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CHALLENGES 2005-2006: Social Reforms Making Slow Progress in South America

Marcela Valente

BUENOS AIRES, Dec 28 2005 (IPS) - Hit hard by the impact of free-market “neoliberal” policies during the 1990s, in recent years many South American voters have opted for progressive governments. But the social agenda of the new administrations has lagged, and while some countries are moving forward slowly, the progress made by others is frankly disappointing.

IPS interviewed a sociologist, an economist and a political scientist about the challenge taken on by leftwing, centre-left or “progressive” parties, alliances and movements now in government, who when they were in opposition criticised structural adjustment policies, the dismantling of the State and the opening up of markets in Argentina, Brazil, Chile, Uruguay, Venezuela, and, now, Bolivia.

The new governments are committed, on the one hand, to maintaining a balanced budget, meeting debt-servicing payments punctually, and attracting investment by offering solid guarantees. Voters, on the other hand, expect them to fulfil their electoral promises to fight poverty and unemployment, and distribute wealth more equitably in the region with the greatest gap between rich and poor in the world.

Sociologist Atilio Borón, executive secretary of the Latin American Council of Social Sciences, believes the challenge is a realistic one. “But it implies a paradigm shift in economic policy which so far the countries have not sought. The most disappointing experience of all is that of Brazil,” he stated.

Great hopes arose in Brazil in January 2003 when Luiz Inácio Lula da Silva, a former trade union leader and metal worker, came to power. However, his leftist Workers’ Party has not achieved as much in terms of economic growth and job creation as was expected.

Lula does have some achievements to his credit.

Extreme poverty fell from 27.26 to 25.08 percent of the population in 2004, the Getulio Vargas Foundation in Rio de Janeiro reported in early December. This means that more than three million people have escaped extreme poverty, eight percent of the 40 million people who were extremely poor in 2003.

The minimum salary was increased by nine percent this year, and the programme of “family grants” (a subsidy for poor families) benefited 6.57 million households in 2004. The goal is to reach 8.7 million families in 2005, and 11.2 million by the end of Lula’s term, in December 2006.

However, Lula’s economic policies have so far been based on excessively tight spending to ensure debt payments, and on high interest rates to fight inflation, a combination that is far from novel and creates recession.

In Argentina, governed by the left-leaning Néstor Kirchner since May 2003, one can see “a certain willingness to change things, at least in some areas,” Borón commented. After the late 2001 economic and financial collapse, the poverty rate climbed to well over 50 percent, whereas in the last two years it has fallen to 40 percent.

But essentially the government “is adhering strictly to the prescriptions of the Washington Consensus, with no change in direction of its economic policy,” he added.

“Washington Consensus” refers to a set of structural adjustment policies prescribed by the World Bank, the Interamerican Development Bank and the International Monetary Fund beginning in the 1980s. The reforms included the privatisation of state enterprises, fiscal policy discipline, deregulation, openness to foreign direct investment, and trade liberalisation.

In Borón’s view, in-depth change in Argentina would require implementing tax reforms to make the current tax system less regressive. “Selling a 1985 model car is a taxable transaction, but selling a 15 billion dollar company isn’t,” he illustrated.

This system, which does not tax income on financial assets, was inherited from the administration of Carlos Menem (1989-1999). During that period, one of the region’s most orthodox versions of the neoliberal model was put into practice. And “The present government is using the same tax system,” the sociologist pointed out.

Borón considers the legacy of the Chilean government led by socialist President Ricardo Lagos to be “another frustration.” Lagos is about to end his term of office with a high popularity rating. However, during his administration “there was economic progress,” but inequality was not reduced, he stated.

The centre-left coalition that has governed Chile since 1990 has not managed to reverse the social inequality left behind by the military regime.

“Chile used to be one of the most egalitarian countries in Latin America – before the dictatorship of Augusto Pinochet (1973-1990) – and now it has become one of the most unequal in the region,” noted Borón.

However, Chile has reduced poverty by half, from 38.5 percent of the population in 1990 to 18.8 percent this year, while extreme poverty has fallen from 12.9 to 4.7 percent over the same period. Chile is the first Latin American country to fulfil the first of the eight Millennium Development Goals adopted by the United Nations General Assembly in 2000.

Lagos’s likely successor is socialist candidate Michelle Bachelet, who will face off with her rightwing rival Sebastián Piñera in a runoff election in January.

Argentine political scientist Rosendo Fraga, director of the New Majority Studies Centre, pointed out that “Chile has reduced poverty, but it hasn’t made significant progress in reducing inequality.”

“In Brazil, the social statistics for 2004 show some progress,” but in Argentina and Venezuela, in spite of the economic growth they have enjoyed this year, “poverty levels remain stable,” Fraga observed.

“Poverty reduction is possible with sustained growth. But reducing inequality seems to be more difficult,” he added.

Joint action by this group of countries might be an effective way of fighting inequality, but Brazil and Argentina, who are the economic powerhouses of the sub-region, should take the lead, said Borón. “We can’t expect Bolivia or Uruguay to be the front-runners,” he stated.

The first leftwing government in the history of Uruguay took office in March, led by socialist President Tabaré Vázquez. It has instituted a wide-ranging social programme to fight poverty and extreme poverty, under the new Ministry of Social Development.

In Bolivia, meanwhile, the leader of the country’s coca farmers, Evo Morales, won a majority of votes in the Dec. 18 presidential election, an unprecedented triumph for an indigenous leader. “Perhaps Morales will be more consistent and make better progress on social issues, supported by a strong grassroots movement,” Borón said.

Referring to Venezuela, Borón said the government of Hugo Chávez “is trying out a new economic, social and political regime” that involves a departure from “the Washington Consensus. He is blazing an important trail, but not one that should be imitated. Changes should arise from processes originating within each country,” he stated.

According to José Luis Coraggio, an economist and expert in social policy, “there is no reason” why a government that is prudent in its public accounts should not be able to adopt measures to reduce poverty and distribute wealth more fairly. “The only problem is political will,” he declared.

“There is plenty of capacity for contributing revenue in our countries. The problem is that there is a high level of tax evasion, and changing that takes a great deal of political will,” indicated Coraggio, who is a member of the Phoenix Plan, a group of academics at the University of Buenos Aires who came together in 2001 to help design a new model of development.

“A few signs of a new model are visible, but we have a long way to go yet,” said the expert, referring to the group of countries in the region that are facing the same challenge. Coraggio believes that Argentina and Brazil “are making a little progress with a lot of effort” in social policy.

“Chile is presented as the new development paradigm, but they have got used to living with a model marked by a high level of inequality,” the economist criticised.

An expert in grassroots economy and local development, Coraggio believes that an economic model based on social justice should be sought, with better access to credit, land and technology, and with the State playing the role of “guarantor” of development.

In Borón’s view, the argument that presupposes that the United States will resist the development of South America “is small-minded,” but he recognised that “any government trying to put through a programme of changes is going to face tenacious resistance and formidable adversaries.”

Neither does he believe that foreign investments will be curtailed if progressive governments move forward on social issues. On the contrary, “investment will come when the internal market expands to include the entire population” through greater buying power, he indicated.

Most South American countries no longer follow the same economic policies as in the 1990s, but “they are very slowly advancing towards a new paradigm.” “A very definite political will is needed to go further, and so far this has not been seen,” Borón remarked.