05 February 1993 - 07 February 1993

Latin America: Stocktaking and Prospect

Chair: Sir William Harding KCMG CVO

Ditchley had last taken a general look at Latin America in 1989. The dominant theme then had been crisis and danger. This year we all recognised marked improvement, though with much still to be done; and the underlying debate largely turned on judgment of how likely it was that the remaining agenda would be tackled successfully. We reminded ourselves early on, and recurrently thereafter, that we were discussing a huge region with numerous states of widely (and indeed increasingly) different features, and also that the various issues arose in complex interactions, not in tidy compartments. But we managed nevertheless, at least to majority satisfaction, to pick out strands both common enough regionally and distinct enough conceptually to allow discussion.

The general reduction of the debt problem and of inflation to non-catastrophic (albeit still serious) levels was a notable achievement. Most countries, in parallel with this, had made important progress towards free- market economies with privatisation and trade liberalisation; the fading of the rival Marxist model had at least simplified the agenda. The best form of the market model for Latin American conditions had not yet however emerged clearly, and it was becoming evident - even more than in other parts of the world - that it was unrealistic and inefficient to look for a complete withdrawal of state intervention from investment and strategic structuring. And there remained room for reserved judgment about the durability of economic improvement. Its scale, however commendable by comparison with past expectation, remained modest in relation to the opportunity available, and to the social need. Growth had mostly been led by imports, not exports; internal private investment was limited, and a heavy outflow of funds persisted. Most external investment was moreover in mobile portfolio form (though this last, some argued, was not be scorned - it implied a degree of useful integration into wider global structures, and it also exerted a disciplining pressure towards stability). Economic reform, financial stability and fiscal discipline had made less headway, and to a less determined national agenda, in Brazil - much the biggest and richest country, with most leverage - than in several others. Across much of the region the market model was still just another option undergoing test, rather than an agreed and entrenched national assumption.

On the political side, however, the commitment to democracy did seem to have considerable solidity (though we noted - with a touch of discomfort - that good economic performance was as yet, across the region as a whole, poorly correlated with democratic advance). There was of course much more to democracy than just elections; but the regularity of these almost everywhere, and the acceptance of their outcomes, was an undoubted advance. The major worry was perhaps the lack of stability and of underlying consensus between elections. For all that the extremes of the old political spectrum commanded far less support than before, ballot outcomes still sometimes yielded dramatic swings putting in power inexperienced leaders with unsteady mandates. Party structures for continuity of support and direction were often poorly developed, and there were uncomfortable halfway-house risks in attempts to blend Parliamentary and Presidential modes of Government. Such features could impede the cool fine-tuning of policies that successful management of the economic challenges increasingly required.

There were nevertheless heartening shifts of general political attitude within most countries, towards clearer realism, a healthier sense of in-house responsibility bearing, more openness to a wider world and greater concern for its views, as for example in nuclear non-proliferation. The accountability of government was becoming more genuine; voluntary associations (like those for women’s rights) were increasing their influence, and the media - though still often lacking the habit of rigorous investigation - were playing a positive part in challenge and exposure. The accountability trend would be enhanced if within states more could be done to devolve power to local levels, matching responsibility and resources, and in the process valuably diluting the dominant power of capital cities.

We talked a good deal, often rather gloomily, about judicial systems. The quality of these - their objectivity and integrity - was important not only on ethical and social but also on economic grounds, since a legal environment on which businessmen and investors felt unable to rely for predictability and fairness was bound in the long run to be a serious impediment. Corruption remained a grave and widespread problem, and current levels of income and status among judges did not help its extirpation. Difficulties were compounded, in some countries, by the proliferation of legislation - often, by internal contradiction, offering scope for biased or capricious application - and by a practice of allowing very wide leeway for executive discretion. There was, it was suggested, comparatively little sense in Latin American political culture of a settled primacy for enduring law.

Not the least of the contrasts with the 1989 discussions lay in the low-key discussion of the armed forces. Though we believed that they could still at times be significant supporters of preferred political movements, the likelihood of their seizing and holding power themselves was waning. Questions needed to be tackled about their future size and role. Their political salience and perhaps their cost, we thought, might be healthily reduced if the resolution of outstanding border questions weakened one of their present rationales, and also if the transfer of internal roles to the civil police could be maximised. We mostly liked the idea of increasing their UN involvement, not least as exemplifying a wider view of national concerns.

Through all our exchanges on these aspects of domestic policy and structure we heard the drumbeat of deep poverty and social inequality, compounded by family break-up and the spread of crime and drug-related sub-cultures. These were still problems on an enormous scale, widely spread through the region, and indeed at risk, at least in the near term, of being intensified by the economic focus on market mechanisms. Despite the faltering of old dissident creeds on the left, and the welcome slowing of growth in population pressures, there remained here a vast seedbed for populist backlash against current reform programmes; special concerns like those of Indian peoples might be a further element, and environmental factors an additional and complicating dimension. Doubt must persist, in some key countries, about whether tolerance would hold long enough for reform to take root and yield persuasive dividend. There were some substantial Government programmes, for example in Mexico, to address the problems directly, but no-one claimed confidence that policies anywhere were truly commensurate with the need; and some scepticism was voiced about whether key governing élites were truly committed to the drive for remedy.

We spent a good deal of time on the prospects and nature of interstate groupings among countries of the region. There was plainly a strong impetus towards such groupings, for both political and economic reasons. Political considerations included an increasing sense of common interest as wider global awareness deepened, and also perhaps a judgment, explicit or not, that political dialogue and convergence would help entrench democratic reforms; in addition challenges like terrorism and drug supply (the latter still a grave worry, even if the prime need was to attack the consumption aspect) were best tackled on a multi-national basis. Economically, groupings could help to spread, as well as to secure, the benefits of more efficient trade - though we noted warily that realising such benefits inescapably required structural adjustments certain to be locally painful, and difficult accordingly for societies many of which were as yet less fully-formed nations than those of, say, Western Europe. We were less than confident which particular groupings would prove most fruitful. The success of MERCOSUR would turn largely on whether Brazil was truly interested and made the reforms the grouping’s logic required. Elsewhere, cooperation between Venezuela and Colombia had made striking headway, but we doubted whether any much wider Andean grouping would have adequate economic coherence; Ecuador might fit, but scarcely Peru and Bolivia. It was not altogether easy to see where Chile, for all its various strengths, might find its most natural grouping.

We paused briefly on the OAS, to register views ranging from “Hopeless” to “Might still just be useful”. We were inclined to think the Rio Group a more promising collective instrument; through one or other, action to put matters right in Haiti was a key test for Latin America. But the keenest interest, in this field of our debate, was in NAFTA. It was, we heard, a misconception to see this as essentially a free-trade mechanism - tariffs were already mostly very low between the three member countries, and the prime significance and attraction lay in the achievement of comparable standards and system consistency, to facilitate the free flow of investment. For Mexico, this would mean both opportunity (through low-labour-cost advantage) and adjustment pain; and despite the surface magnetism of the NAFTA concept, the realism of further accessions declined rapidly with distance from the United States, quite aside from the large question of whether the US Congress could be persuaded to acquiesce in any extension. NAFTA in any event could not be the core of a viable US defensive option against the eventuality of aggressively protectionist behaviour by Europe or Japan - the scale of US trade in the Western hemisphere was inadequate for such a purpose. This point, like much else in the discussion, underscored the importance to all of a successful outcome to the Uruguay Round.

We observed that Congressional ratification of NAFTA even with its present ambit would not be easily assured; that would need strong political effort from President Clinton’s new Administration. All were waiting to see, more generally, where the region rated among the Administration’s priorities, following Bush initiatives which had won a good deal of approval. Would serious US political interest reach south of the Caribbean basin? Would Cuba be a distracting fixation? The shadow of US approaches, whether by action or by neglect, remained a major element in the course of regional events. This said, we recognised that external influences could in the end play only a limited part; it was indeed a reality to be welcomed that the countries increasingly saw their future as in their own hands. Europe might prove to have only modest leverage for good or ill. There might be areas in which particular European countries - notably Spain - could offer advice or models arguably more apt than US ones, but the general weight of politico-economic dialogue between Europe and Latin America was not yet impressive.

We managed, not wholly without difficulty, to avoid spending over much time on particular issues like Cuba (where we thought that the odds were against very sudden transition, but that when it did come its problems - like recovery of private ownership - might be very severe) and the Falklands. And we heard surprisingly little about the role and impact of the churches, or of trade unions; perhaps the accumulating complexities were enough for us even without these.

As we scanned the region’s diversity, the toughness of its many-sided agenda and the fragility as yet of much of the improvement we had noted, we mostly agreed that simple reversion to old patterns was not a high risk. Constructive advance along the political and economic paths currently mapped out was however by no means the only direction which events could take. Whether, as we would wish, it remained the likeliest, or at least likelier than any particular alternative path, we were not sure - we did not attempt a poll as between optimism and pessimism. The votes, no doubt, would have reflected temperament as much as fact. But things were mostly a lot better than they had been; and one participant reminded us that sober optimism was itself a useful resource, meriting a sympathetic presumption.

This Note reflects the Director's personal impressions of the conference. No participant is in any way committed to its content or expression.

Chairman: Sir William Harding KCMG CVO
Director and Adviser on International Affairs, Lloyds Bank pic


Dr Celia Szusterman
Senior Lecturer, School of Languages, Faculty of Law & Communication, University of Westminster, London

Professor Maria D’Alva Gil Kinzo
Professor of Political Science and Vice-Director, Centre for Research on International Relations and Comparative Politics, Universidade de São Paulo

Mr Paulo Sotero
Washington Correspondent and Bureau Chief, O Estado de São Paulo and Agencia Estado

Mr Alan E Angell
Fellow, St Antony’s College, Oxford; Lecturer in Latin American Politics, University of Oxford
Mr Colin Armstrong
Executive Committee member, Canning House
Mr Adrian J Beamish CMG
Assistant Under Secretary of State (Americas, Australia, New Zealand and South Pacific), Foreign and Commonwealth Office

Professor Victor Bulmer-Thomas
Director, Institute of Latin American Studies, University of London
Mr Eduardo Crawley
Editor, Latin American Newsletters Ltd, London

Admiral Sir lames Eberle GCB
Author; a Governor of the Ditchley Foundation

Mr Stephen Fidler
Latin America Editor, Financial Times
Mr Alastair Forsyth
Director, J Henry Schroder Wagg & Co Ltd, London

Professor Alastair Hennessy
Department of History, University of Warwick.

Ms Isabel Hilton
Chief feature writer, The Independent, joined Sunday Times 1976

Mr Alistair Home CBE
Author, journalist and lecturer

Professor Alan Knight
Worsham Centennial Professor of History, University of Texas at Austin

Dr Iain McFarlane
Latin American Regional Executive, ICI Group, London

The Rt Hon Viscount Montgomery of Alamein CBE
Managing Director, Terimar Services

Mrs Rosemary Thorp
Fellow, St Antony’s College, Oxford; Lecturer in the Economics of Latin America, University of Oxford

Mr Ray Whitney OBE MP
Member of Parliament (Conservative) for Wycombe, Bucks

Mr James P Cooney
Director, International & Public Affairs, Placer Dome Inc, Toronto

Mr Gary German
President and CEO, Crown Global Trade Canada Ltd

Dr Michel G Maila
Senior Vice President, Special Country Unit, Bank of Montreal, Toronto

M. Pierre Defraigne
Director for North-South Relations, Directorate-General External Relations, Commission of the European Communities, Brussels

Professor Guy Hermet
Professor of Political Science, Institut d’Etudes politiques de Paris;

Ambassador Dr Gerhard Henze
Director, Latin American and Caribbean Affairs, Foreign Office, Bonn

Dr Nikolaus Werz
Senior Staff Member, Arnold Bergstraesser Institute

Herr Wolf Grabendorff
Director, Institute for European-Latin American Relations (IRELA), Madrid

Professor Jorge G Castañeda
Visiting Professor, Woodrow Wilson School of Public & International Affairs

Mr Thomas Carothers
Lawyer with Arnold & Porter, specialising in international financial and corporate transactions with particular emphasis on Latin America

Professor Jorge I Domínguez
Professor of Government and chairman, Latin American Studies Programme, Harvard University

Mr Phillip McLean
Deputy Assistant Secretary of State for South America, Bureau of Inter-American Affairs

Professor Robert A Pastor
Emory University: Professor of Political Science; Director, Latin American & Caribbean Program, The Carter Center, The Carter Presidential Center Inc., Atlanta, Georgia;

Dr Susan Kaufman Purcell
Vice President for Latin American Affairs, Americas Society, New York City

Professor Riordan Roett
Sarita and Don Johnston Professor of Political Science and Director, Latin American Studies Programme, Paul H Nitze School of Advanced International Studies (S AIS), Johns Hopkins University, Washington DC

The Hon William D Rogers
Senior partner, international practice, Arnold & Porter (Attorneys), Washington DC; Vice Chairman, Kissinger Associates Inc

The Hon Sally A Shelton
Senior Fellow and Adjunct Professor, Centre for Latin American Studies, Georgetown University and Co-Director, US-Mexico Project

Ambassador Harry Shlaudeman
United States Ambassador to Brazil

Professor Sidney Weintraub
Economist; Dean Rusk Professor of International Affairs, Lyndon B Johnson School of Public Affairs, University of Texas at Austin