Washington Is Losing Its Grip on Latin America

"State of Denial" is the title of Bob Woodward's famous book on the Bush team's road to disaster in Iraq, but it would have served just as well for a description of their Latin America policy. This week President Bush heads South for a seven-day, five country, trip to Latin America to see if he can counter the populist political tide that has brought left governments to about half the population of the region.

Carrying vague promises of a joint effort on ethanol production -- but no offer to lower tariffs protecting the U.S. market -- President Bush hopes to entice Brazil into taking his side against his nemesis, President Hugo Chavez of Venezuela. This is a fantasy.

President Lula da Silva of Brazil made a point of visiting Venezuela for his first foreign trip after being re-elected last October. There he presided over the dedication of a $1.2 billion bridge over the Orinoco river, financed by the Brazilian government, while he lavished praise on Chavez and gave the popular Venezuelan president an added boost in his own re-election campaign.

The Bush Administration's policy of trying to isolate Venezuela from its neighbors has only succeeded in isolating Washington. Last week President Nestor Kirchner of Argentina, speaking in Caracas, flatly rejected the notion that Argentina or Brazil should "contain President Chavez," who he called "a brother and a friend." In another thinly-veiled swipe at Washington, Kirchner said: "It cannot be that it bothers anyone that our nations become integrated." At the same time he announced that Venezuela and Argentina will jointly issue a "Bond of the South" for $1.5 billion.

If Washington is in denial about the political reality of Latin America, it is even more in denial about the economics. For twenty-five years our government has pushed a series of reforms throughout the region: tighter fiscal and monetary policies, more independent central banks, indiscriminate opening to international trade and investment, privatization of public enterprises, and the abandonment of economic development strategies and industrial policies. The Bush team thinks that these reforms, known as "neoliberalism" in Latin America, were just the right formula to stimulate economic growth.

But in fact Latin America's economic growth over the last 25 years has been a disaster -- the worst long-term growth failure in more than a hundred years. From 1980-2000 GDP per person grew by only 9 percent, and another 4 percent for 2000-2005. Compare this to 82 percent for just the two decades from 1960-1980, and it is easy to see why candidates promising new economic policies have been elected (and some re-elected) in Argentina, Bolivia, Brazil, Ecuador, Nicaragua, Uruguay, and Venezuela. They also came close to winning in Mexico, Peru, and Costa Rica.

The left governments that have introduced new economic policies have done pretty well: Argentina has grown by a phenomenal 8.6 percent annually for nearly five years, pulling more than 8 million people out of poverty in a country of 36 million. Bolivia has increased government revenue from hydrocarbons by about 6.7 percent of GDP, an amount that would equal $900 billion in the United States, and is using the additional revenue to increase to help its majority poor. Venezuela is also using the government's increased take of oil production to provide health care, education, and subsidized food for the poor. All of these governments have succeeded by implementing policies that Washington opposed.

President Bush will get a good reception from the right-wing governments he is visiting: his close allies in Mexico, Colombia, and Guatemala. Colombia is in the midst of a huge national scandal over the responsibility of government officials for mass murder and assassinations of political opponents. More trade unionists are killed in Colombia each year than in the rest of the world combined. Guatemala is another right-wing ally with a terrible human rights record: two weeks ago three Central American parlimentarians were murdered by a Guatemalan police death squad. All three governments have been linked to narco-trafficking, but President Bush will likely praise them for their co-operation in the war on drugs.

It's all about denial. The political and economic changes sweeping Latin America are a serious break with the failed policies of the past. Washington's influence has collapsed, and is not likely to recover.

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