A Note from the Director (Ditchley 2003/2)
24-26 January 2003
Over the weekend of 24-26 January we looked at the state of democracy in South America, an issue we had last considered at Ditchley six years ago. To give greater focus to our conference we looked at South, not Latin, America but accepted that it would be sensible to give due recognition to the role of Mexico as a major influence on the area. We were helped by having not only a number of experts on the area from Europe but also some participants from the countries under discussion. Our discussions were guided by a chairman with great experience of the region. We looked at the question from the political, economic and social points of view.
In our first general political overview we were inclined to think that in the last two decades democracy had become more firmly established, with growing political maturity, in some countries like Brazil and Mexico. There did not appear to be any appetite for a reversion to military regimes and the extreme left also appeared to lack credibility. On closer inspection, however, we thought that there was considerable dissatisfaction with the way in which democracy was practiced. In the 1980’s there had been a clear sense that democracy would lead to freedom of choice, to security and ultimately to prosperity. Security and prosperity had not been achieved to anything like the degree that people had expected and disillusion and disenchantment had set in. One participant explained this by saying that while the traditional social struggle between the haves and have-nots had continued, democracy had illuminated this struggle more clearly.
Although the threat of military intervention in the political process appeared to have receded, some of us discerned a nostalgia for authoritarianism which had been noted in a recent Human Development Report. Others saw a problem with Presidential rule and what might be called “plebesitory democracy”. In some countries, for example Venezuela, the focus of attention seemed to be on removing the President on the apparent assumption that a change of leader would solve most problems. Not enough attention was given to thinking through the policies which were needed to deal with the underlying issues. This search for a “quick-fix” had led to a spiral of disillusion. Plebisatory democracy could lead to common agreement to “tear up the rule book” and move rapidly to agreed outcomes. But as one participant put it, this risked political parties losing their intermediary role between the people and their elected leaders. In those circumstances, NGOs, which had a valuable social role to play became political themselves. Checks and balances became weakened and the risk of a backlash from the excluded and marginalized, increased. The result was a low level of democracy.
This analysis focussed attention on the institutions essential for democracy and the observation that in many countries there had been substantial internal decay in such institutions. It was argued that what was needed was a strong, not a large, state. And, added one participant, a strong state should rest on active democratic institutions at local and regional levels. The quality of political leadership was also important. If political leaders wilfully undermined their democratic institutions then confidence was bound to be damaged. We went on to identify a number of institutions which were important in helping to underpin the democratic process. Externally, the OAS was thought to exercise a greater and more benign influence than was generally thought. Election monitoring, and peer group pressure were thought to have had an effect. But commented another participant it had done little to affect the alarming decay of democratic institutions in many countries. Some EU countries were helping with local security systems which did not cost much but which went to the heart of individuals’ concerns. Civil Servants were important in delivering the services the public expected. It was desirable that they should be insulated from shifts in governments and have the public good as their main objective. An independent and courageous judiciary was thought to be essential. Other institutions including the Church, political parties, legislatures etc were also identified as needing attention. From time to time the word “crises” was used, and we were cautioned not to generalise too widely. Currently there were clear political “crises” in Argentina and Venezuela. Other countries might have problems of varying severity but were not yet in crises.
In turning our attention to economic developments and their implications we touched briefly on the circular argument as to whether South America’s troubles stemmed from political failure which had caused economic problems or whether a slow-down in the economies which mirrored global developments, had led to disillusion with the political classes and institutions. Put in economic terms, was this a systemic failure or a cyclical downturn. Arguments were advanced on both sides. Some saw the lack of contractual certainty, such as property rights and economic freedom for small and medium sized enterprises at the heart of the problem. In their view there was a clear link between economic freedom and per capita income. Others thought that economic liberalisation without a strong state would prove disastrous for many of the developing economies of South America. Asian success had been built on strong governments which had given protection to their national industries until they were able to compete in global markets. Lack of the rule of law was thought to be a significant factor in capital flows out of the area.
It was suggested that lack of rapid economic progress should be seen in a global context. The effect of globalisation had been to integrate economies to a much higher degree than hitherto. This could lead to more pronounced cyclical swings than in the past. One participant asked how South American countries could expect to grow at 6/7% when the USA, its main export market, was only growing at 1 to 2%. Globalisation, and the rationalisation which came in its train, caused short-term problems. In Mexico, we were told, more jobs had so far been lost through rationalisation than had been gained by economic growth. Some argued that trade would be the key to future growth in South America. South America had, however, found it difficult to increase its share of world trade and a number of difficulties were identified. At the macro-level there appeared to be protectionism practised by the USA and EU. Notwithstanding commitments given in the WTO round at Doha, there were still restrictions in place on textile, agricultural, steel and other exports where South American firms had a comparative advantage. In the Free Trade Agreement of the Americas, the USA had specifically excluded anti-dumping measures and agriculture. One participant, with reference to these and other restrictions, maintained that Brazil would not give up its ambition to be an industrial country. But, wondered others, could smaller economies stand out against those pressures without the safety of a large domestic market? Costs were also seen as a problem. Protection given to labour in many countries had made labour expensive. This mattered in a world exposed to super-competitive countries like China and Vietnam who were now able to export their white goods into Mexico with success.
A number of suggestions were made to tackle these weaknesses. These ranged from attempts to increase competence in export negotiations, to attempts to bring greater focus into IMF and other sources of foreign funding with the aim of mitigating financial volatility. Increasing employment was seen as an important objective but there was disagreement over how this might be achieved. State capacity needed to be increased so that basic infrastructure and services could be better provided. These could only be funded through an effective tax system which did not become a disincentive in itself and lead to an increase in black market activity. Targeted social programmes such as education and skills were suggested, as was help for SMEs such as access to credit and micro-finance, and relief from the burden of excessive regulation.
In thinking about the social and other factors which had influenced political developments we discussed the effect of social security programmes and agreed that these had been uneven throughout the area. Some groups had been excluded and some privileged. Brazil and Colombia were identified as countries which had sought to correct these inequalities. But pension provision and other safety-nets brought us back to the central question of lack of long-term confidence in the state and its institutions. If, in Argentina, a billion dollars of pension savings could arbitrarily be used to pay the interest on foreign loans what security did citizens who might in future contribute to such savings, have that in 30 or more years time the state’s institutions would have protected their investment. In Colombia, however, there was an example of how a Government which exhibited real determination to tackle profound domestic problems could gain the confidence of its citizens and persuade them to pay higher taxes to combat insecurity and violence.
There were a number of other social issues which were identified as contributing to current political and economic difficulties in South America. Corruption, drugs and violence were seen as three of the most destabilising. Corruption was thought to exist at all levels from Government decisions to personal protection which created an attitude of distrust and dishonesty. A strong judicial system and a free press were seen as part of the answer. Political will, or political incentives for good governance, were also important, as was recent US and EU legislation making the payment of bribes illegal. The poor were thought to suffer disproportionately from violence and crime, the economic and social effects of which had been recognised by some governments who had introduced judicial and police reform to cope with it. Drugs were another question. They fuelled violence and crime. The long-term solution of legalising the use of drugs in industrialised countries was proposed as a means of reducing the enormous profits made by the drug runners. This was, however, recognised not to be a practical proposition in the short term and consumer countries were urged to try to curb demand. Neighbouring countries should, some thought, be encouraged to cooperate with Colombia’s plight and show support for the new Government’s policy of re-establishing a police presence across the country. Such support led on to a wider question of the relative lack of knowledge in many South American countries about their neighbours. Venezuelans tended to know more about Miami than Bogota. Changes to the educational system to encourage more awareness of other countries were recommended. In looking at the educational system there was a view that Governments should address the imbalance between lower and higher education to reallocate more funds to the former. One participant commented that it was difficult to show a close link between good educational systems and democracy. Argentina had one of the highest levels of education and yet was facing the gravest political crisis. The brain and skills drain from South America to more developed countries was also cited as a serious problem. We were told that over 10% of all graduates in Mexico had emigrated. We speculated on the effect of 35 million Hispanics in the USA. Would they help to attract the authorities attention to their native lands? We thought, on balance, that they probably did not have a big effect on national policies in the USA but might have a more indirect effect at the regional or cultural levels.
Throughout our discussions the question of the USA’s influence on, and interest in, the area came up. We heard that the US Military had given thought as to how they should fulfil the overall priorities for Homeland Security set out in the latest security report to Congress. Northern Command would help to secure the border with Canada and reinforce the already closed border with Mexico. It was alleged that President Bush’s references to the area before his election could have been motivated by electoral considerations. There appeared to be little interest in the area at lower levels in the Administration. In policy terms there was interest in drugs and terrorism but there was no overall policy and indeed the appointment of senior officials to take responsibility for Latin America was still outstanding. There was no bold vision for the area. The FTAA would be a major step but the countries of the region might have preferred something like the association agreements between neighbouring countries and the EU in which a political dialogue was possible. One participant thought the USA was taking a short-term view of its interests in not recognising the dangers to democracy throughout the area and the possible consequences of not addressing it. Another commented that even existing policies aimed at the “nuts-and-bolts” of democracy were being cut back. It appeared that the USA’s interest was episodic and that the only way to attract US attention was through a crisis or by posing a major security threat.
Looking back at the points raised in our discussions some general conclusions were drawn by one participant. While our analysis of the political/economic interaction had led us to the view that the solution lay in a combination of an effective state and a more efficient market it seemed that the vision of the 1980’s and 1990’s about the way to organise countries and economies in the area, had faded. The external world appeared more problematic and external leaders did not understand, or were not interested, in the area. The problem facing South American countries was one they shared with many others – how to engage and influence their traditional hegemon, the USA. On some issues like drugs, it was clear that US policy would not change, but good lobbying of the USA and the EU in both the Doha and FTAA rounds might produce better results on trade. It was important that South American countries should be allowed to sell what they could produce competitively. Economic progress could make some of the political problems less acute.
I am grateful to those who came to Ditchley for this conference, some from a considerable distance. It is an issue to which we should certainly return well within the next six years.
This Note reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression
Chairman : The Rt Hon The Lord Garel-Jones
Formerly Minister of State, Foreign and Commonwealth Office (1990-93); Member of Parliament (Conservative), Watford (1979-97)
Dr Celia Szusterman
School of Social Sciences and Humanities, University of Westminster BRAZIL
Mr Alexandre Parola
Visiting Fellow, Centre for Brazilian Studies, University of Oxford; former spokesman for President Cardoso CANADA
Mr John W Graham
Chair, Canadian Foundation for the Americas; formerly: head, Unit for the Promotion of Democracy in the Organization of American States; Ambassador to the Dominican Republic and Venezuela
Mr James Leach
Executive Director, The Estey Centre for Law and Economics in International Trade (1999-); formerly: Canada’s Ambassador to Peru and Bolivia (1990-93)
Mr Colin Russel
Former Canadian Ambassador to Venezuela FRANCE
Professor Jean-Michel Blanquer
Director, Institute for South American Studies
Mr Patrice Paoli
Deputy Head, Department of the Americas and the Caribbean, Ministry of Foreign Affairs MEXICO
Dr Francisco E González
British Academy Research Fellow, Nuffield College, Oxford
Dr Gastón Melo
President, Fundación de Investigaciones Sociales, AC; Head, SILOG (Logistics Information System); formerly Head, Grupo Televisa
HE Senora Alma-Rose Moreno Razo
Ambassador of Mexico to the UK
Ambassador Andrés Rozental
Eminent Ambassador of Mexico; Founder and President, Rozental and Asociados (1997-); President, Mexican Council on Foreign Relations (2002-); formerly: Deputy Foreign Minister (1988-94); Ambassador to the United Kingdom (1995-97); Ambassador-at-large and special envoy for President Vicente Fox (2000-2001); author UNITED KINGDOM
Professor Victor Bulmer-Thomas OBE
Director, Royal Institute of International Affairs
Mr Malcolm Deas
Fellow, St Antony’s College, Oxford; University Lecturer in the Politics and Government of Latin America
Mr John Dew
Head, Latin America and Caribbean Department, Foreign and Commonwealth Office
Dr Andrew Hurrell
University Lecturer in International Relations and Fellow, Nuffield College, Oxford
Sir Keith Morris
Former Ambassador to Colombia
Professor George Philip
Professor of Government, London School of Economics and Political Science
Dr Nicola Phillips
Hallsworth Research Fellow, Department of Government, University of Manchester
Mr Michael Reid
Americas Editor, The Economist
Mr Geoffrey Weston
Strategy consultant, Eden McCallum (2001-); formerly: Bain & Co, Latin America (1996-2001)
Mr Laurence Whitehead
Fellow in Politics, Nuffield College, Oxford
Mr Richard Wilkinson CVO
Director Americas, Foreign and Commonwealth Office UNITED STATES OF AMERICA
Mr Marc Cassidy
Senior Associate, Center for International Development, State University of New York
Dr James Ketterer
Director, Center for International Development, State University of New York
Dr Jennifer McCoy
Director of the Americas Program, The Carter Center, Atlanta (1998-); Executive Director, Council of Presidents and Prime Ministers of the Americas; Associate Professor of Political Science, Georgia State University
Major Samuel H Prugh
United States Southern Command, Miami: Political-Military analyst for Strategy, Policy and Plans Directorate (Brazil)
Dr David Smilde
Assistant Professor of Sociology, University of Georgia; formerly: research associate, Centro de Estudios del Desarrollo, Universidad Central de Venezuela; University of Notre Dame; Undersidad Católica Andres Bellow, Caracas; author USA/ARGENTINA
Ms Ana Eiras
Latin America Policy Analyst, Center for International Trade and Economics, The Heritage Foundation USA/VENEZUELA
Dr Carolina Acosta-Alzuru
Assistant Professor, Grady College of Journalism and Mass Communication and Lilly Teaching Fellow, University of Georgia; member, Latin American Studies Association