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Monday, February 05, 2007

Latin Left: Authoritarian & Undemocratic

The leftist leaders in Latin America are not just a threat to free markets, but also to democracy.
WHO NEEDS DEMOCRACY? Venezuela's president Hugo Chavez with Bolivian president Evo Morales (top) and Ecuadorian president Rafael Correa. (Photo: MinCi Venezuela)


In Ecuador, thousands of pro-government protesters last week forced lawmakers to flee congress. In Bolivia, pro-government protesters have forced a leading opposition governor into hiding and are increasingly attacking other government critics. In Nicaragua, the new leftist president asked lawmakers to grant him direct powers over the police and army (a move that was rejected by the opposition-controlled congress).

All this while Venezuela's president Hugo Chavez has achieved unprecedented power, restricting media, controlling the judicial and legislative branches and - for the next 18 months - ruling by decree.

Tragically for both foreign investors and local citizens, parts of Latin America are now again returning to authoritarianism after being dominated by free markets and democratic rule in the 1990s.

The leftist leaders of Bolivia, Ecuador and Venezuela have attacked foreign investors not only with their economic policies, but also by reducing democracy, the political equivalent of free markets.

Only in open societies with strong and independent civil groups (media, business chambers, non-governmental organizations and political parties) and independent judiciaries, can business thrive best. Only democratic socities can provide a minimum of fair rules of the game for investors - as opposed to the secret, shady dealmakings of authoritarian regimes. 

Mix populist policies of huge and overbloated state companies with restrictions on media and the opposition - like we are seeing in Venezuela - and you have a perfect recipe for boosting corruption. Venezuela is now the second-most corrupt country in Latin America (after Haiti), according to the latest ranking from Transparency International. In 1999, when Hugo Chavez assumed Venezuela's presidency, the country was the fifth-most corrupt country in the region.

And needless to say, corruption is a major factor undermining an even playing-field for business, small or large.

Just as economic freedom is essential, if not sufficient, for political freedom - as Milton Friedman tirelessly pointed out - so too it can be argued that polical freedom is key to the longterm success of economic freedom.

Nicaragua's president Daniel Ortega has so far not followed his fellow leftists in Bolivia, Ecuador and Venezuela in terms of economic policy and we hope he is smart enough to not do so, either. Nicaragua, the second-poorest country in Latin America, desperately needs foreign investment. And you don't get that by scaring them off with Chaveznomics. Bolivia, the third-poorest economy in Latin America, is becoming poorer. Ecuador and Venezuela, in turn, are becoming even more dependent on oil - a commodity infamous for price volatility. To make things worse, economic policies are also curtailing efficient production of oil (thanks to nationalizations and expropriations). Chaveznomics also brings higher inflation - another major problem for foreign investors and local citizens alike.

Latin America already tried authoritarianism and it only brought human tragedy and economic deterioration. Making the same mistakes again won't make them any better.

 © Copyright Latin Business Chronicle

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From: jane

i think that you should come to Latin America and talk to the people before you talk about democracy, and we need to reexamine the sad excuse we have for democracy in the United States before we can unnecessarily accuse other countries of turning authoritarian.

From: franklin

la paz, bolivia
your free markets have only enriched the elite few in bolivia. the 90s were not a decade of democracy in bolivia, not while all of our industries: trains, telecomm, water, etc. were sold for almost nothing, and then those private industried decided to jack up prices--making even the most basic services unaffordable. the people have voted, your rhetoric is empty and only holds sway in miami, not here where people suffer the consequences of rapacious capitalism.

From: John

United States
Hmm. Having lived a number of years in Bolivia and Venezuela, my observation is that the source of the problem is not with democracy or capitalism. It is social in nature. Wealth is concentrated in few hands because of the lack of trust outside of family ties to form and grow businesses, leading to a lack of growth and opportunites for employment. I have observed this among all social classes. "Capitalización" was an abject failure; functioning, state-run industries were decimated as companies were put in place in a market with little capital flow and no accountability to the market or the people. Sanchez de Lozada should answer for this travesty.

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