MIT Center for International Studies
About CIS
Programs
Publications
Audits
Foreign Policy Index
Op-Eds
Research Publications
Newsletter

News & Events

 


PUBLICATIONS :: FOREIGN POLICY INDEX



Latin America

I. Politics of the Left
II. Debt Crisis
III. U.S. and Latin America - Conflict, Drugs, Terrorism, Trade
IV. Maps/Tables
V. Recommended Reading
VI. Additional Resources
VII. Footnotes


Among the most important recent developments in Latin America is a new generation of political leaders elected on leftist platforms. This is interesting in and of itself in the wake of the demise of the Soviet Union and the strong capitalist policies of China, and it has significance for U.S. foreign policy because America is the target of many of the these new leaders' rhetoric.


This cohort of leaders, who have enjoyed electoral success in every corner of the region, profess socialist ideals, galvanize the poor and disadvantaged, and advocate closer relations with Fidel Castro's Cuba. They are highly critical of the United States, particularly of its economic leadership in the Western Hemisphere, military intervention in Iraq, and immigration policies. They contend that the U.S. has continually failed to deliver on promises of regional economic development and is largely to blame for their adoption of the failed economic policies of the International Monetary Fund (IMF). Although they often speak as revolutionaries, they are more pragmatic once in office. They have not opted for massive state intervention in the economy. Instead, they seek to attract foreign business investments, strengthen regional trade, and enact moderate economic reforms.


I. Politics of the Left

A. Latin America's New Leftists

Country Leftist Leader Election Victories National Policies
Argentina Cristina Fernandez de Kirchner Elected in 2007 Kirchner favors gradual economic reforms.  With moderate economic policies, she seeks to attract foreign investment. 
Bolivia Evo Morales Elected in 2005 He is an ardent critic of the US, the policies of the IMF and NAFTA.  He supports land redistribution and a partially nationalized energy industry. 
Brazil Luiz Inacio Lula de Silva Elected in 2002; Reelected in 2006 Although he has enacted anti-poverty programs, he adheres to a liberal economic model. 
Chile Michelle Bachelet Elected in 2006 She advocates market-based economic policies, even as she aims to reduce the gap between rich and poor.
Ecuador Rafael Correa Elected in 2006 He is a critic of US-backed trade accords and seeks a greater state role in the economy.
Nicaragua Daniel Ortega Elected in 2006 He is a former Marxist revolutionary, who now seeks national reconciliation and favors a market economy. 
Uruguay Tabare Vazquez Elected in 2005 He has adopted a pragmatic approach to national economic reforms.  He has not opposed US-backed trade policies.
Venezuela Hugo Chavez Elected in 1998; Reelected in 2002 and in 2006 He is one of the most vocal and ardent critics of the US government.  During his presidency, Chavez used oil profits to subsidize food, literacy programs and health care for the poor.   

II. Debt Crisis

  • Background
    1. The 1960s and early 1970s were generally a great time for Latin American countries economically. Countries like Brazil, Argentina, and Mexico enjoyed historic rates of growth, and they borrowed massive sums of money to help fuel continued expansion, which many international banks were happy to provide due to the previous periods of growth.

    2. However, the significant downturn in the global economy in the late 1970s and early 1980s, due in part to the increasing energy costs that had emboldened the lending to oil exporters Venezuela and Mexico, made it difficult for Latin American countries to pay back their loans, which collectively totaled tens of billions of dollars each year with interest included, and had ballooned over 1000 percent from 1970 to 1980. Interest rates rose in lending countries, making servicing of the debt even more difficult.

    3. In 1982, Mexico announced that it could not continue to service its debt, leading to many lenders cutting off loans to all of Latin America and those with money in the region pulling it out as quickly as possible. Brazil, Venezuela, Argentina, and Chile (among others) soon followed suit in announcing their inability to pay on schedule, and the massive withdrawal of capital right when it was most needed led to a full-blown crisis from which most Latin American countries have yet to fully recover.

  • Response
    1. The U.S. government helped bring about an IMF stabilization program for each of the countries, however, many of the Latin American countries wanted the debt to be dealt with as a political, rather than just a financial issue1

    2. The IMF stabilization program included a number of reforms that are often referred to as the "Washington Consensus"2 – interest rates were liberalized, entry barriers were removed, the banking system was privatized, and restrictions on capital flows were reduced-which the IMF required in exchange for financial
      assistance (a practice that has been repeated in subsequent crises)

      • Under this approach, commercial banks agreed to provide new loans to debtor countries and stretch out external debt payments. In return, debtor countries agreed to abide by IMF and World Bank stabilization and structural adjustment programs intended to correct domestic economic problems that gave rise to the crisis. IMF stabilization programs typically included drastic reductions in government spending in order to reduce fiscal deficits, a tight monetary policy to curb inflation, and steep currency devaluations in order to increase exports. World Bank structural adjustment programs focused on longer-term and deeper "structural" reforms in debtor countries."3

    3. However, these liberalizing reforms occurred without sufficient reforms in banking regulation and supervision, leading to banking crises in the late 1980s and 1990s.

  • Implications
    • The tremendous economic hardship imposed by the debt crisis led to the toppling of a number of authoritarian regimes in Latin America, including in Brazil and Argentina. Many of these regimes were replaced with various forms of democratic rule, with mixed results.

III. U.S. and Latin America - Conflict, Drugs, Terrorism, Trade

Concerns of U.S. governments have tended to focus on a suite of issues that touch upon the concerns of Latin America's political leaders, but convey strikingly different priorities.

A. Conflict

After a period of revolutionary upheaval and counter-reaction from the 1950s to the 1990s, with the United States sometimes in the middle of fomenting coups and counter-revolution, the region calmed but has still been beset by localized conflicts. Most prominent in this regard is Colombia, with a forty-year-old civil war. The conflict has been intertwined with Colombia illicit drug trafficking. It is also now affecting relations with Venezuela and Ecuador. Haiti remains an unstable and poverty-stricken island that is beset by high levels of violence. Some political and social violence lingers in Central America, for so long the locus of several civil wars; some of this is gang warfare of that is international and of growing scale, and probably a residue of the old civil wars. Mexico's south remains troubled as well, though the main guerrilla group, the Zapatistas, is less prominent recently.

B. The Drug War

The U.S. has heavily invested in the "drug war" that seeks to reduce production and export of cocaine particularly in Colombia, Peru, and Bolivia.  See the Drug Trade in the Foreign Policy Index.

C. Terrorism

Since 9/11, the U.S. Government has expressed concern about terrorism in Latin America, as elsewhere.  While the threat to the United States seems minimal, this has been a priority in U.S. regional relationships.  Some conflicts and the drug trade overlap with this issue.  See Terrorism in the Foreign Policy Index.  

D. Trade and Labor Migration

In addition to the financial issues of loans, debt forgiveness, and structural adjustment policies, the economic concerns at the top of the regional agenda are trade and labor migration.  Trade is mainly discussed in terms of "free trade" agreements, like the North America Free Trade Agreement, or NAFTA, passed a decade ago.  New such agreements with Chile and the so-called CAFTA—The Dominican Republic-Central America-U.S. Free Trade Agreement—have followed.  All such agreements are controversial for their provisions that, critics say, do not contain sufficiently strong protections for labor rights and environmental protection.  Two such critical views can be found here and here.  See also the U.S. Dept. of Agriculture fact sheet.


Labor migration, particularly illicit migration into the U.S., remains a sore point between the U.S. and Mexico particularly, but many other undocumented workers come from other Latin countries, too.  See Immigration in the Foreign Policy Index.  

A number of resources on regional issues can be found at the web site of the Organization of American States.

IV. Maps/Tables

Figure 1: South America

South America

Figure 2: Central America and the Caribbean

Central America and the Caribbean

Figure 3: Mexico

Mexico

V. Recommended Reading

Jorge Casteneda, "Latin America's Left Turn," Foreign Affairs (May/June 2006).


Barry Eichengreen, "Historical Research on International Lending and Debt," Journal of Economic Perspectives, Spring 1991


Steve Ellner, "Leftist Goals and the Debate over Anti-Neoliberal Strategy in Latin America," Science and Society, 68:1 (Spring 2004).


Charles Kindleberger. Manics, Panics, and Crashes: A History of Financial Crises (New York: John Wiley & Sons, 2001).


Kenneth Rogoff. "International Institutions for Reducing Global Financial Instability." Journal of Economic Perspectives 13, no. 4 (Fall 1999): 21-42.


Lars Schoultz, Beneath the United States: A History of U.S. Policy Toward Latin America (Harvard University Press, 1998)


Edwards, Sebastian. "How Effective Are Capital Controls?" The Journal of Economic Perspectives 13, no. 4 (Autumn 1999): 65-84.


Thomas E. Skidmore and Peter H. Smith, Modern Latin America (Oxford University Press 2005).


Joseph Stiglitz. "What I Learned at the World Economic Crisis," The New Republic, April 17, 2000.


Jeffrey Williamson. "Globalization, Labor Markets, and Policy Backlash in the Past," Journal of Economic Perspectives 12, no. 4 (Fall 1998): 51-72.


VI. Additional Resources

Latin American Studies Centers – Harvard, U.C.-Berkeley, Chicago


State Department – Bureau of Western Hemisphere


International Crisis Group has timely reports that focus on conflict


The Congressional Research Service typically publishes two or three reports on these topics annually


Center for International Policy, a Washington think tank with emphases on Central America, Colombia, Cuba, etc.


North American Congress on Latin America, a U.S.-based NGO, publishes Report on the Americas, which has extensively covered the financial crisis and politics.


The Development Gap, a Washington-based advocacy NGO, has an archive of articles, mainly critical of U.S. policy on development and trade issues.


Latin America Network Information Center has a large number of resources on a variety of topics.


Human Rights Watch has timely investigations on a wide range of issues in the region.


VII. Footnotes

1. Riordan Roett, "Latin America's Response to the Debt Crisis," Third World Quarterly, (April 1985).


2. A significant debate rages to this day over the U.S. and IMF's handling of the crisis, the effectiveness and wisdom of the Washington Consensus, and the future handling of debt crises (see recommended readings)


3. Enrique R. Carrasco, "The 1980s: The Debt Crisis and the Lost Decade," http://www.uiowa.edu/ifdebook/ebook2/contents/part1-V.shtml.


 
Massachusetts Institute of Technology