16 May 1996 - 18 May 1996

The Impact of Political and Economic Change in Latin America

Chair: The Hon Donald Rumsfeld

Jointly organised with the Southern Center for International Studies

Ditchley had last surveyed the Latin American scene in early 1993, reaching then a wary satisfaction with the general directions of change and a highly qualified optimism about their maintenance. We now renewed our agreeable cooperation with Atlanta’s Southern Center for International Studies in a review of whether the satisfaction and the optimism could be re-affirmed.

In the field of political structures, we noted, the welcome sweeping-away (save in Cuba) of unelected authoritarian rule had nowhere been reversed or even closely threatened; basic democratic freedoms were generally being sustained, and there had been healthily peaceful changes of regime. Only time however would prove how securely rooted and institutionalised all this was, and we observed several reasons for continuing caution. The acceptance of elections did not guarantee thoroughgoing systemic reform; styles of central government were still for the most part highly presidential and personalised, with parties weak and the concepts of legitimate yet effective opposition, minority rights and constitutional process not yet well entrenched. More fundamentally, politics was still in most countries an affair between élites, rather than an arena of wide popular influence.

Corruption remained a widespread problem and burden upon both politics and economies - though it was arguable, we recognised, that such dramatic events as the Collor impeachment at least showed that retribution through democratic frameworks and public pressures was increasingly possible. Structures of general accountability nevertheless often remained precarious or worse, partly through the weakness of political oppositions and partly through the continuing inadequacy of judicial systems. Despite some evidence of improvement, these last remained a focus of much concern. There was need both for more coherent and more systematic law (though please not, said one heartfelt aside, the wholesale importation of United States tort law) and for its more dependable and honest application, both to individual rights and to commerce.

The concern expressed about the working of systems of justice was one aspect of a theme powerfully recurrent almost throughout our discussions: the cardinal importance of good governance. Incompetent or untrustworthy public services - and standards varied very widely across the region - risked corroding both efficient economic operation and (equally crucial) long-term public confidence in the democratic and free- market paths. The need, it was powerfully urged, was for a better and stronger state capability both centrally and locally - not a bigger role, repeating the over-ambition of the 1980s, but doing less much better. We speculated that better training, better pay and severer disciplines all had a remedial part to play. There was clearly a role too for the media. We saw some encouraging signs that these were becoming more apt for their necessary contribution to a healthy civil society, though there remained worries about over-concentrated ownership, poor access given (especially on television) to opposition viewpoints, and a reluctance - perhaps reflecting defensive habits formed during repressive eras - to press investigation rigorously. External TV might remain a significant political and social force in widening popular awareness of societal shortcomings and of widening opportunities.

The societal shortcomings in many countries remained very severe. Welfare systems were patchy if not vestigial; taxation was often both uneven in concept and sketchily levied; massive inequalities of wealth persisted, despite some evidence of “trickle-down”. The result, quite aside from the direct individual consequences of grave poverty, was often societies of very little cohesion - one comment suggested that across the region as a whole barely a third of the population was truly a part of the consumer society.

The necessary even if not the sufficient condition for rectifying such ills remained economic advance. Many participants saw a good deal to applaud in this regard. Inflation, though nowhere dead and buried, was almost everywhere curbed to a degree that would have been thought astonishing (for example in Brazil) a decade or so ago, and policies were acquiring a consistency that reassured investors both at home and abroad. Unemployment remained at worrying levels, especially alongside the sustained drift to the cities (as well as continuing distortions in labour markets), and economic growth was in many countries still largely absorbed by little-checked demographic surge; but the difficulties sparked by the crisis over the Mexican peso had been survived and indeed mostly well-managed, and the regional debt position was improving. There was no coherent ideological rival to the free-market concept, even if (amid social discomforts) the advance might still in some countries need more impetus; and increasing international openness and interdependence would make it hard, even if a serious political challenge did emerge domestically, for any country to break away towards the past. Structural change and, in particular, privatisation were irreversible, though a good deal of disquiet was expressed about how the latter was often implemented, with too much individual enrichment and not enough control. Internal market development seemed the key to adequate growth and job creation, but it was widely impeded by a range of factors including an unhelpful regulatory framework for the small and medium enterprises on which (as elsewhere in the world) growth specially depended; poor competition policies; and overdependence on foreign capital even when, as from the United States, that was at present fairly readily forthcoming. Financial systems were often weak, interest rates high and (save in one or two countries such as Chile) savings levels inadequate, though the gradual rise of confidence in the holding down of inflation might help remedy this.

Our survey - like almost any survey of any region - noted areas of deficiency constricting economic advance; the examples most stressed were education, especially of women, and transport and communications infrastructure, though in this last respect we suspected that energetic development of modem instruments like Internet could have a galvanising impact.

The region’s general commitment to free international trade and the principles of the World Trade Organisation system seemed clear enough, though some uncertainty was voiced about how particular groupings within the region would work in practice. NAFTA was unlikely to expand beyond Chile even with a second Clinton Administration in the US; the main doubts related to MERCOSUR, given its economically uneven composition and the inevitable predominance of Brazil. Smaller countries might be wary of that predominance and of the possibility of its being exerted in protectionist-bloc ways, or politically as counterweight to US influence; but on balance most of us were disposed to a less sceptical view, seeing MERCOSUR’S potential as an encouragement to investors and an aid to market opening.

It was indicative of the region’s transformation that concerns about “classical” security and the military were relatively muted. Major external threats were hard to discern; Cold-War-related distortions had faded; guerrilla movements, while they had not vanished, were less salient than in the past; there was no substantial ethnically-based irredentism of the kind that disfigured several other regions; and though an assemblage of border disputes remained there was little propensity to resolve them by force or to magnify them as props to regime legitimacy. The military were safely in their barracks, though their scale might still exceed real need and structures of civilian control were mostly still underdeveloped. The recently successful collective pressure on the Paraguayan military to remain within constitutional process had been noteworthy - not least in that the consensus had been essentially intra-regional (“they heard it in Spanish”). Growing resolve and sense of shared security interest, not dependent on US leadership, had not yet undergone the test of high cost to be accepted or of a big country to be faced down, but the episode was a propitious one. There were signs too - for example in Brazil’s interest in permanent Security Council membership, and Argentina’s useful contributions to UN operations - of increasing confidence to act on the global stage.

More negatively, the drumbeat of the narcotics issue echoed through many of our interchanges. The problems were increasingly recognised as gravely damaging in domestic social impact as well as in relations with the United States and others; but the friction in these relations remained serious - ultimate goals might be shared, but there were wide disagreements about methods and about relative responsibilities as between reducing demand and constraining supply. The high public profile which US domestic constitutional structures and procedures imparted to such issues as decertification (even if the concept of conditionality in international economic relations was far from unique to the US) exacerbated resentment.

Despite these special strains, it was strongly suggested that US/Latin American relations – always bound to be complex, with so massive an interface - were mostly less stressful than a decade ago. Cuba remained inescapably a danger-point, given the domestic pressures within the US; post-Castro transition was a potential time-bomb, and the problems even before that were vividly illustrated by the Helms/Burton legislation, viewed by most US trading partners - not just those in Latin America - as unconscionable and indeed probably in breach of international law and obligation. In respect of Cuba and more widely, so it was urged, the European Union and its member countries ought to be taking a more active interest (as Britain and Spain seemed already to be doing) in the affairs of the region; there was perhaps a case for triangular dialogue involving the US and EU together.

We were reminded constantly that the region was large and diverse; that such unity as it had was more cultural and historical than political and economic; and that almost any generalisation about it was accordingly over-simplified. We noted for example that the upbeat economic propositions which had marked much of our debate did not apply as readily to the Colombia-Venezuela-Ecuador grouping as further south. We realised too that we had barely touched upon several major dimensions such as land reform, decentralisation of government and the tackling of environmental issues. With all these provisos, however, the broad tenor of our conference was sanguine; we knew that transitions on the scale now in hand, seeking to remedy failings accumulated over many years, could not be carried through in less than decades, and we saw moreover the special opportunities that the region, learning from experience elsewhere, might have of leapfrogging in some key fields like high-technology communications and service industry. Overall, most of us seemed minded to sustain - some indeed to deepen - that wary satisfaction and qualified optimism.           

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

Chairman: The Hon Donald Rumsfeld
Secretary of Defense (1975-77)


Dr Andrés Bajuk
Special Representative, Inter-American Development Bank, Paris

Dr Alfredo G A Valladão
Professor Institut d’Etudes Politiques, Paris

Mr Julian Amey
Director General-designate, The Hispanic and Luso-Brazilian Council, London
Mr Alan E Angell
Director, The Latin American Centre, St Antony’s College, Oxford
Mr Malcolm Deas
Lecturer in the Politics and Government of Latin America, University of Oxford
Mr Stephen Fidler
Latin America Editor, Financial Times
Sir Peter Heap KCMG
Ambassador to Brazil (1992-95)
Mr Henry Hogger
Head, Latin America Department, Foreign & Commonwealth Office
Mr Stephen Hugh-Jones
International Editor, The Economist
Mr Hugh O’Shaughnessy
Latin America Correspondent, The Observer (1968-95)
Mr David Pirrie
Director of International Banking, Lloyds Bank pic
Mr Ray Whitney OBE MP
Chairman, Parliamentary Latin America Committee
The Rt Hon The Baroness Young PC DL
Minister for State, Foreign and Commonwealth Office (1983-1987)

Herr Georg A Boomgaarden
Head Latin America (South) Department, Foreign Office, Bonn
Professor Dr Albrecht von Gleich
Institut für Iberoamerika-Kunde, Hamburg

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

HE Ambassador Andrés Rozental
Ambassador of Mexico to the United Kingdom

Señor Don Pedro Bermejo
Spanish Ambassador to Peru (1982-85); to Mexico (1985-90); to Chile (1990-95)

Mr Christopher Brown
Research Director and Latin America Specialist, The Southern Center for International Studies
Mrs Jeanne R Ferst
Board Member, International Rescue Committee and International Human Assistance programs, New York
Mr Gordon Harrison
Assistant to the President, Kennesaw State College
Mr Edward J Hawie
A Senior Partner, specializing Argentina and other Latin American countries. King & Spalding, Atlanta
Mr Isaac Lemor
Consultant, Republic National Bank of New York
The Hon David A Lipton
Assistant Secretary for International Affairs, US Department of the Treasury
Mr Raymond D Lucas
Senior Vice President, Strategic Operations, Scientific-Atlanta Inc
The Hon William D Rogers
Senior Partner, international practice, Arnold & Porter
Dr Cedric L Suzman
Vice President & Director of Programming, The Southern Center for International Studies
The Hon Arturo Valenzuela
Deputy Assistant Secretary of State, US Department of State