by Norman Lowe
(a) Venezuela
Although Venezuela was rich in oil, when Hugo Chávez became president in 1998 the country was facing economic problems, mainly because of a fall in world oil prices. His general aim was to free Venezuela from US influence and create a network of countries sympathetic to his project. He didn’t try to abandon capitalism, but simply moved away from the type of neo-liberal capitalism favoured by the USA and other leaders, such as Margaret Thatcher in the UK. From the beginning he spoke out publicly against the USA, ending Venezuela’s long-standing military ties with the USA, and giving economic support to Cuba. This provided a lifeline for the beleaguered Cuba, which had lost its main supporter when the USSR collapsed.
One of Chávez’s earliest moves was to tighten control over the PdVSA, the state oil company set up in the 1970s. In recent years the company had been contributing less and less to the state treasury, while managers paid themselves vastly inflated salaries. This was immediately put right, and a Hydrocarbons Law introduced, making it illegal for any private company to own more than 50 per cent of the shares in joint oil ventures with the state. All of this upset many traditional interests – sections of the army, oil executives and right-wingers in general. An alliance of these groups, partly financed by the USA, staged street demonstrations demanding the resignation of Chávez. A group of hostile officers kidnapped him, but he was rescued by officers loyal to him, and amid massive pro- Chávez street demonstrations, he was enabled to stay in power. This proved to be the first serious blow against US influence in South America and the beginning of a new era. Large parts of the economy were taken into state control: the oil industry was fully nationalized in 2007, followed by the electricity supply and telecommunications. In 2011 the gold industry followed.
By this time Chávez had started moving much of Venezuela’s gold reserves out of Western banks and into countries he counts as allies – Russia, China and Brazil. As the debt crisis in Europe worsened, more reserves were transferred to China, a move welcomed by Beijing, which had invested heavily in Venezuela. The main economic weakness was that Venezuela, the world’s fifth largest oil exporter, was still overdepen-dent on oil production, with around 90 per cent of revenue from all exports coming from oil. It meant that whenever world oil prices fell, the economy suffered. In 2009 for example, the economy shrank by around 3 per cent because of the world recession.
Another aim of the Chávez government was to help the poverty-stricken masses by spreading some of the country’s wealth more widely. According to UN statistics, in 1998 when Chávez came to power, 54 per cent of the population were living below the poverty line. He introduced a social welfare programme known as the Bolivar Plan 2000 (called after the nineteenth-century revolutionary leader and founding father of Venezuela). There were plans to improve the public health-care system, housing projects, and loans to enable people to start up small businesses. Thousands of co-operatives owned by the workers were set up with government help. Extra cash was made available to tackle the AIDS epidemic. Great progress was made in securing equal rights for women, including a new rule for political parties: at least 50 per cent of election candidates had to be female. In 2008 the government announced a $111 million plan to upgrade dozens of hospitals.
There is no doubt that Chávez and his Bolivarian socialism have brought important changes to Venezuela. He has switched the country from being almost a colony of the USA, asserting its independence, and has focused on trade and co-operation agreements with other states in the region, in order to promote his vision of Latin American integration. His attempts to reduce poverty have had some success: UN statistics show that 54 per cent of the population lived in poverty in 1998 compared to 28 per cent in 2008. Clearly there is still some way to go, but these statistics suggest that if similar policies were to be continued for another ten years (until 2018), serious poverty might well have been all but eliminated. However, by 2012 the signs were not auspicious. By this time Chávez had alienated most of the business class, the Roman Catholic Church, and left-wingers who felt that he had become too authoritarian. In 2009 the Church and Human Rights Watch accused him of ‘creating a climate of fear’. Chávez was due to stand for re-election in October 2012, but local elections in 2010 and 2011 showed a fall in his socialist party vote. He also had health problems, having been recently diagnosed with cancer. However, he was still seen as a hero by the majority of the working class; in spite of all these problems, plus the efforts of the USA to discredit him, he won the 2012 election comfortably.
(b) Brazil
In 2002 the voters of Brazil, sick of corrupt party politics and neo-liberal economic policies, elected as president ‘Lula’ da Silva of the Workers’ Party. He had promised to narrow the enormous gap between rich and poor by expanding education and redistributing land, and to introduce social welfare programmes. In office he turned out to be much more moderate than he had sounded during the election campaign. Though a socialist, he felt that the economic crisis was serious enough to require non-socialist solutions. He went along with the IMF conditions, reducing public spending in return for the $41 billion credit needed to stabilize the currency. On the other hand he did introduce widespread anti-poverty programmes, and increased the minimum wage by 25 per cent. His Bolsa Familia programme paid modest monthly grants to poor families provided they sent their children to school and had their health checked regularly. It was estimated that by 2008 Bolsa Familia had helped some 7.5 million families.
Lula was not afraid to stand up to the USA if he felt strongly enough. He opposed George Bush’s Free Trade Area of the Americas (FTAA) and got away with it, probably because the USA was preoccupied with the Iraq War. Instead, a trade agreement with China did much to steady the economy, and reforms were made to pensions and taxation systems, as well as a drive for administrative efficiency. New policies were devised to encourage industry, trade and exports and foreign investors were encouraged. Inflation and government debt were brought under control. This was a considerable achievement and Lula was re-elected in 2006. Brazil received an enormous boost in 2007 when the Tupi undersea oilfield was discovered, taking it into the top league of oil producers and removing the need to import oil. The surge in exports, the fall in unemployment and the general economic expansion, together with the welfare programmes, have helped to lift millions of people out of poverty, so that for the first time probably a majority of the population of over 190 million can be deemed middle-class.
The constitution did not allow Lula da Silva to stand for a third term in office, but the Workers’ Party continued in power with the election of Dilma Rousseff who, in January 2011, became the first woman president of Brazil. A strong advocate of human rights, social inclusion and equal treatment for women, she had served as a minister in the da Silva cabinet. She continued Lula’s policies; at the end of 2011 Brazil’s economy was ranked sixth largest in the world, and experts predicted that by the end of 2012 it would probably have risen to fifth place. Since the economic crisis at the end of the twentieth century the country had made remarkable progress. It now had arguably the most advanced industrial sector in the whole of Latin America, responsible for about one-third of total GDP. Brazil is a major supplier of minerals such as iron ore, tin, manganese, uranium, copper, zinc and gold. Manufactures include motor vehicles and spare parts, aeroplanes, textiles, steel, various types of machinery, computers and petrochemicals. Agriculture is important – Brazil is the world’s largest producer of sugarcane, coffee, tropical fruits and concentrated orange juice. Although agricultural produce makes up only about 7 per cent of GDP, it amounts to over 30 per cent of exports. Brazil is also active in the realms of science and technology, including agricultural research and deep-sea oil production. Although relations with the USA are generally good, there has been a change in the nature of their relationship. Brazil was once treated very much as a subordinate; now they deal with each other almost as equals. As the Brazilian economy climbs higher in the international league table, they coul
d easily become serious rivals in the future.
(c) Mexico
The new National Action Party (PAN) president Vicente Fox had been elected on a programme of ending government corruption and improving the economy. As a centre-right politician he was happy to have a close relationship with the USA and worked hard to improve and expand Mexico’s trading partnership with the USA, and they co-operated in a campaign against drug trafficking. However, when Fox called for the frontier between Mexico and the USA to be opened so that Mexican migrant workers could move freely into the USA, the Americans rejected the idea and accused Fox of encouraging illegal immigration. On the other hand, Fox’s left-wing opponents criticized him for aligning Mexico too closely with the USA. In 2002 when he proposed to visit Washington, the Mexican senate blocked the plan. Unfortunately for Fox, PAN did not have a majority in the legislature, which rejected many of his reform proposals. Farmers staged widespread protests because the government did nothing to solve agricultural problems caused by Mexico’s membership of the North American Free Trade Association (NAFTA), particularly the huge increase in imports of American produce, especially meat. Fox’s presidency was something of a disappointment, although he was personally popular.
The constitution did not permit a second term; the presidential election of 2006 was won by the PAN candidate, Felipe Calderón, by the narrowest of margins. His election promises included campaigns against corruption, poverty and tax evasion; and infrastructure improvements – new roads, railways, airports, dams and bridges, all of which would help to solve the unemployment problem. But again there were economic problems: the economy was heavily dependent on the cash that millions of migrant workers sent home from the USA. In 2008 the world credit crisis (see Section 27.7) caused a downturn in the US economy and in global demand generally, and this had repercussions on Mexico, which was also hard hit, suffering arguably the worst slump since the 1930s. However, a recovery was soon under way. Foreign investment began to flood in once more, so that during the first half of 2010 there was a 30 per cent increase from a year earlier. In 2012 Mexico had the second largest economy in Latin America, with about a third of its revenue coming from oil, much of which is sold to the USA. Other exports include machinery and transport equipment, various foodstuffs and live animals.
One of the great issues in Mexico and in much of Latin America is the drug-trafficking problem. Powerful cartels control the trafficking of drugs out of Latin America into the USA, a business which generates around a staggering £9 million. One of President Calderón’s first actions was to declare war on drugs and deploy the army against the drug gangs. Since December 2006 an estimated 35 000 people have been killed in Mexico in drug-related violence and the country has one of the highest rates of kidnapping in the world. The president claims that his fight against the cartels is working, but still the struggle goes on. In April 2012 a summit meeting of Latin American leaders was held in Cartagena, Colombia, at which Guatemalan president Carlos Molina said that the system of merely making drugs illegal had failed, and he called for an alternative system. The summit was divided between those who advocated complete legalization of drugs and those who thought that this would be irresponsible. In Mexico critics of the president claimed that his policy of using the army against the cartels had failed and had been so expensive that more important projects, such as improving the nation’s infrastructure, had been neglected. Although Mexico had the second largest economy in Latin America, there was still a long way to go before it could claim to be a genuinely ‘modern’ state. According to a BBC report in January 2012:
Mexico is a nation where affluence, poverty, natural splendour and urban blight rub shoulders … . But prosperity remains a dream for many Mexicans and the socioeconomic gap remains wide. Rural areas are often neglected and huge shanty-towns ring the cities.
(d) Argentina
Argentina was ruled by a military junta from 1976 until 1983, when the country returned to democracy. The junta was responsible for thousands of deaths in what became known as the ‘the dirty war’ to restore order and eliminate opponents. A human rights commission charged the junta with 2300 political murders, over 10 000 political arrests and the disappearance of up to 30 000 people. In an attempt to win some popularity the junta made the mistake of invading the Malvinas Islands, held by the UK as the Falkland Islands (April 1982). Britain won an unexpected victory, recapturing the islands, and leaving Argentina with an unprecedentedly high foreign debt and inflation of around 900 per cent. There was a return to democracy for the presidential election of 1983, but the economy continued in crisis. By 1991 there were riots in protest at high food prices and unemployment. President Carlos Menem, who took office in 1991, resorted to classic neo-liberal policies: protectionist trade and business regulations were removed, strict austerity measures were introduced and there was a wave of privatizations of state-owned industries. It was all to no avail – in September 1998 Argentina moved into the worst recession for years. Ferdinando de la Rúa was elected president in 1999 and introduced more austerity measures. But the recession continued and the IMF came to the rescue twice in 2001. In November of that year the economy seemed on the verge of total collapse and there was a financial panic; in December there was serious rioting in the capital, Buenos Aires, forcing the president to resign.
After a chaotic interval, Nestor Kirchner was elected president and came to power in 2003. An admirer of Hugo Chávez and his policies in Venezuela, Kirchner was determined to make a break with the past and reject neo-liberal economics. In his public pronouncements he savagely criticized the IMF and foreign investors. He abandoned what he called ‘automatic alignment’ with the USA in favour of closer ties with other Latin American countries, especially Venezuela, and with Mercosur, a sort of common market and customs union set up in 1991 to encourage free trade and political co-operation. Its original members were Argentina, Brazil, Uruguay and Paraguay; Venezuela joined in 2006. Kirchner raised wages and pensions for those most in need, set up a new state-run oil company and signed energy agreements and various other trade agreements with Venezuela. He encouraged greater government involvement in the energy sector, though he stopped short of renationalizing the country’s main oil company, YPF, which had been sold off to a Spanish company, Repsol, during Carlos Menem’s presidency. The economy soon showed signs of recovery: Venezuela began to import cattle and agricultural machinery from Argentina, and by 2008 Argentina’s exports to Venezuela had quadrupled since Kirchner came to power. The economy showed an impressive annual growth rate of about 8 per cent and in January 2006 it was announced that Argentina had paid off all remaining debts to the IMF. Kirchner also won popularity when the laws granting pardon to those accused of atrocities during the ‘dirty war’ were cancelled, so that in 2006 many military and police personnel who thought they were safe were arrested and put on trial. Kirchner decided not to stand for re-election in 2007, and his wife Cristina Fernández de Kirchner was elected instead. She broadly continued her husband’s policies, and against the predictions of many neo-liberal economists, Argentina’s boom continued. The economy maintained its 8 per cent annual growth rate, and by the time of the next election in October 2011, the poverty rate had been halved, employment had risen to a record high, and a lucrative export market had been developed in China. It was no surprise when President Fernández was easily re-elected for a second term, winning by the largest margin since democracy had been restored in 1983. Relations with the UK were threatened by the re-emergence of the Falklands question when it was announced in September 2011 that a British company would begin drilling to exploit the Falkland’s offshore oil reserves in 2016.
(e) Chile
Chile had the first democratically chosen Marxist/socialist government ever, when Salvador Allende was elected president in 1970. However, he was soon overthrown and killed in a military coup backed by the CIA. General Augusto Pinochet ruled Chile for the next 17 years, and though he did much to improve Chile’s economy, it was a per
iod of brutal repression (for full details see Section 8.4). Following the return to democracy in 1990, Chile was ruled by presidents from the centre-left Coalition of Parties for Democracy (CPD). There were two Christian Democrats: Ricardo Aylwin (1990–4) and Eduardo Frei (1994–2000), son of the earlier President Eduardo Frei. Next came two socialists: Ricardo Lagos (2000–6) and then Michelle Bachelet (2006–10), Chile’s first woman president. She was a former paediatrician and her father had been a victim of the Pinochet regime. Faced almost immediately with a strike by thousands of students demanding educational reforms, she calmed the situation and promised to put things right.
At first she continued her predecessor’s economic policies and increased social spending. It was during her presidency that Chile began to move out of the period of transition from military dictatorship to genuine democracy. Clearly the classic neo-liberal economic policies were not sufficient to bring full recovery, and so the government broke the neo-conservative rules with a dose of state intervention: for example, the world’s largest copper producer, Codelco, was taken into state hands and government control of capital was introduced, allowing the president to finance new social policies. As the next election (December 2009) approached, Bachelet’s popularity level, which had dropped to around 40 per cent during the world debt crisis in 2008, had risen to 84 per cent. Unfortunately for Bachelet and the CPD, the constitution does not allow presidents to serve for two consecutive terms, and consequently a former president, Eduardo Frei, was endorsed as the CPD candidate. The main right-wing opponent was Sebastián Piñera, whom Bachelet had defeated in 2006. It was Piñera who won the presidency in the second round of voting in January 2010. His victory surprised many observers, bearing in mind the popularity of President Bachelet. However, the explanation for the CPD defeat was probably that Eduardo Frei failed to generate any enthusiasm and was seen as representing old-style politics. Piñera, on the other hand, concentrated his campaign on the need for greater government efficiency. Shortly after the January run-off, Chile was hit by a devastating earthquake that killed 500 people, left around a million homeless and caused damage estimated at between $15 and 30 billion. Unfortunately the new president was faced with the problem of dealing with the aftermath of the catastrophe.