1999 Fiscal Conference: Sustainable Public Sector Finance in Latin America

Political Constraints on Sustainable Public Sector Development in Latin America

LAWRENCE S. GRAHAM
University of Texas at Austin

More so than any other recent event, the political changes in Venezuela linked to the election of Hugo Chávez as president in December 1998 call attention to the explosive ramifications of the politics of exclusion that go hand in hand with the revival of markets in Latin America. For the last two decades, economic reforms identified with market-friendly strategies that promote economic stabilization and new economic growth have engendered a debate over their impact on social inequities in the region. The very discourse that has ensued, with its references to redemocratization and neoliberalism, flag the unresolved social and political issues in South America that shape this debate. For, if we stand the hemisphere on its head and survey the region from the vantage point of those countries that first experienced sustained political and economic progress early in this century, beginning with the Southern Cone countries and Brazil, it becomes clearer that for most of the countries in this region, this is not their first encounter with either democracy or markets. Rather, the political and economic history of Latin America, seen from this perspective, involves long-standing experience with the struggle to make democratic institutions work and to make markets perform as an effective way to achieve economic growth and raise the levels of living for all the peoples inhabiting these nations.

What has proven to be endemic for these countries is the repeated breakdown of democratic and market initiatives. Redemocratization speaks to the fact that in South America we have seen distinct cycles of efforts to make democracy work since the nineteenth century, out of which political breakdowns have occurred, leading either to authoritarian rule or major reconfigurations in political power structures. While we do not yet know the outcomes of the current democratic wave, there are signs that political turbulence once again may well constrain or undercut the prospects for further economic and political reforms.

Neoliberalism calls attention to the fact that, despite earlier attempts to install economic liberalism in the late nineteenth and early twentieth centuries and to build national markets, the countries making the greatest progress under that economic model suffered dramatic losses in the late 1920s and early 1930s. Seen from this perspective, the current cycle represents yet another attempt to make markets work and to create appropriate mechanisms for governance to sustain reform initiatives. Thus, this current shift to markets offsets a half-century of experimentation with alternative strategies designed to replace the first model by letting the state assume responsibility for stimulating economic development through state-owned enterprises or joint ventures. State-led economic activity was set up to constrain the earlier reliance on foreign capital and to fill the vacuum where domestic entrepreneurship appeared to be in short supply.

Redemocratization speaks to the fact that these countries have experienced two earlier cycles of democratization, only to experience breakdown and the recursion to authoritarian rule; this failure was due to the inability of limited democracies to respond to demands for substantive democratic reforms made by those excluded from the benefits of earlier economic growth. The issue posed in these instances was that commitment to procedural democracy (through building support for democratic institutions by deciding one’s leaders exclusively at the ballot box and by legislating economic and social reforms according to the majority principle) did not create a mechanism through which social and economic inequities could be dealt with effectively; that is, they did not demonstrate to the poor and the excluded that the substance of democracy, measured in terms of equality of opportunity, could attend to their desires to improve their socioeconomic conditions.

Given the diversity of the political and economic experiences of the Latin American states, an effective way to capture both the political constraints that are emerging in the present, as well as the paths pursued in the past that continue to shape the present, is to use theoretically relevant case studies. By examining key country cases that flag developments that later became crucial in the evolution of politics and economics in the region, it becomes easier to understand the continuing political and social forces that have the capacity to constrain or reverse the shift toward markets. To capture these developments, Argentina, Brazil, Mexico, and Venezuela are particularly relevant.

The Argentine Case: Harnessing Populism to Fit the Demands of Neoliberalism

In the debate over which political and economic models are most appropriate for achieving sustained economic growth while also installing political regimes responsive to the values of progress and individual freedom transferred into the New World from Western Europe, no country in the region demonstrates more effectively than Argentina the ties between the past and the present. In the first wave of economic and political reforms in the Americas, the commitment to late nineteenth-century economic liberalism and political democracy in Argentina moved that country to the forefront of the Latin American republics. On the eve of the Great Depression of 1929, Argentines could look back on forty years of spectacular growth and development that put their country at the threshold of a future on a par with the economic and political achievements identified with Western Europe. Through external investments (especially British), massive European immigration, commercialization of its agricultural resources in beef and wheat, and commitment to procedural democracy through electoral reform (for example, through the Saenz Peña Act of 1912), Argentina’s leaders had created a vibrant economy and a political democracy in which universal male suffrage had become accepted. Elections were generally agreed upon as the appropriate mechanism through which national leaders could be selected to govern.

For all its successes, however, the prevailing economic and political regime was not without its problems. Labor protest in urban and rural areas in the late 1910s and early 1920s signaled the fact that while the new middle classes were able to integrate themselves effectively into a growing economy and expanding political system, working-class individuals found little tolerance for reallocating economic resources in a way that permitted higher wages or for changing the bases of political power to allow adjustments in social benefits to those disadvantaged by the shifts in the economy in urban and rural areas. Consequently, when generalized economic collapse hit the country in 1929, those who had the power to impose an immediate solution closed the political system down in order to control social unrest, ensure order, and give priority to economic recovery. Fifteen years later, in the context of World War II, neither full economic nor political recovery had been achieved. What did occur was that, after more than a decade of attempted economic and political engineering, a group of younger military officers with lower-middle-class backgrounds carried out a more radical coup within the earlier coup of their military superiors. One of these officers, Colonel Juan Perón, who was assigned to be Minister of Labor, found a working-class constituency responsive to his attempts to attend to their needs and willing to accept his leadership to achieve immediate economic and social revindication. Despite the attempts of military superiors to sideline him, when he and his wife Evita fought back, they found a huge mass of working-class men and women backing them and willing to go into the streets to support them. In a very short period of time, the Peróns discovered a huge popular mandate supporting them, and they were able to convert this support into a new political movement that overwhelmed existing civilian and military forces.

Consolidated in the election of 1946, Peronismo introduced a new, popularly based, mass political movement that changed Argentine politics and economics once and for all, through suspending the rules of procedural democracy and imposing by force what the masses perceived to be substantive democratic gains. By enfranchising workers, not so much through formal politics as through guaranteeing immediate economic and social benefits that adjusted disparities in income and in access to social services, the Peróns built what their supporters believed to be a social justice movement. The Movimiento Justicialista guaranteed immediate and direct substantive gains for working-class Argentines under progressively more and more authoritarian practices, in the name of direct and substantive adjustments in social and economic inequities. For this reason, when we speak of populism in the Latin American context, the Argentine experience frequently becomes the prototype of the populist movements that swept across the region in the 1940s and the 1950s and into the 1960s. Rejecting disciplined political party organizations, mass movements rallying behind middle-class leaders dominated the second wave of democracy that followed the end of World War II.

In a second wave of democratic experimentation, limited democracies followed these earlier democratic breakdowns, characterized by populist authoritarian governments or restricted right-wing authoritarian regimes. No stable form of democratic rule could be found in these limited democracies because the dominant political and military rulers were determined to exclude or to limit populist forces through writing democratic rules that constrained the impact of the masses. Each of the countries experiencing this second phase of democratic rule has a distinct set of national experiences. Once again, however, the Argentine case further defines this prototype in that it directed attention to the creation of populist democracies and the attempt to sustain democratic regimes, as long as they did not threaten the political and economic power of national elites.

Argentina’s reencounter with democratic rule under these conditions extends from 1958 to 1966, followed by a long cycle of authoritarian rule, from 1966 to 1984, broken intermittently by failed attempts to reestablish democracy. The breakdown of this second democratic cycle, which provided for much less stable democratic practices, generated a longer cycle of authoritarianism. Failed initiatives to return power to civilians ultimately led to violence and made hard-line military authorities determined to repress opposition at all costs. On the economic side, throughout these years an alternative economic model—import-substitution-industrialization—prevailed; the state also practiced active involvement in the economy to control markets and exchange rates and sought to stimulate new economic development through joint ventures or state-owned enterprises.

Both of these political and economic reform initiatives eventually failed. In the shifts in Argentine politics since January 1984, the two major political movements, the Radicales and the Peronistas, laid aside their differences and recognized the desirability of a redemocratized polity in which both could compete openly at the ballot box. Once the Peronistas, under the leadership of their new leader Carlos Menem, were able to demonstrate a clear-cut popular majority and to gain power, major economic restructuring followed. Import-substitution-industrialization and state-dominated economic policies were replaced by rapid movement in the direction of free markets under neoliberal economic policies. These policies first emphasized fiscal stabilization and then significant structural adjustments to ensure the functioning of market mechanisms without constraints. In the Argentine setting this accomplishment was made possible by Menem’s ability to refocus the forces of populism in his society in such a way as to put together a dominant coalition that extended across two terms of office. In the process, Peronismo was redefined as Menemismo: the techniques of power for obtaining mass support first developed by the Peróns were reformulated and converted into a new populist coalition that supported the dramatic turnaround in the Argentine economy.

While there were important variations in this resurgence of populism elsewhere in Latin America during the 1990s, Argentina once again has become the prototype of what is now called neopopulism. The term refers to the use of populist political practices in a democratic context to enlist mass political support for the purposes of economic restructuring. These refurbished mass movements have been reconfigured to fit the times, principally through redefining the link between leader and working-class and lower-middle-class support. Neopopulist leaders advocate (1) abandoning statism, (2) refocusing nationalism by reaffirming confidence in one’s own society in cooperation with the new economic forces identified with globalization, and (3) heightening the powers of the presidency by minimizing the impact of parties, legislatures, and the courts under presidentialist forms of governance (Roberts 1995; Weyland 1996).1

The Brazilian Case: Reform-Mongering while Encouraging Democratic Practices

Yet another emerging pattern of political constraints on sustainable public sector development in Latin America can be illustrated by looking at Brazil. There the path taken diverges from the Argentine example in that the new political economy, with its emphasis on markets, democracy, and institutional reform under the presidency of Fernando Henrique Cardoso, converges with the decision to follow a political model emphasizing decentralization and engineering economic and political reforms that respect the principle of the division of powers inherent in democratic presidential practices. Throughout his rule Cardoso has accepted consistently the limits placed on the presidency by Congress and the courts and has attempted to sustain a strategy of economic and political reform by working within these constraints, thus promoting democratic initiatives in Brazil.

During these years, the government (that is, the two administrations of Fernando Henrique Cardoso, from 1995 to 1998 and from 1999 to 2002), has followed the new orthodoxy in structural reform. First, it achieved economic stabilization through the Plano Real. Then it undertook an aggressive privatization program that involved a political reform component, amending the constitution in those areas where public enterprise has been linked most closely with economic nationalism. Subsequently, once Cardoso had engineered his reelection for a second term of office, the government expanded the scope of its political reforms by increasing the powers of the federal government in fiscal policy; it did so, however, at the expense of the state governments through the imposition of federal controls over state indebtedness. The devaluation of the real on January 13, 1999, the decision to float the country’s currency on January 15, and the acceptance of a de facto loss in the value of the real, which mounted initially to approximately 40 percent, produced economic turbulence. By the second half of the year the exchange rate was fluctuating between 1.8 and 1.9 reais to the dollar. Within this context, the image of Cardoso as an effective leader quickly moved from positive assessments in the polls to increasingly negative reactions in the drift of Brazilian politics as Cardoso ran into more and more opposition in Congress. Overnight an image of stalemate and stasis at the national level replaced the earlier one of reform and change.

In this setting, the reformist strategy Cardoso had used so successfully in his first administration became the source of his difficulties in the second. Earlier, to achieve the constitutional reforms necessary to sustain his commitment to privatization, Cardoso had built and maintained a broad-based coalition that brought together reformers and moderates on the center-right. Key to this coalition was an alliance among his own party, the Brazilian Social Democratic Party (the PSDB), the Party of the Brazilian Democratic Movement (the PMDB), and the Liberal Front Party (the PFL). To this one should add a number of smaller parties and representatives in Congress, who were also rallied to muster the three-fifths votes needed in each house, in two successive votes in each chamber, to reform the constitution.

As Cardoso moved into his second term, he faced major difficulties. Already the criticism had been levied against his government that, in the commitment to markets and extensive privatization, there was no place for social reform. As the new budget took form, it was clear that there would be even larger cuts in health, education, and social welfare. When all this settled out, by July 1999, major splits within the government and problems with the administration’s coalition in Congress produced an alliance that was notably farther to the right. The alliance was more dependent than ever on the support of the PFL and its leader, Antônio Carlos Magalhães. The immediate cause of this shift was political reality. While the coalition supporting Cardoso in Congress consisted largely of the same parties, electoral outcomes produced an important realignment. In the new congress, the conservative PFL led by Magalhães had the largest number of representatives, followed by the PMDB, whose centrist position produced more ambiguity than ever. In third place was Cardoso’s PSDB with Michel Temer as president of the Chamber of Deputies. The coherency of the PFL organization and Magalhães’s leadership role in that party as president of the senate, combined with the coalition character of the PSDB and the PMDB, meant that Magalhães had become an even more important player in national politics in Cardoso’s second administration. The net result was Cardoso’s increasing dependence on Magalhães for any legislation he wished to pass and the limiting of his options at best to economic measures. In that setting, negotiating further reforms ceased to be a viable option.

While Cardoso’s commitment to economic and political reforms within the framework of democratic politics was notable during his first administration, his difficulties in sustaining reform initiatives in his second administration calls attention to the limits of “reform-mongering” in democratic Brazil.2 Increasingly, lacking a majority in Congress to support further economic reform initiatives, he has had to opt for a strategy in which further economic structuring has been occurring by default, allowing market forces to determine economic outcomes.3 Herein lies the anomaly of an economy that continues to do well, despite increased unemployment and economic dislocations, both of which are linked to protests and demonstrations against the economic changes under way.

The Mexican Case: Engineering State Reform in the Midst of Democratization

Mexican developments highlight yet another path taken in engineering political, economic, and institutional reform in today’s Latin America. The redefinition of the role of the state throughout Latin America over the last decade cannot be separated from the realm of politics or from the economic and political transitions that have swept across the hemisphere. The side of the equation that is probably best understood falls within the purview of economics: the return to markets as the primary regulating force has led to a retreat of the state from intervention in the economy. On a worldwide basis, state shrinking is a consequence of structural adjustment policies—those policies that require major changes in the structure of the economy, the state, and society. In Latin America, the most visible aspects of this change to date have been the use of monetary policy to end inflation; the recourse to privatization; and the opening up of national economies, previously dominated by state-owned enterprises and statist strategies for economic growth, to private sector firms. What has been much more difficult to achieve is structural change within the apparatus of the state itself. Here the case of Mexico is instructive for understanding how difficult it is to move from the first phase of structural adjustment policies into the second, in which restructuring of political and administrative institutions is required to consolidate markets. If Brazil illustrates the limits of political reform while attempting to enhance democracy and markets, Mexico speaks to the difficulties of reforming the state while attempting simultaneously to restructure the economy and to democratize.

The issue of state reform has been a major part of the policy agendas of Mexican presidents since the six-year term of office, or the sexenio, of José López Portillo, which ran from 1976 to 1982. Because these attempts at state reform stretch across more than twenty years, engaging major economic and political change in the process, the tension there between sweeping internal political and economic changes and external conditionalities identified with structural adjustment policies is the greatest. Yet, despite long-standing debates over the direction the Mexican transition is taking as well as competition between government and the opposition to control the process, economic reform coupled with administrative reform has continued inside the government. Regardless of differences over the direction and the content of the political opening, both sides generally have concurred that continued progress in economic reform is contingent on extensive changes in the state’s administrative apparatus. While calls for administrative reform are not new to Mexico, what is different about current discussions is the extent to which economic reform has become linked to administrative reform. As a consequence, a new consensus has emerged between the Mexican business community and central-government officials that civil service reform—emphasizing nonpartisan, merit-oriented criteria in recruitment and promotion—is in their best interest. This is especially the case when one compares the programs of Partido de Acción Nacional (PAN), the leading opposition party, in the states and major cities where it now holds office with those of President Ernesto Zedillo and his Partido Revolucionario Institucional (PRI) in the federal bureaucracy.

This convergence between reformers in both camps must be juxtaposed against increasing turbulence and uncertainty in politics as the pace of change accelerates in Mexican society. There is a simple reason why this is the case. For all the problems and difficulties inherent in the present situation, Mexico continues to have a relatively strong state, in which public officials in strategic sectors have considerable capacity to design and to implement the economic and social policies to which government is committed. Groups in the center and on the right politically do not wish to see this resource squandered. In this regard, Mexican experience in state building stands in marked contrast with that of most other developing countries; in Latin America only Chile can match the Mexican record.

In the eyes of Mexican reformers, a technocratic revolution is under way. While set back by unexpected political assassinations, popular protests and revolts, and continued instances of police corruption, those operating inside the federal government have not lessened in the least their push to consolidate a new regime based on the instrumentalities of a strong state. For example, those identified with what is often referred to as the New PRI, a new alliance between professionals and party officials committed to greater transparency in politics but not in government, differ little from those staffing PAN governments in the city of Monterrey and the state government of Nuevo León. Furthermore, Miguel Ángel Centeno, the author of an important book on the internal workings of the Mexican state, argues that when one looks at the top, and examines elite interaction, separation between party (the PRI) and government has already occurred (Centeno 1994).4

Against the desiderata of these reformers must be juxtaposed more than a half-century of partisan political practices. Reformers, operating at the apex of the political and economic systems, have the capacity to shape policy and control the reform agenda, and they wish to expand that capacity. But their success in determining macroeconomic policy does not translate into an ability to implement other aspects of economic and social policy at the grassroots level. For all the talk of reform, the issue of corruption and influence peddling abounds at the state and local levels. Seen from below, within the middle and lower levels of government employees, and outside government in the middle and working sectors of society, the labels of party and government remain inseparable. From this perspective, one of the major challenges at the end of the Zedillo sexenio concerns whether or not it will be possible to move this debate among insiders over reform of the state out of the offices of the privileged and into mass-based state and party organizations without rupturing the prevailing presidentialist regime. As Centeno makes so clear in his analysis of the technocratic revolution in Mexico, the past strength of the PRI party state was its ability to sustain a political settlement in which the civilian bureaucracy was able to retain the upper hand over politicians and the military, within the framework of a single dominant party organization that could deliver mass support (47–51).

As pressures have increased for adjustments in social policy to absorb the further dislocations likely to occur as economic liberalization advances, the old formula of bureaucratic expertise at the top and political party patronage below within the organs of the state can no longer work. This is because along with greater transparency in the economy has come greater transparency in politics. In the older political world controlled by the PRI, public employment at the middle and lower levels of Mexican society was linked to job creation and enhancement for individuals who lacked employment opportunities elsewhere in the economy. This style of political clientelism is no longer compatible either with the newer demands for greater efficiency and effectiveness in government as the economic reforms advance or with the opening up of politics in such a way that more and more government officials are finding themselves subject to public scrutiny and accountable for their actions.

The impact of the North American Free Trade Agreement (NAFTA) and of sustained support for this agreement in Mexico among elites, despite economic hardship for major segments of the Mexican population, argue for a state at the middle and upper levels that is less politicized than conventional wisdom would suggest. Thus, when this administrative equation is added to the revolt in Chiapas and the PRI’s loss of Nuevo León and its capital, Monterrey, it is not so clear that the Mexican transition is necessarily linked to continued democratization. These components call attention to the fact that, while the movement away from old-style authoritarianism is irreversible, it is not at all certain that greater transparency in the economy will automatically generate greater transparency in government and hence lead to democratic consolidation. Quasifederalist experiments characteristic of Mexican governance since the late 1970s may well become the foundation for a quasidemocratic regime in the 1990s that extends beyond the year 2000. This regime would be characterized by a strong state in the center identified with a new PRI in control of the presidency, greater respect for electoral majorities, and greater political competition—but without necessarily bringing an end to PRI dominance of national politics.

The alternative emerging in Mexico is not so much a retreat of the state in the administrative field; it is rather a movement from an era in which groups struggled to control the state and build new forms of state power into one in which a weak state is dominated by interests and groups in society that are pulverizing the state, thus increasing its incoherence and its marginality as a force attending to social policy. What is under way is not just privatization in the economy but privatization of social policy: social security systems, educational establishments, health systems, and other social institutions, which in an earlier era were brought into the domain of the state, are now being cut loose and moved into an environment characterized by competing social and political groups engaged in a struggle to determine who will design and control the policies that will determine the nature of the projects and the programs to be pursued. Here the case of Venezuela becomes as important as the experiences of Argentina, Brazil, and Mexico, as long as we keep in mind that retaining a relatively strong state, as is the case with Mexico and Chile, defines a path very different from neopopulism and reform-mongering in a democratic environment tied to presidentialism.

The Venezuelan Case: Resurgence of Old-Style Populism

From 1958 through 1998 the progress made in institutionalizing democratic practices in Venezuela was impressive. An earlier pattern of confrontation politics had culminated with Acción Democrática (AD) demonstrating its capacity to obtain an absolute majority in national elections in 1946, only to trigger a military coup in 1948 and dictatorship under General Marcos Pérez Jiménez (from 1952 to 1958), thus reversing what were perceived to be radical reforms. Seeking an end to this pattern of reversals, the leaders of the three major parties—the majoritarian AD, the Christian Democrats or COPEI as the leading opposition party, and a smaller populist party, the Unión Radical Democrática made up of AD dissidents—banded together in a political pact. In the Pacto de Punto Fijo they committed themselves to respecting electoral outcomes as the sole legitimate way to determine the country’s government. Eschewing taking power by alternative means and agreeing to respect the norms of procedural democracy, they proceeded to institutionalize democratic practices. Facilitating this agreement was Venezuela’s newfound oil wealth, which from the 1930s onward made the country one of the major oil-producing countries and produced steadily increasing governmental revenues. Yet, agreement on democratic rules was not easily accomplished. First, AD and its opponents had to make democracy work by getting their leaders and followers to respect electoral outcomes, when that meant turning over government to one’s opponents under conditions of extreme partisanship. As a left-of-center political movement mobilizing workers in the oil industry, in the cities and countryside, AD had to convince its political allies that they could use their electoral majorities to govern effectively. They accomplished this objective by designing and implementing a reform agenda that would respect the reservations of their political opponents in the center and the right while fighting a guerrilla movement on the left that sought revolutionary changes. In the process, AD modified its agenda, became increasingly a centrist political alliance, and benefited from the left’s eventual abandonment of armed struggle and acceptance of the principle of competition at the ballot box. When, after two terms of office, AD lost national elections to COPEI in 1968, it was not at all certain that its left wing would honor the commitment to accept the transfer of power to a party of center-right Christian Democrats in 1969. Party splits resulted, but AD’s Rómulo Betancourt remained adamant they would pass into the opposition. In an electoral system marked by repeated scandals, charges of corruption, and accusations of manipulated results in electoral districts, the party leadership on both sides honored the agreement. What ensued was a succession of party governments in which AD and COPEI, as the two major parties, alternated in office for the next twenty-five years. In the process, the country passed through partial agrarian reform, gradual nationalization of the oil industry, and alternative economic programs designed to lessen dependency on oil and to stimulate national economic development.

Throughout these years, there was a continuing debate among political analysts about the basis of the country’s success in sustaining commitment to democratic rule, despite initial conditions of adversity, the split between right and left over the country’s future, and AD’s commitment to finding a middle way. Critics argued that what sustained Venezuelan democracy was its oil-based economy, which subsidized government and made it possible to use the country’s economic wealth and oil revenues to ameliorate social and economic conditions by rewarding the party faithful with subsidies, jobs, and direct benefits. Others defended the accomplishments by pointing out how consensus had been built on democratic rules, how the revolutionary left had been isolated, defeated, and then folded into the system, and how the country was making progress in diversifying its economy and laying a foundation for sustained economic progress.5

Then, in 1989 economic crisis hit Venezuela in a way that transformed the country’s economy and politics. In February 1989 riots broke out against austerity measures designed to correct the country’s economic decline as oil revenues dropped precipitously. AD’s Carlos Andrés Pérez, in office for a second term after an earlier presidency from 1974 to 1979, responded with policies intended to balance the necessary economic restructuring under austerity measures and neoliberal reforms with a continuation of the social subsidies and party favoritism that had long characterized Venezuela’s democracy. Economic and political turbulence increased, however, rather than lessened. The economic situation continued to deteriorate, leading to a virtual collapse of the banking system in 1994, followed by a $9 billion international bailout. Political partisanship reached unprecedented levels as one political scandal followed another and Carlos Andrés Pérez’s involvement became more and more murky. This culminated in two failed military coups in 1992 to remove him by force from office, his impeachment by Congress in May 1993, and his removal from office in such a way that, while AD suffered the brunt of the criticism, COPEI was equally damaged. In the subsequent presidential election, COPEI’s Rafael Caldera found it necessary to stand as the head of a multiparty coalition minimizing his ties with his own party. But Caldera too failed to resolve the country’s economic crisis. Then, in December 1998, voter revolt against the established parties generated a clear-cut victory for one of the former coup leaders, Hugo Chávez. Convinced that he had a mandate from the voters, Chávez imposed radical change by altering the country’s political system and convoking elections in July 1999 for a constituent assembly to write a new constitution. He attacked Congress (where the opposition retained a majority) and the courts for opposing his implementation of what he perceived to be a mandate from the voters to change prevailing political and economic policies radically by concentrating power in the Office of the Presidency.

This political explosion in Venezuela, first in the December 1998 election of Chávez by a clear majority, then by constituent assembly elections with an even higher level of support in July 1999, and followed by a favorable standing in the polls of an estimated 75 percent in September, signaled the return of old-style populism with a vengeance. This mass movement of the disenfranchised and the excluded demanded immediate social justice and a redistribution of the nation’s wealth to benefit the majority. The classic ingredients originally present in Juan and Evita Perón’s Movimiento Justicialista have thus been galvanized in a way not seen since the late 1940s and early 1950s in Argentina: charismatic leadership, mass political support breaking with previous party and political structures, and revindication in the demand for direct and substantive economic and social benefits for the popular masses. While parallels can be identified with the policies of Carlos Menem in Argentina, Alberto Fujimori in Peru, and Hugo Banzer in Bolivia, this is not neopopulism in the way those countries’ leaders harnessed populism as a mass movement to legitimize neoliberal economic reforms. Rather, the Venezuelan upheaval has all the ingredients identified with the political explosion in Argentina of the 1940s, which ruptured that country’s politics and economics in such a way that it took fifty years to reach a new political and economic accommodation. Chávez’s demands are for social revindication for the poor and reversal of economic policies identified with austerity measures, externally imposed market reforms, and structural adjustment policies intended to reduce the role of the state in the economy and consolidate markets. The actions taken by Chávez and his supporters have ruptured the existing framework for democratic politics and thus have set the country on a course in which creating new institutional arrangements within Venezuela, while simultaneously renegotiating economic accords abroad and getting the economy back on track, have proven to be very difficult.6

Conclusions and Trends

What the outcomes will be within the Latin American region remains unclear as we move into the next millennium. But the paths and the choices are increasingly clear (see Table 1):

  • Neopopulism, in which mass movements outside the framework of established parties can be harnessed to neoliberal economic policies, centers on excesses in presidential power and comes at the expense of constrained democratic practices and limited response to social and economic grievances (the case of Argentina, and the variants present in Peru and Bolivia).
  • Reform-mongering in economics and politics is tied to strengthening democratic rule but makes it difficult to achieve economic reforms that require major political and economic restructuring and to respond to social inequities (the case of Brazil and attempts at reform-mongering in such different countries as Chile, since 1989, and Uruguay).
  • Advancement of state reform in the midst of democratic initiatives responds to demands for opening up participation and contestation in society, after the initial restructuring of the economy and the state under authoritarianism (the cases of Mexico and Chile, before 1989, with the understanding that the inclusionary authoritarian system of the former and the exclusionary one of the latter produced very different reform policies and outcomes once the decision to democratize was made).
  • Reversion to old-style populism increases economic and political turbulence and has a negative impact both on markets and politics insofar as the survival of substantive democratic practices is concerned (the recent experiences of Venezuela and Ecuador).

TABLE 1: Responses to Neoliberalism in Latin America:
The Four Major Alternatives

 
          Neopopulism Argentina, Peru, Bolivia
 
          Reform-Mongering Brazil, Uruguay, Chile (since 1989)
 
          State Reform Mexico, Chile (before 1989)
 
          Old-Style Populism Venezuela, Ecuador
 

Nevertheless, identification of these four paths in Latin America in response to global pressures to move to markets should not be taken to exclude the possibility that new hybrid patterns might evolve. Just as the study of Argentina’s experience with old and new forms of populism identifies a path in which there are significant new developments in Bolivia and Peru, so too there are variants in the path taken by Brazil in its reformist policies that account for very different outcomes in Chilean and Uruguayan politics today. Likewise, it is not at all certain that the breakthrough of the excluded masses in Venezuela in a way similar to Peronismo will produce a radical break with the neoliberal economic policies dominant in Latin America. The argument can be made that the current coalition of international forces favoring free markets may well place such constraints on Chávez that his leadership will produce yet another variant of neopopulism. Furthermore, while the four paths taken in response to neoliberalism and the country prototypes selected call attention to the diversity of national responses within the region, this should not lead to the conclusion that these are the only patterns. For example, narco-trafficking and guerrilla activity have produced very different outcomes in Colombia. The presence of a consolidated national state system in Latin America means precisely that different responses to globalization will continue to occur as these countries respond to very different sets of domestic and international concerns.

 

Notes
 
1    While scholars who call attention to the phenomenon of hyperpresidentialism do not necessarily link this phenomenon to neopopulism, this was an important ingredient in the reappearance of populism in the 1990s. See also Nino (1996).
 
2    The term reform-mongering was first used by Hirschman (1973) to call attention to the prospects for democratic reforms in the Latin American context, especially during the administration of Eduardo Frei in Chile, when the Christian Democrats controlled the presidency and held a working majority in Congress.
 
3    The disarray in Cardoso’s political coalition should not lead one to conclude that economic restructuring has ceased. To the contrary, strategic planning within the context of Cardoso’s economic team during the first administration already had identified four global scenarios to which the country would have to respond regardless of political outcomes within the country. In the Brazil 2020 project, mounted by the Center for Strategic Studies in the Presidency of the Republic, the National Bank for Economic and Social Development (BNDES), and the Planning Ministry, four scenarios were developed. The two identified as the most relevant to Brazil’s immediate economic positioning in the international context were the need to respond to globalization as a process driven essentially by international market forces and the shift toward knowledge-based industries centered on high technology. By the end of 1998 it appeared that Brazil was well situated in the South American context through the Cardoso reforms at the center and the push toward decentralization that had given new meaning to state and local governments to be able to accommodate further economic restructuring through market-based solutions over the short term. While secondary, but of potentially growing importance in individual states and Brazil’s more advanced regional economies, the options opening up in the area of knowledge-based industries likewise point to developments at the state and local level that, when combined with state-based economic and political reforms, offset the tensions present in Brasília. See Graham (1999).
 
4    See especially Chapter 5, “The Technocratic Vanguard.”
 
5    In the extensive literature on Venezuela’s democracy, books and articles that capture this debate well are Karl (1986), Levine (1978), Tugwell (1975), and Coppedge (1994).
 
6    An article indicating that, while Venezuela is at the crossroads in terms of its democratic system, there is still the possibility that this political revolt can be folded into its democratic institutional framework for resolving conflict is “Supporters of a Drive to Reshape Venezuela Make a Retreat: A Constitutional Assembly Is Stung by Criticism,” New York Times, September 11, 1999, p. A2. Should Venezuela ride out this economic and political crisis of major import, then it will have met a key requirement in passing from what I would define as a democratic situation of long-standing into the ranks of a consolidated democracy. In the current setting, international factors, involving the role of multilateral institutions and the policy options pursued in negotiating economic accords, carry the prospect of avoiding the confrontational politics nationally and internationally that led to the consolidation of a populist mass movement in Argentina and the rupturing of prior political and economic institutions earlier.
 

References

CENTENO, MIGUEL ANGEL. 1994. Democracy within Reason: Technocratic Revolution in Mexico. University Park: Pennsylvania State University Press.

COPPEDGE, MICHAEL. 1994. “Venezuela: Democratic Despite Presidentialism.” In The Failure of Presidential Democracy, edited by Juan J. Linz and Arturo Valenzuela. Baltimore, MD: Johns Hopkins University Press.

GRAHAM, LAWRENCE S. 1999. “New Dynamics in Economic Restructuring: Cross-National Patterns in Regional Accommodation and the Brazilian Response.” Paper prepared for the Third International Conference on Technology Policy and Innovation, Austin, Texas, LBJ School of Public Affairs, August 30–September 2.

HIRSCHMAN, ALBERTO O. 1973. Journeys Toward Progress: Studies of Economic Policy-Making in Latin America. New York: Norton.

KARL, TERRY LYNN. 1986. “Petroleum and Political Pacts: The Transition to Democracy in Venezuela.” In Transitions from Authoritarian Rule, edited by Guillermo O’Donnell, Philippe C. Schmitter, and Laurence Whitehead. Baltimore, MD: Johns Hopkins University Press.

LEVINE, DANIEL. 1978. “Venezuela since 1958: The Consolidation of Democratic Politics.” In The Breakdown of Democratic Regimes, edited by Juan J. Linz and Alfred Stepan. Baltimore, MD: Johns Hopkins University Press.

NINO, CARLOS SANTIAGO. 1996. “Hyperpresidentialism and Constitutional Reform in Argentina.” In Institutional Design in New Democracies: Eastern Europe and Latin America, edited by Arend Lijphart and Carlos H. Waisman. Boulder, CO: Westview Press.

ROBERTS, KENNETH. 1995. “Neoliberalism and the Transformation of Populism in Latin America: The Peruvian Case.” World Politics 48 (October).

TUGWELL, FRANKLIN. 1975. The Politics of Oil in Venezuela. Stanford, CA: Stanford University Press.

WEYLAND, KURT. 1996. “Neopopulism and Neoliberalism in Latin America: Unexpected Affinities.” Studies in International Comparative Development 31 (Fall): 3.

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