Regional Focus: Latin America

 

Latin America continues to grapple with ambiguity toward the market system and democracy. The emergence of the two lefts illustrates that divide. The progressive left in Peru, Brazil, or Chile is committed to markets while emphasizing the need to deal more urgently with the issues of poverty. The populist left of Hugo Chávez or Evo Morales, on the other hand, uses anti-market rhetoric to dominate the economy and restrict democratic freedoms in the name of social justice. This message resonates in countries such as Ecuador and Nicaragua where disappointment with the shortcomings of the Washington Consensus policy prescriptions runs high and where populist leaders have also been elected into office.

 

In order to create well-functioning markets delivering growth that reaches the neediest segments of the society, Latin America must recognize that effective reforms have to go beyond macroeconomic policies and address the institutional underpinnings of markets: property rights, legal vehicles for entrepreneurship, rule of law, independent judiciary, etc. In turn, those institutions can only be created if corresponding mechanisms ensuring transparent policymaking and good governance exist in a democratic political system.

 

Populist policies in the region have served mostly to destabilize governance rather than unify constituents behind a viable path toward greater equality and prosperity. Instead, problems of corruption and widespread informality continue to hold back large segments of the Latin American societies from fully participating in – and benefiting from – political and economic reforms.