First live, then philosophise
Latin America swaps its populists for apparatchiks
By Daniel Lansberg-Rodriguez
Beijing’s readiness to invest facilitates regimes to ape China, writes Daniel Lansberg-Rodriguez
Latin America, long neglected by Europe and taken for granted by the US, has found a suitor in China. Resource hungry, highly risk tolerant and non-judgmental about matters of social and public policy, China has become the first or second-largest export market for Brazil, Chile, Peru, Uruguay, Cuba and Venezuela. Likewise, it has positioned itself as a principal lender to most of the region’s countries (and often the only lender to those otherwise eschewed by international investors, including Argentina, Venezuela and Cuba).
Less attention, however, has been paid to a vogue among the region’s more revolutionary leaders: invoking the “Chinese model” when discussing the road to economic prosperity. Even in Cuba, where Fidel Castro once likened Deng Xiaoping to “a caricature of Hitler” for his market reforms, the leadership now celebrates the Chinese example.
Resource rich but relatively small, most of Latin America’s far left nations lack the agricultural and manufacturing clout – and the cultural values – to recreate the Chinese economic growth miracle. But duplicating the Chinese political model is possible. Charismatic populism in Latin America – reliant on cults of personality, short-term largesse and ephemeral majorities – shows signs of decline. Populist systems struggle to make necessary long-term decisions that are unpopular, and can end up hamstrung if their charismatic icon dies (as in Venezuela) or their money runs out (as in Argentina).
Beijing’s readiness to invest without value judgments enables regimes to become more like China: hegemonic, moderately corrupt one-party states that are open for business. Certain countries are moving in that direction, becoming market-oriented and investment-friendly police states, where a ruling party operates free from rivals, an independent press or civil society.
Constantly placating the electoral base is easier when external finance is readily available, and becomes less important with time. By consolidating power through party bureaucracy and economic growth fuelled by foreign direct investment, while weakening checks on ruling party authority, a president (and their party) may achieve an aura of permanence. Populism can then become authoritarian capitalism. In the past decade, Bolivia and Ecuador have used technicalities to sidestep presidential term limits, while Venezuela and Nicaragua have scrapped them altogether. Cristina Fernández, Argentina’s president, seems keen on inserting a place-holder as her successor until she can engineer a return to office, much as her late husband once did with her.
Ecuador and Bolivia trot this path most successfully and most subtly. While publicly denouncing the global “imperialist” system – therefore remaining eligible for Venezuelan oil and cash handouts – they have continued promoting FDI from OECD nations (and from China, where more than 80 per cent of Ecuadorean oil exports are sold in advance to state companies), while avoiding the more disastrous interventionist policies that have hamstrung economic stability in Venezuela and Argentina.
Charismaticpopulism in Latin America – reliant on cults of personality, short-term largesse and ephemeral majorities – shows signs of decline
Ecuador’s dollarised economy curtails inflationary risk by outsourcing its monetary policy to the “imperialists”, and local businesses are no longer given tax advantages allowing them to undercut global competition. In Bolivia, the legal framework for investing in mineral extraction has more in common qualitatively with that of the UK than protectionist Venezuela. This strategy has yielded robust returns. While Latin American nations grew at an average 2.4 per cent in 2013, according to the World Bank, Ecuador grew by 4 per cent and Bolivia by 6.7 per cent.
Facilitated by “hands-off” access to capital, the leaders of both nations have managed incrementally to consolidate ruling party authority: neutering judiciaries, rewriting constitutions, co-opting electoral authorities and decisively curtailing domestic media and opposition.
Even in Venezuela, the wellspring of modern Latin revolutions, the heirs of Hugo Chávez have been attempting an awkward shift away from the unsustainable paternalist populism he embodied. Nicolás Maduro, lacking the charisma to fill the void between lavish utopian promises and comparatively poor results as Chávez could, has changed tack, cautiously signalling a commitment to economic coherence.
If ever actually implemented, these promises would include unifying Venezuela’s arcane foreign exchange regime, decreasing social spending and slashing petrol subsidies. Such pain-inducing policies, even while silencing all vestiges of free domestic media, have damaged Mr Maduro’s brand, and his approval rating hovers around 35 per cent. Such a number would be dangerously low for a populist, but should matter far less to an apparatchik-in-chief.
Should he survive, he may well have China to thank for it.
The writer is a geopolitical risk consultant based in Chicago, where he teaches Latin American business at the Kellogg School of Management
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