Interview on Understanding Latin American Politics

If you want to hear me talk about my book Understanding Latin American Politics, here is the link to an interview I did with Keith Simmons for New Books in Latin American Studies. Incidentally, it is not what I normally sound like--I am slowly getting over a cold that left me hoarse.

Interpreting Latin America's Slowdown

Latin America's economic growth is slowing. By chance I happened to see two accounts that use the same variables but come to completely different conclusions. So the Wall Street Journal and a political economist writing for Telesur both say the slowdown is due in large part because of China's decreased demand for commodities and the United States winding down its stimulus.

The WSJ conclusion is mostly "glass half full":

There is a silver lining to the slowdown. After decades of going through debt-fueled booms followed by costly busts, the current downturn appears to be part of a more conventional business cycle, which the World Bank describes as an “unprecedented experience” for the region. 

“That is good news because the bust is very bad for equality, very bad for growth and can set the region back several years,” Mr. de la Torre said.

The Telesur conclusion is conspiratorial and even apocalyptic:

It should also be noted that certain recent USA government policies have also been exacerbating Latin America’s emerging recession.  The USA is taking advantage of the emerging recessions in Latin America to put additional economic pressure on two of the region’s most important economies: Argentina and Venezuela. This further destabilization suggests that the USA may be ‘turning’ again toward a focus on Latin America in an effort to reassert its hegemony in the region and to roll back the progressive developments and governments there that have arisen in recent years. But how the USA is now attacking both Argentina and Venezuela—i.e. by defending the vulture capitalist hedge fund billionaires in the case of Argentina debt payments and by working with US multinational corporations to artificially create a dollar shortage and runaway inflation in the case of Venezuela in a USA effort to still further destabilize the slowing economies of both countries—s the subject of a subsequent essay and analysis.

Take your pick!

Presidential Approval in Latin America 2014

Consulta Mitofsky put together a report on Latin American presidential approval based on national polls. Some thoughts:

1. As always, forget ideology. The populist left is both the most (Correa, Morales) and least (Maduro, Fernández) popular.

2. On average, Central American presidents are more popular than those in North or South America. That's about the definition of "counterintuitive."

3. When Barack Obama and Dilma Rousseff meet, at least we know they have one thing in common, which is that they similarly unpopular. Both can laugh at Stephen Harper.

4. Danilo Medina of the Dominican Republic has Alvaro Uribe-type numbers, with 89%. Even economists like him.

Explaining Sluggish Growth in Latin America

The Brookings Institute has a short and gloomy analysis of economic performance in Latin America. They base the gloom on the fact that Latin American economic growth is sluggish right now even though the "external environment" is very favorable, whereas previous dips corresponding with poor external conditions and the economies recovered when those conditions improved.

Here's the chart they base the argument on:




This is really a classic case of confusing correlation and causation. "External environment" is defined very narrowly and indeed arbirtrarily as a few major crises. Those crises fit the argument, but in the absence of testing other possibilities, we can only say there is correlation, not causation.

Most prominently, we know Latin America depends heavily on commodities. We also know China has been buying commodities. Yet in the past few years China's growth is slowing. It is therefore reasonable to hypothesize that the current sluggishness stems from that. It's correlation until we do more work to show causation, but it's at least more precise than their analysis.

Along similar lines, since Latin America exports commodities we need also look at commodity prices. As it turns out, corn and soy are at four year lows. This would take much more work, but we could hypothesize that dropping commodity prices (or dig down and specify what commodities in what countries) are causing weak economic growth.

Their analysis could be right. Maybe. I feel there are plenty of ignored independent variables that likely do a better job of explaining the dependent variable of growth rates. You don't know until you test them, and if you don't test them at all, then you don't have much of an analytical foundation.

Pacific Alliancing

Michelle Bachelet, Juan Manuel Santos, Enrique Peña Nieto, and Ollanta Humala have a joint op-ed about the Pacific Alliance. Its basic thrust is that the free movement of goods and people will improve welfare.

One interesting point to consider is that both Bachelet and Humala were bashed when they took office for being leftists (remarkably, this was true even just recently for Bachelet). Santos, meanwhile, is center-right but bashed by his predecessor for, among other things, being willing to reach out to the left. So all the easy ideological labels don't work too well.

This is also notable for the "losing Latin America" argument I've periodically tried to counter. A majority of Latin American countries are market-oriented, which has consistently been a U.S. policy goal. Like it or not, it's reality. The Pacific Alliance is a good example of how Latin American countries can actually come together in pursuit of something the U.S. favors but is not directing. That's hardly "losing." It just means that leading is not synonymous with directing.

Trade Within Latin America

Shannon O'Neil notes the increase in "South-South" trade, meaning between Latin American countries. Two points in particular are worth briefly expanding on:

First, it is true that trade with China with increasing. But so is trade with a lot of countries. If you cherry pick China numbers only, then you end up with all the op-eds about China gaining power (she does not actually make this point--it's just my pet peeve). When you look at the bigger picture, what you see is diversification, which is a positive development. As she notes, Latin America has more to gain with intra-regional trade than with China.

Second, the glass half empty part of the equation is that trade diversification is not the same as product diversification. While it's good to have more diverse trading partners, it's not as valuable in the long-term when you're exporting soy (or whatever) to all of them.

How to Spice Up an Iran Conspiracy Article

Here's a lengthy Iran-Latin America conspiracy article, which is more or less identical to many others over the years.* The basic recipe, which you can spice up in various ways, is as follows:

1. Discuss how Iranian leaders have spoken to leftist leaders in Latin America
2. Refer to 1992 bombing in Argentina
3. Paste together circumstantial and unconnected evidence
4. Criticize those who do not believe Iran is a threat in Latin America, including the State Department
5. Suggest taking "action," preferably "before it's too late."

The current article used the following extra spice:

1. Bring in Machiavelli
2. Talk a lot about 9/11
3. Discuss 1979 hostages in Iran

* One of my favorites is the one asserting "the absence of evidence is not the evidence of absence."

Lack of Interest in Non-Intervention

I happened to buy a used book online--a 1955 book by Donald Shea, The Calvo Clause, which examines the question of intervention (or, as Calvo argued, absence of intervention) for foreign investors in Latin America (or indeed anywhere).

So this book was published at a time when U.S. policy makers were in a clearly interventionist mood and the Cold War would rage on for several more decades. As it turns out, the particular copy I got was originally from the State Department library (even with a stamp indicating the book was first received 1955 or 1956, I can't quite tell which), then subsequently withdrawn. In the back there is a check-out slip well glued in, with no evidence that there was ever any other previous slip. It was checked out a grand total of one time.




So I guess nobody in the State Department was particularly interested in learning more about Latin American ideas of non-intervention.

Poverty Reduction in Latin America

The UN Development Program has a new study (seems to be Spanish-only) about the reduction of poverty in Latin America. It is quite optimistic, arguing that the total percentage of people in poverty dropped from 41.7% to 25.3% while the middle class grew from 21.9% to 34.3%.

As is so often the case, the trends defy easy ideological identification. Argentina, for example, is doing quite well.

This is great news. We also need to be cautious. There is some fine print, for example, such as that in seven countries informality exceeds 60%. Plus, as the study (and other studies like it) note, millions of people are at risk of falling back into poverty.

CEPAL has noted that the 2000s were good for poverty reduction, but that the trend had slowed sharply.

Personal Security in Latin America

Gallup just released a poll on feelings of personal security. Latin America scores the lowest of any region of the world, and Venezuela the lowest in the world. I tend to doubt Venezuela is truly that low since the poll is taken by telephone (do people in Afghanistan truly feel less secure than Venezuelans??). But it does likely mean that Venezuela is the lowest of any country in the middle range of development.

Here are the Latin America numbers:

As with so much in Latin America, we don't see any correlations to ideology. The best and worst countries are leftist, for example. The same question about telephones also pertains here, as countries with large rural populations (e.g. Guatemala seems high to me) will be skewed.

In general, this reminds me what we already know. Violence is too prevalent and governments face major challenges in addressing it, while police are too corrupt. As a result, people don't feel safe. This isn't a way to build thriving democracies.

Critique of the Latin American Left from the Left

Via Robin Grier, I found this new working paper by José Gabriel Palma, an economist at Cambridge, with the casual title of "Latin America social imagination since 1950. From one type of 'absolute certainties' to another -- with no more (far more creative) 'uncomfortable uncertainties' in sight." Yes, that is in fact the title.

It's an ideological and intellectual critique of the Latin American left, which he argues is bereft of new ideas. His criticisms come from the left's left, so to speak, as he wants something new and radical. In the 1950s and 1960s, the Economic Commission for Latin America and the Caribbean, along with dependency theorists, provided a rich and critical body of work. Dependency theorists started to give up in the 1970s, and nothing new grew from it.

Reading the political analysis of most ‘dependentistas’ at the time, one is left with the impression that the whole question of what course the revolution should take in the periphery revolved solely around the problem of whether or not a ‘proper’ capitalist development was viable. Their conclusion seems to be that if one were to accept that capitalist development is feasible on its own contradictory and exploitative terms, one would be automatically bound to adopt the political strategy of waiting (‘Penelope-style’) and/or facilitating politically such development until its full productive powers have been exhausted — and only then to seek to move towards socialism. As it is precisely this option that these writers wished to reject out of hand, they were obliged to make a forced march back towards a pure ideological position in order to deny any possibility of meaningful capitalist development in the periphery at the time — even if this was taking place in front of their own eyes. 

So they stagnated instead of offering a socialist critique of the way in which capitalism was developing in the region. This part seems overstated to me--he says that he wouldn't have enough material on such critiques to fill a review article, but those critiques were already plentiful when I was doing my doctoral coursework in the mid-1990s, though of course I was reading political science rather than economics journals.

At any rate, he criticizes the Latin American left for going from one certainty (socialism) to another (capitalism) instead of finding uncomfortable alternatives. He notes, for example, the Chilean socialists, who are so supportive of capitalism that the name "socialist" seems odd these days. Same with the Brazilian PT.

The result? Self-proclaimed leftist governments talk the talk, but actually end up producing more millionaires than their "neoliberal" counterparts.

And LA’s ‘new left’ has proved to be remarkably effective in the implementation of their upside-down hegemony; according to a the Wealth Report (2014), in the last ten years no other main region in the world has created so many millionaires as LA has done (i.e., individuals with US$ 30 million or more in terms of net assets, excluding their principal residence), centa-millionaires (those with net assets of more than US$ 100 million), and billionaires. And within LA, perhaps not surprisingly, those countries with ‘centre-left’ governments are the ones with a rate of increase of these types of millionaires well above-average. Among these, in terms of new millionaires created in the last decade (defined as above) Uruguay comes joint first with Venezuela, followed by Brazil Argentina and Chile; as for new centa-millionaires, Venezuela ranks first, followed by Brazil, Uruguay, Argentina and Chile; and for new billionaires, Argentina ranks first, followed by Brazil, Chile and then Venezuela.36 During this period, in turn, traditionally ‘right-wing’ Mexico had an increase of people in these three categories which was only one-fourth to one-sixth those in the ‘new-left’ countries.

That won't surprise anyone following the news about Venezuela.

He concludes with a certain amount of frustration because markets have wooed everyone and their negative effects are swept under the rug by just about everyone, but most frustratingly by a new left.

Israeli-Palestinian Conflict and Latin America

There have been quite a few stories on Latin America's response to the current Israeli-Palestinian conflict. I tend to agree with this assessment:

As Gaza smolders, the anti-Israel drumbeat is likely to continue, but the smart money says the damage will remain confined to the rhetorical battlefield. "Latin diplomacy was correct in criticizing Israel's excesses in Gaza but no one is interested in severing relations," says former Brazilian foreign minister Luiz Felipe Lampreia. "There's too much at stake."

Palestinian and Israeli leaders alike have been courting Latin America quite aggressively. This isn't new--I had a spate of posts in 2010-2011 about recognition of the Palestinian state, which included the support of Chilean president Sebastián Piñera. Too many of the media stories give the impression that this is all new.

What I need to do is wrote a post sometime after the current crisis is over, and see how much concrete rejection of Israel--reduction of trade, cancellation of investment, that sort of thing, long-term severing of relations--has actually occurred. This makes me think of Venezuela's treatment of Honduras and Panama some time ago, both of which were vocally and publicly labeled as adversaries for a while, followed later by quiet restoration of normal relations.

Understanding Latin American Politics Textbook

My new book is officially out and I received my copies today. I mentioned it a while ago with some details here. If you're an instructor, go over to Pearson's website and request an exam copy.

According to me, it is the best book written about the topic ever, and likely will never be topped. But that's just me.

Having a book come out is always a great feeling and even more so when it took so long to write.

Economic Outlook in Latin America: Meatballs

The Miami Herald reports on a conference of economists talking about Latin America's short-term economic future. It's not an impressive result. One said that if he were a weatherman he'd say "cloudy with a chance of rain" though I would venture to say the quality of the analyses is such that we can label all of it cloudy with a chance of meatballs.

That same economist, incidentally, had thought that in 2010 the region was about to "overcome the curse of being emerging markets" despite remaining reliant on high commodity prices. Now, of course, low commodity prices are seen as a brake on growth.

Another commented that Ecuador has "exhausted its economic growth model" yet will grow by 4 percent anyway. I guess economists have a different definition of "exhausted."

Yet another said that stagnation is a risk. Great, thanks.

It's all arbitrary, and when you get to the end of the article you realize that you have not learned anything. Variables like public education are posed as the critical obstacle for Brazil yet somehow not in Colombia. Congressional intransigence is a problem in Mexico but somehow not anywhere else.

If you shook a Magic Eight Ball you'd get about as good an idea.

Dollarization in Latin America

A professor of economics at Johns Hopkins makes the case that dollarization in Latin America leads to less misery. Unfortunately, correlation and causation whirl around each other.

The lesson to be learned is clear: The tactics which socialist governments like Venezuela and Argentina employ yield miserable results, whereas dollarization is associated with less misery.

Well, no. Or at best, maybe. The question of dollarization is fascinating and deserves more attention, even in the mainstream media, which for example too often just bashes Rafael Correa without latching on to how Ecuador's economy is fundamentally different from non-dollarized countries.

But you cannot just flip it and say "socialist" (a term left undefined) governments are worse. In fact, you could make a good argument that countries with capitalism and dollar pegs (like Argentina at the time of their crash) create more misery. Further, of the seven most "miserable" countries, four of them are already part of FTAs with the United States, obviously a sign of a) capitalism and b) close economic ties to the U.S.

Latin American Debt

U.S. and Latin American Relations has a simple table showing total amount of external debt in Latin America, so I spent some time updating it. It poses some challenges.

Total External Debt in Latin America, 1980-2012 ($ billions)

	1980	1985	1990	1995	2000	2005	2012
Argentina	27.16	49.33	65.0	101.46	155.02	113.52	141.13
Bolivia	2.34	3.29	3.77	4.78	4.46	4.94	6.28
Brazil	70.56	105.13	122.2	159.26	216.92	169.45	312.9
Chile	11.2	20.4	18.58	25.66	37.18	45.01	117.78
Colombia	6.8	14.06	16.7	26.34	36.13	38.35	78.64
Costa Rica	2.2	4.14	3.7	3.26	3.15	3.63	14.47
Dominican Republic	2.17	3.72	4.3	3.99	3.68	6.75	12.87
Ecuador	4.17	8.11	11.86	13.93	13.22	17.24	15.9
El Salvador	1.18	1.98	2.22	2.17	2.83	4.98	12.12*
Guatemala	1.05	2.69	2.6	2.11	2.64	3.72	6.82*
Honduras	1.39	3.03	3.48	4.24	4.71	5.08	4.84
Mexico	50.7	97.8	98.2	164.01	148.65	127.09	229.03*
Nicaragua	1.82	4.94	8.65	10.25	6.66	5.35	4.289
Panama	2.97	4.76	5.7	5.89	5.6	7.58	10.78*
Paraguay	0.86	1.77	1.76	1.74	2.87	2.76	3.77
Peru	9.59	13.72	17.35	33.36	27.98	28.6	58.83*
Uruguay	2.14	4.9	7.38	5.32	8.89	11.44	21.07*
Venezuela	29.61	34.3	33.01	37.54	36.44	47.23	115.49

*Statistics changed drastically from 2006 report to 2013 report

Source: Economic Commission for Latin America and the Caribbean, Publicaciones Estadísticas, http://estadisticas.cepal.org/cepalstat/WEB_CEPALSTAT/PublicacionesEstadisticas.asp?idioma=e

ECLAC revises data from year to year, which I became really aware of when I was making tables for Understanding Latin American Politics. That complicates reporting when you want to show a long period of time. Typically, though, the numbers are revised only a small amount so that the overall patterns you see still hold, and that's really what the table is for. For debt, however, the most recent (2013) report had drastic upward revisions for a few countries. I think patterns still do hold but the absolute numbers are tricky. I put those cases in asterisks and will have to think about the best way to explain.

What we see is an absolute increase in debt. If you look at it instead as a percentage of GDP, it's not nearly as bad. ECLAC did not report that statistic in 1980 so I can't show it across time. But if you compare 2005 to 2012, most countries look a lot better.

Argentina, for example, went from 62.1% of GDP to 29.6% because it had strong growth. But Argentina also shows the limits of these numbers because there is concern that the rosy side is overstated. The quality of numbers is therefore also an issue.

The upshot is that Latin American countries are borrowing a lot and countries like China have been dishing it out. The problem comes when economic growth slows, as when commodity prices drop, and servicing it eats up a greater share of your capital.