Why is Latin America Going Backwards?

July 26, 2018

     By Duncan Green     

Simon Ticehurst, Oxfam’s Regional Director for Latin America and the Caribbean, delves into the background of some worrying times for Latin America

Just a few years ago Latin America was being lauded as a success story, with stable economic growth, political stability and historical progress in addressing poverty and finally tackling the structural and historical inequality that has stymied development in the region for centuries.

Today the region is in the news for all the wrong reasons – from high profile investigations exposing rampant corruption, to economic slowdown and democratic decline. Latin America is now politically volatile, increasingly violent (with the highest levels of femicides in the world) and faces a growing migratory crisis. How did we get to this?

During the 1980s and 1990s the region endured a period of austerity, structural adjustment, and fledging democratic reform following long periods of authoritarian regimes. Poverty was unacceptably high and the region was noted for the extreme concentration of wealth and power, and exclusion and denial of basic rights for the majority of the population. The most unequal region in the world.

The new millennium brought a relative golden period between 2000 and 2015, with an economic boom, fuelled by high commodity prices and a combination of growing economic opportunity, redistributive public policies, and consolidation of democratic and electoral processes, enabling a dramatic and historical reduction of poverty and inequality.

Brazil was widely considered the success story and leader in the region with wide-ranging and successful social programmes under the banners of “Zero Hunger” and “Brazil Without Misery”. Success was built on a combination of growing formal employment and an increase in the minimum wage and social security coverage; conditional cash transfers to women living in poverty, which got kids to school and school meals; an investment in family agriculture and food production to address food and nutritional security, access to water with thousands of domestic cisterns installed across the semi-arid regions of Brazil; promotion of women and black people rights. All of this contributed to a decline in inequality not only in income but also across gender and race. The World Bank has estimated that 29 million Brazilian people emerged from poverty between 2003 and 2014.

This was just 4 years ago, when I left Brazil. And yet today Brazil is in a state of collapse. Economic recession has been followed by a political and democratic crisis. President Dilma was ousted through an impeachment process led by the Congress. Widespread corruption scandals have followed, linked to bribes and backhanders from Brazil´s giant oil company Petrobras. Similar scandals have rocked the region with the giant Brazilian construction company Odebrecht allegedly winning contracts after handsomely paying politicians and presidents across the region. Former president Lula is in jail charged with corruption in a ploy many believe is designed to prevent him from running for president in this year´s elections, and which by many accounts he would probably win.

Neighbouring Venezuela, rocked by declining oil prices, has imploded. The funding that fuelled the parallel state set

up by Chavez to address poverty, has run dry, and President Maduro, Chavez´s self-appointed successor, has been unable to maintain the same political momentum. Food shortages and hyperinflation have ensued with an increase in violence and political persecution of the opposition, which largely boycotted this year´s elections. Despite poorly contested and a barely credible poll, Maduro retained power.

The economic collapse and political crisis in Venezuela has now generated a regional humanitarian crisis, with hundreds of thousands of refugees and migrants spilling over the porous borders with Colombia, Ecuador, Peru and Brazil, fleeing food and medicine shortages and economic hardship.

Nicaragua is the latest country to implode, with Daniel Ortega´s government after 11 years in power reacting violently to protest groups who are now calling for his resignation and justice for more than 300 people killed by police and paramilitary groups during peaceful protests.

The political and ideological shift toward the left between 2000-2015 opened up space for moderate and progressive social reforms across the region and for a renewed consensus around the role of the state in addressing poverty and inequality. This is now under threat and being rolled back. With several leftist options falling from grace and mired in scandals of corruption, we seem to be going back to our neo-liberal past. Country after country is resorting to austerity and cutting back its social programmes. Unsurprisingly, poverty and inequality are rebounding.

The most extreme case is in Brazil, where legislation has capped social spending for the next 20 years and has already led to widespread spending cuts on women´s rights (a 53% cut), housing (62%), climate change (72%) and food and nutritional security (76%). Millions have fallen back below the poverty line.

There are a number of factors that have reversed progress on inequality. The continued reliance on commodities and natural resources and the lack of a diversified productive base is often cited as the main economic reason. Economic growth and recession follow boom and bust commodity price cycles. The failure to shift this reliance on extractivism and generate new sources of employment must be considered one of the failures of the ‘golden age’.

Increasingly, however, academics and development practitioners are looking at a less visible and tangible obstacle – the capture of the State by economic and political elites. The extreme concentration of economic and political power reinforces the ability to unduly co-opt, corrupt and divert the democratic process, and influence the role of the State, perpetuating measures that reinforce privilege on the one hand and inequality and exclusion on the other. This elite capture is manifested in the ability to influence public policies, fiscal systems (regressive rather than progressive), and keep wages low (one in six workers with formal employment in the region live in poverty). It also leads to corruption and an erosion of democratic process, principle and institutions.

The UN Economic Commission for Latin America and the Caribbean (ECLAC) call it “the culture of privilege.” Latinobarometro in its 2017 report “Decline in Democracy”, refers to a ‘democratic diabetes’, an invisible illness that isn´t alarming in itself but slowly kills you. 75% of Latin Americans believe they are governed by an elite that rules for its own benefit.

Power and privilege has a habit of not letting go, but they are being contested and against the odds, social movements are trying to build an alternative narrative to tackle inequality. Farmers and indigenous peoples are defying the extreme concentration of land and seeking legal protection for their access to natural resources. Women are demonstrating in the major cities across the region against exclusion and impunity of violence against women. Youth movements, seeking a future of opportunity, are rallying in the streets against corruption and abuse of power. The region is unpredictable and volatile, but not without hope.

For more, see Oxfam’s regional report: Privileges That Deny Rights: Extreme Inequality and the Hijacking of Democracy in Latin America and the Caribbean