economic systems that saved too little and taxed only a small portion of the population.

After a short period of apparent success, most of the countries encountered bouts of hyperinflation, labor unrest in the cities, and in some countries, new and escalating violence in the countryside, as politicians sought new popular bases of electoral support. Public order became a growing concern for the established elites, both urban and rural. The natural ally of these groups was the armed forces, whose constitutional responsibility was the maintenance of internal law and order as well as the defense from external challenges. But the latter was irrelevant in the twentieth century. The military therefore assumed a role of internal vigilance against political polarization and populist movements that might upset the existing institutional order.

The first country to succumb to a military coup d’état was Brazil in 1964. There, ISI had produced all of the symptoms mentioned above. To return to the status quo ante, the army removed a weak, populist, but democratically elected government and replaced it with the first bureaucratic-authoritarian (BA) state. Supported by the traditional elites, the military argued that the country needed an efficient State that would modernize the country at any cost and the modernization project would be supported by a flexible, but authoritarian, government in the hands of the armed forces. Military interventions quickly followed in Argentina, Uruguay, Peru, Bolivia, and other countries. Ultimately, all the BA regimes imploded—some through violence, but the majority, luckily, through negotiation and face-saving exits for the armed forces. The process began in Argentina in 1983, following the disastrous defeat of the military regime by Great Britain in the conflict over Las Malvinas (Falkland Islands) in the South Atlantic. Brazil followed in 1985, and the process was complete by 1990, when President Augusto Pinochet in Chile ceded power.

The Transitions and the Washington Consensus

With one or two exceptions—Chile being the most successful—the transition governments that emerged were weak and feckless. It did not help the transition to democracy that the region had entered a deep recession in 1982 with the onset of a decade-long debt crisis. Revenues that should have been spent on social programs to ease the transition were transferred overseas to meet the debt payments due to US and European banks and financial institutions. Yet the democratic regimes survived— though barely. As it became apparent that the old economic models were no longer valid, a group of Latin American and US economists began to explore a new model. They termed it the “Washington Consensus,” (hereafter referred to as “the Consensus”), and it was launched in 1989. It called for, first and foremost, fiscal discipline, along with tax reform, competitive exchange rates, privatization of state-owned enterprises, encouragement of foreign direct investment, and economic deregulation in the region. Most of these reforms were implemented over the next several years. Unfortunately, a few important components of the Consensus were overlooked, including the idea that government spending, once fiscal balance was achieved, should be directed to education, health, housing, and physical infrastructure. Also ignored was the concept that property rights must be reinforced, since weak laws and poor judicial systems reduce incentives to save and accumulate wealth.

After a few years of positive results, it became apparent that these overlooked issues were more important to the majority of the population than the more technical aspects of the program that had been implemented. Polls indicated that support for democracy was increasingly precarious, given that the governments were not producing more jobs or providing better education and health care but rather appeared to be more interested in working with foreign investors, wealthy elites, and the multinational institutions in Washington, DC. In a few countries, there were rumors of a return to military rule and a new version of the BA regime.

It slowly became apparent that the region was dividing between committed reform leaders, who understood the need for social progress as well as economic reform, and leaders who did not. Chile, with its transition to democracy in 1990, was the first country to demonstrate that sound fiscal policies were compatible with social progress. It also showed that after repressive dictatorship, different political parties could govern in a grand coalition and reduce the role of the armed forces in the economy and society. But Chile was a small country with a “boutique” economy. After a negotiated return to democratic rule in 1985 followed by nine years of political drift, Brazil was in 1994 the first major country in the region to undertake a meaningful economic and financial reform agenda. It faltered in 1999, when the financial crises that arose in Asia in 1997 and Russia in 1998 forced the devaluation of Brazil’s currency. But good management by intelligent public officials resulted in the necessary adjustments, and Brazil has since then become a regional powerhouse and an increasingly important player on the global stage.

Both Chile and Brazil demonstrated that political leadership was capable not only of good government but also of a peaceful transfer from one political party to another. In 2002, the Social Democratic government of President Fernando Henrique Cardoso in Brazil gave way to the Workers Party (PT) of President Luiz Inácio “Lula” da Silva (2002–2011). The PT had been a far-left organization, but Lula and his advisors understood that the hard work of the Cardoso government was in their— and in the country’s—best interests. Continuity was the best policy option. In Chile, the year 2010 saw the 20-year-old coalition of the Christian Democrats and the Socialists defeated democratically by the right-of-center movement of President Sebastián Piñera, who has promised continuity.

Uruguay followed a similar course, as did Colombia (the only major state not to have suffered under a military dictatorship). Peru followed a more tortured path to democracy. After the withdrawal of the military in 1980, weak civilian governments survived but with growing disorder driven by the Maoist-oriented Sendero Luminoso (Shining Path) guerrilla movement. Only with the election of President Alberto Fujimori in 1990 did the government successfully defeat the Sendero and introduce market reforms and related policies. But Fujimori became a civilian authoritarian leader for a decade, with the strong support of the state security forces. After his resignation in 2000, Peru finally experienced a true transition to a democratic system with strong civilian leadership.

Argentina remains the odd man out. Democratic elections are held with regularity. But after a period of apparent success with the Consensus under Peronist Party leader President Carlos Menem (1989– 1999), the country collapsed economically and politically in 2000–2001 under a failed opposition government. The Peronist Party, a classic urban populist regime, returned to power in 2003 when Néstor Kirchner was elected through a classic appeal to the urban workers and the poor. He was succeeded by his wife, Cristina Fernández de Kirchner, in 2007. Since then, Argentina has confronted swelling inflation, a lack of access to international capital markets, and an affinity with populist leaders in the region.

The Populist Left Emerges

But the story does not finish there with a happy ending. Venezuela, a petro-state, had also avoided a BA regime. But its two traditional parties atrophied: old leaders precluded new ones from emerging. The state’s oil wealth “disappeared” into the hands of a few while jobs were not created and social welfare programs were nonexistent. Having pacified the armed forces in 1958 after an impressive transition to civilian rule, the political elites failed to understand that the junior officer corps was increasingly critical of the lack of government reform. In 1992, Colonel Hugo Chávez led a coup d’état that almost succeeded in overthrowing the government of President Carlos Andrés Pérez. Ironically, Pérez had attempted to implement the Consensus after his election in 1989 but did not prepare the country for the shock program he attempted to implement. Following Pérez’s impeachment, weak administrations tried to sustain the democratic process, but Chávez, now widely popular, used his populist rhetoric and leadership style to win the presidency in open and fair elections in 1998.

Chávez immediately condemned the market-oriented policies of the Consensus and created a one-man regime that has maintained a façade of democracy but has become increasingly autocratic and repressive. His “Bolivarian revolution” has used the impressive oil revenues of the state for programs of social distribution that retain the support of at least fifty percent of the population in poll after poll.

A similar model has been adopted in Ecuador. After a transition from military government in 1979, weak civilian governments attempted to use oil revenues for social investment projects, but warring factions in Congress stymied well-meaning efforts. Throughout the 1980s and into the mid-1990s, the political pendulum swung violently from left to right and back again. Presidents came and went with frequency. An increasingly mobilized indigenous movement began to play an important role in making and breaking governments. Finally, in 2006, Rafael Correa, a young US-trained economist and former finance minister, won a run-off election. He was expected to establish a stable civilian regime, but he chose to follow the Chávez model of governance. He quickly denounced US policies in the region and neutralized political opposition and dissent, and he currently rules by decree and constant referenda designed to expand his power. Young and charismatic, he uses the Chávez style of appealing to the marginal groups in Ecuadorian society for political support and uses the rhetoric of anti-elitism so familiar to the political discourse in Venezuela.

Bolivia, a poor and isolated landlocked country in the Andes, has seen every model of government—military, civilian, and mixed—fail. During two terms of President Gonzalo Sánchez de Lozada (1993–1997 and 2002–2003), the Consensus was applied with varying degrees of success. But the social group that carried the burden of reform was the majority, indigenous population. In his second term, Sánchez de Lozada encountered an economy in sharp decline and a growing fiscal deficit. His opponent in the 2002 election was Evo Morales, a leader of the coca growers’ union and the leader of the Movement Toward Socialism (MAS). In late 2003, the People’s High Command, led by MAS, challenged the government; the president quickly resigned and left the country. Morales won with an overwhelming majority in the 2005 elections. He has adopted the rhetoric of Chávez and Correa but with a more nuanced set of economic and financial policies. Yet the anti-Consensus bias is obvious in the populist discourse of the Morales regime. It is highly critical of US foreign policy, supports the power of the people, and calls for a reduction in both the economic and political power of the nonindigenous minorities in the country’s lowlands.

Conclusion

Latin America has seen a deep division in styles of leadership over the last fifteen years. After failed, weak civilian governments, some countries opted for reasonable market reforms with a “socialist face.” Brazil under Lula demonstrated that it is possible to maintain responsible fiscal policies and invest in people—the best example is the highly successful Bolsa Família (Family Basket) conditional cash transfer program that has helped lift tens of millions of Brazilians from poverty. Chile under regimes of the Center-left and the Center-right has addressed the “social deficit” that remained from the military regime in a strong democratic framework. In Peru, the democratic regimes succeeding Alberto Fujimori’s 2000 departure have governed responsibly but still face the demands of an isolated but increasingly mobilized indigenous population in the Amazon Valley. Uruguay and Colombia have demonstrated that transitions can be both peaceful and successful. Leadership in both countries has proven to be popular and predictable.

The success of the leadership in the consolidated democratic regimes contrasts sharply with the ongoing political distress in countries like Venezuela, Ecuador, and Bolivia, where populist rhetoric, anti-elitist policies, and opposition to US influence continue to flourish. But the economies remain weak, and investment is low or nonexistent. And in spite of efforts to provide handouts to the poor, poverty and inequality remain high. The hope is that future transitions in the populist states will provide opportunities for responsible democratic leaders to come forward and implement people-friendly policies in a responsible fiscal framework.

Professor Riordan Roett is the Director of Western Hemisphere Studies and the Latin American Studies Program at the SAIS Washington campus, where he has twice received the Excellence in Teaching award. He also is a member of the Board of Directors of a series of mutual funds at Legg Mason, Inc. in New York. From 1983 to 1995, he served as a consultant to the Chase Manhattan Bank in various capacities, and from 1989 to 1997, he was a faculty fellow of the World Economic Forum at the annual meeting in Davos, Switzerland. Dr. Roett is a member of the Council on Foreign Relations and the Bretton Woods Committee.