Sign Up

Latin America’s Survival Spirit

Were fears about Argentina’s crisis bringing down its neighbors largely unfounded?

April 11, 2002

Were fears about Argentina's crisis bringing down its neighbors largely unfounded?

Despite the continued economic crisis in Argentina, fears that the country’s economic collapse would generate a wider regional crisis and spur a backlash against free markets have largely subsided.

Thus far, the Argentine crisis has been largely self-contained. And while complaints about persistent poverty and stubbornly high unemployment are widespread in other countries in the region, voters appear disinclined to elect leaders pledging a return to the statist remedies of the past.

Argentina might in fact be “Exhibit A” of the durability of Latin America’s free market reforms.

When Eduardo Duhalde took over in January following the resignation of President Fernando de la Rúa, he sounded much like the Peronists of old, promising to resist the IMF’s policy prescriptions and expressing reluctance to impose austerity measures.

It didn’t take long, however, for Mr. Duhalde to realize the same thing that just about every modern leader recognizes — that fiscal discipline is a precursor to economic revival. Duhalde is largely following a path pursued by other leaders in the region of all political stripes — liberal or conservative, democrat or autocrat. (The notable exception, Hugo Chavez, the populist president of Venezuela, is rapidly losing his luster as an alternative as public protests mount over his policies.)

The lessons of Argentina and of globalization have not been lost on other politicians in the region. Take Lula, the Brazilian left-wing labor leader and perennial presidential candidate. He is trying to hold on to his lead in public opinion polls by reassuring voters that he will be a responsible steward of the Brazilian economy if he wins this year’s election. He has made a point of reaching out to his country’s business leaders and has proposed an alliance between his Workers Party and the centrist Liberal Party.

Lula’s approach may frustrate ideological purists in his party. But he evidently understands that Brazilians — despite their economic struggles — are not inclined to endorse an abrupt shift in economic policy. Brazilian voters, like their counterparts elsewhere in the region, vividly recall the traumatic hyperinflation of the 1980s. They do not want to relive those times.

Recent public opinion surveys and focus groups in South America, conducted by Greenberg Quinlan Rosner Research, a polling firm based in Washington, D.C., underscore the public’s economic pragmatism.

First, voters recognize that restoring economic growth will take time and that there are no quick or easy solutions to the current crisis.

Even in Argentina, where the public is understandably desperate about the economy, people recognize there is little leaders can do to improve things dramatically in the short run. Last year, as Argentina was entering the fourth year of a recession, a majority of voters thought that even with the best policies, it would take at least a year to turn the economy around.

Voters in Bolivia, which is experiencing a downturn of its own, are also realistic about the prospects for a quick economic turnaround. Two-thirds of the voters believe it will take years to fix Bolivia’s economic crisis.

Second, the public tends to understand that job creation will result from a favorable business environment — rather than a government that primes the pump. A majority of the Brazilian public and slight pluralities in Argentina and Bolivia think the best way to create jobs is to provide incentives for companies to hire workers — rather than the old formula of having the government invest in public works.

Third, despite nationalistic appeals from some sectors in several countries, their citizens recognize that foreign forces are not to blame for their troubles. Bolivians and Brazilians overwhelming attribute their economic problems to domestic, rather than foreign, causes.

To the extent that Latin Americans blame their leaders for their economic problems, it is not for submission to the IMF, but for allegedly lining their pockets at the expense of the people.

Bolivians and Argentines overwhelmingly believe that corruption is the principal cause of their economic problems. Citizens believe that politicians have stolen millions that could have been invested in productive enterprises or services.

None of this is to say that Latin Americans are now sporting Adam Smith ties. The benefits of economic reforms have been uneven enough to raise serious and legitimate concerns. In Bolivia, for example, voters are divided over the viability of the current economic model.

Elections later this year in Brazil, Bolivia and also Ecuador will likely be portrayed as a referendum on the free-market policies promoted by the United States and embraced by many current Latin leaders. The real test, however, will come when the new governments take office. If history is any guide, pragmatism, and free markets, will prevail, no matter who takes office.