Hoover Daily Report

Why Has Latin America Turned Left?

Wednesday, July 27, 2005

In the past five years, Latin American governments that came to power in the 1990s and favored privatization, deregulation, and the opening of their borders to foreign trade and investment have been swept aside and replaced by presidents who lean to the left.

In Brazil, the Workers' Party candidate, Luis Inácio Lula da Silva, was elected to the presidency in 2002. The following year, Argentina elected a left-leaning Peronist, Nestor Kirchner; earlier this year in Uruguay, Taberé Vázquez's election ended 150 years of electoral dominance by the country's two established political parties. Venezuela retained Hugo Chavez and his "Bolivarian revolution" in a national referendum in August 2004. Bolivia has yet to elect a leftist president but is likely to do so. That country's Movement Toward Socialism (MAS) has forced President Carlos Mesa to resign and has signaled that potential successors will be met with similar resistance. Mexico also appears poised to follow in the footsteps of its southern neighbors; the leading contender in the 2006 presidential elections is Andres Manuel Lopez Obrador, the populist mayor of Mexico City.

What accounts for this sea of change in Latin American politics? Have Latin American voters undergone a profound ideological transformation in half a decade? Or do other factors explain the defeat of politicians who espoused free markets by those whose rhetoric echoes a more populist past?

Latin America's anemic economic performance explains the leftward shift in its politics. With the exceptions of Chile and Costa Rica, the economies of Latin America have limped along for the past two decades. In the 1980s, Latin America's economies nose-dived as a result of decades of protectionism, government intervention in markets, and deficit spending. In the 1990s, in an effort to turn things around, Latin American governments opened up their economies to foreign trade and investment, cut spending, and sold off state-owned enterprises, with promises of rapid economic growth. Those reforms did produce positive impacts but not of the magnitude that populations expected. Indeed, most countries grew just enough to make up for their contraction in the 1980s; Mexico's per capita GDP in 2004, for example, was only 15 percent greater than it had been in 1982.

Meanwhile, Latin America's labor force proliferated. Most of the Latin American population is young—recently entering, or about to enter, the workforce. Given that a majority of voters have entered the labor force since the early 1980s and encountered a dearth of opportunities, it is not surprising that they have been receptive to more heterodox approaches to economic policymaking. Equally unsurprising is the new Latin American governments' lack of enthusiasm for U.S. proposals for a hemisphere-wide free trade area.

The implication for U.S. policy is clear: if policymakers are concerned about the leftward shift in Latin America, they should concentrate on helping the region grow. This help will need to go well beyond free trade. Indeed, they might take a page out of the experience of the EU, whose wealthier nations have helped subsidize public investment in its poorer partners.