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Can Latin America's potential be realised?

A Note by the Director (Ditchley 2008/08)
 
26-28 September 2008
Ditchley’s first conference of the new season addressed Latin America, a region which perhaps features less often than it should on the Ditchley agenda.  We set ourselves an ambitious target in looking at the region as a whole and, in particular, at its potential in global terms over the coming decade.  We had a productive mix of perspectives at the table, from both South and North America and from Europe, but there were inevitably some gaps from such a diverse region and Central America was inadequately covered.  There was even a short debate about whether Latin America could be regarded as a coherent unit, given the varied characteristics of the countries covered;  and it was noted that Brazil thinks firmly of “South America” rather than “Latin America”.  But that did not prevent us from getting into some interesting substance, the detail of which does not receive justice from this summary. 
There were plenty of participants who felt that, even as a distinctive region, there were chaotic elements in its makeup.  We recalled the variety of perspectives over the decades:  from the 1950s, that Latin America would go communist;  from the 1970s, that it would relapse into military rule;  from the 1980s, that the Washington consensus would dominate;  from the 1990s, that the world would pass it by.  It was a positive sign that we were now trying to calculate Latin America’s potential, with the feeling that globalisation, even if it seemed to have favoured Asia first, would bring some distinct advantages to Latin America.
There were some good insights into the characteristics of the region.  Most participants thought it relevant to regard the Latin American architecture as comprised of three main parts:  a US hub in the north, with Mexico, Central America and the Caribbean, as well as Canada, as the spokes;  a less distinct hub-and-spoke structure in South America, with Brazil at the centre and Argentina, Uruguay, Paraguay, Bolivia and to some extent Peru as the spokes;  and a distinct Pacific fringe with a more global and liberal trade orientation than elsewhere, revolving around Chile, Peru and Colombia, with its own approach to APEC and to the US.  This left Venezuela to be placed and it was an important feature particularly of our political discussion.  But we felt it right not to be obsessed by the populist political trends in Venezuela and Bolivia.
Addressing the politics of the region, participants felt it right to focus on three particular areas essential for political stability and effective democratic governance:  the capacities of the state, the problems of exclusion and the need for accountability.  Governments were criticised not just for the failure consistently to produce and implement the right policies, but also for a low degree of political will to do so.  There seemed to be no clear vision of the public interest.  When nearly all the countries of the region still had so much to do to produce developed infrastructures, security, justice, good education/healthcare systems and solid government revenues, the prevailing characteristics were too often unprofessional bureaucracies, widespread corruption, incomplete economic reforms, uncontrolled violence and crime and powerfully selfish cliques and informal organisations. 
This intractability of the elites to work in the public interest reinforced the second problem, that of exclusion.  With distribution systems failing to bring the benefits of economic growth to the less well-off, there was a danger that new actors would increasingly challenge the status quo.  We discussed the need for the establishment of a new social contract that recognised the economic and social changes brought on by globalisation and the greater potential of previously excluded groups to assert their interests.  Participants were disappointed in the role of the traditional political parties, which were becoming increasingly irrelevant in the new environment.  In their place social mobilisation was taking place, although the inability of the new movements so far to find solutions to the broader political conflicts made us doubt their real effectiveness. 
We addressed the issue of accountability with some hesitation, not least as there was no Spanish word for it.  No new state capacity or inclusive social contract would work consistently without it.  But the political and judicial structures were still weak and the media were on the whole not constructive players.  Economic considerations trumped investigative journalism and the elites were able to keep new ideas at bay.  Gradually civil society was beginning to exert a force and this might be worth watching in the years ahead.  Nevertheless this area would continue to be a crucial challenge for Latin American democracies. 
Other positive trends could be noted in the bolsa familia in Brazil, in the gradual redistribution of resources in Mexico to the poorer classes and in the holistic approach taken in Medellin, Colombia, where new government programmes were introducing greater reform momentum.  These were examples of state capacity and political will coming together which it would be good to see replicated elsewhere.  Other useful trends involved campaign finance reform, lobbying regulations and freedom of information acts, which it was hoped would have some effect on corruption.  Perhaps the most important instrument in this whole area was tax reform, if it could be used to promote a fairer distribution of resources.  But it was still too early to say where some of the new approaches would take firm root.  The global economic crisis, to the extent that it directly affected Latin America, would not help. 
Against this background, much of which was seriously worrying, we were reminded to look at the real synergies in Latin American society.  There was a time when outsiders worried that strong presidential powers, including command of the wavelengths, would lead to breakdown in Latin America.  But on the whole it had worked quite well in recent years, largely through the inventiveness of the leaders involved and through the working of informal methods and rules.  This could also hide elements of corruption and it might not always look pretty.  But these were usually the channels through which the Latin American democracies made themselves work. 
In the economic field, people were encouraged by the stronger record of economic growth in the current decade, even if it was largely based on the commodities boom and would not escape the current turmoil.  There were plenty of deficiencies to correct.  The degree of poverty and inequality in almost all societies was manifest and was unlikely to be addressed by current redistribution policies.  Savings were low, competitiveness unimpressive and, apart perhaps from Brazil’s rapidly diversifying economy, entrepreneurial drive and innovation were insufficient.  Communications and infrastructure were sorely under-developed.  These faults might take a long time to correct, not least because the standards of education in the region were still far too low.  Corruption and crime also had a marked effect.
We listed five core areas where action was needed:  institutional reform;  macro-economic policy (focussing especially on low inflation, competitiveness and foreign investment);  micro-economic policy (promoting better regulation, higher savings and better training);  energy and the environment;  and regional integration.  There was plenty discussion of the various free trade arrangements across the western hemisphere, none of which had really met expectations but several of which were worth developing  further into the future.  Our underlying judgement was that certain countries, with Brazil and Chile most often mentioned, were developing some effective approaches in both public and private sectors, but that the region as a whole was not really coordinating its economic potential or capitalising on the drive of the stronger players.  Nor were common problems being effectively addressed.  This meant that the region as a whole was punching below its economic weight, a condition not likely to be corrected in the near future, even though the Organisation of American States was effective in some areas. 
Many participants felt that energy and the environment were, taken together, a prime area for greater cooperation and development.  Brazil had done particularly well, but so far with few followers.  There was a real need to develop a consciousness in the region to pay attention to the environment, which was a particularly crucial area for the poorer citizen.  A start ought to be made in particular for greater coordination of electronic and energy grids, the gradual reduction of fuel subsidies and the development of infrastructure geared towards climate change, for instance in the extension of effective public transport systems. 
We had a good discussion of the importance of external relationships for Latin America, although we found the general picture disappointing.  The United States had shown a noticeable lack of interest in the region in recent years, either through indifference to the region’s low ability to deal collectively with its own challenges or preferring to maintain a hub-and-spoke strategy.  We thought that there was a real opportunity for the next US President to develop a more positive and engaged approach, as no-one doubted that the US was going to remain the most important external player and the US-Brazilian relationship the core instrument.  By contrast, the EU was essentially irrelevant to the region, since its level of engagement was just too low (it was not helped, of course, by the absence of a structured interlocutor on the Latin American side).  This was regarded as an opportunity missed, particularly when the United States was itself not trying very hard.  Europeans were encouraged to think again.  China, on the other hand, was developing into a major player in the region, with its influence so far regarded as largely beneficial.  Over the coming period, however, it could easily turn into a competitor, both domestically and in export markets, and Latin American countries needed to look carefully at the possible political content of Chinese investments.  The relationship would need to be watched.  Otherwise, south-south relations did not seem to be as significant as they were sometimes painted, appearing more like instruments of some countries, particularly Brazil and to some extent Mexico, to gain leverage on the global scene.  Overall, we felt that the opportunities for trade and investment with and in Latin America were reasonably encouraging, though outsiders would be better advised to take each country on its merits, rather than trusting in the region’s institutional cooperation or cohesion.  There was a great deal of business to be done by those who tailored their approaches carefully.
Finally it is worth mentioning drugs.  For all the attention which United States in particular had devoted to this scourge, we felt that a broader understanding was still needed of its devastating effect on a number of countries and their economies.  The responsibility of the developed world, as consumers of drugs, had not been fully recognised.  There was room for much stronger cooperation between agencies and security departments, on which the leading governments of Latin America, North America and the European Union should coordinate their activities more energetically.  There was scope for a major international meeting on this subject. 
We wondered at the end whether we had really addressed the question of Latin America’s potential.  The scale and diversity of the problems still to be addressed had to be recognised.  But the growing diversity of activity across the region, the rapid changes taking place on other continents, the momentum of economic growth so far this decade and the increase in different lines of communication to and from the region meant that there were real opportunities for those who took Latin America seriously.  The very adaptability and informality of the region’s structures and methods of operation meant that globalisation was more likely to bring advantages than disadvantages as it evolved, a thought which might not apply in the same way to the more rigid political character of, say, China.  In all this Brazil was the leading force of the region, though not the acknowledged or even the willing leader.  Its capacity to attract attention on the global scale, in international politics and economics alike, could carry real regional benefit.  Mexico, if it could use its close relationship with the United States constructively, might be the second player in this league.  The region’s resources, trade channels, entrepreneurial drive and capacity to adapt were all valuable.  But the deficiencies would have to be addressed, starting with education and inequality and moving on to the institutions and the infrastructure.  Progress and regression were both possible;  and this might be the fundamental reason for external hesitancy.  This conference recognised the problems, but ended up, on balance, believing that faith in Latin America would be justified. 
There was perceptiveness and spirit in this debate.  We owed a lot to the impressive expertise around the table and to a chairman with a remarkable knack for illuminating the core points with clarity and humour.  Ditchley’s readers would do well to pay attention to how this story unfolds in the future.
This Note reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.
 
PARTICIPANTS
Chairman  :  The Rt Hon Michael Portillo
Vice-President, Canning House;  Writer,  Broadcaster;  Columnist, The Sunday Times;  Chairman of Judges, Man Booker Prize (2008).  Formerly:  Shadow Chancellor of the Exchequer (2000-01);  Secretary of State for Defence (1995-97);  Minister of State for Transport (1988-90);  Member of Parliament (Conservative), Kensington and Chelsea (1999-2005);  Enfield Southgate (1984-97).

ARGENTINA
Professor Sergio Berensztein

President and Partner, Poliarquía Consultores, Buenos Aires;  Political Consultant and Analyst;  Consultant, UNDP, Interamerican Development Bank, World Bank;  Director, Master in Public Policy, Tocuato Di Tella University.
BRAZIL
Mr Eduardo de Barros Roxo
Chargé d’Affaires, Deputy Head of Mission and Minister Counsellor, Embassy of Brazil, London (2008-).
BRAZIL/UNITED KINGDOM 
Professor Leslie Bethell

Senior Research Fellow, Fundação Getulio Vargas, Rio de Janeiro;  Emeritus Fellow, St Antony’s College, Oxford;  Emeritus Professor, Latin American History, University of London;  Honorary Research Fellow, Institute for the Study of the Americas, University of London;  Editor, Cambridge History of Latin America.
CANADA
Dr Jean Daudelin 

Assistant Professor, The Norman Paterson School of International Affairs, Carleton University, Ottawa.  Formerly:  Visiting Professor, University of São Paulo;  Principal Researcher, North-South Institute, Ottawa.
CANADA/ARGENTINA
Mr Pablo Bréard 

Vice-President, Head of International Research and Chief Latin American Economist, Scotiabank Group;  Member Economic Advisory Committee, Institute of International Finance;  Board Member, Canadian Foundation for the Americas.
CANADA/BRAZIL
Ms Annette Hester

Senior Associate, Canadian International Council (2008-);  Associate, Centre for Interamerican Studies, Laval University, Canada (2004-);  Fellow, Latin American Research Centre (1999-).
EUROPEAN COMMISSION/SPAIN
Dr Alexandra Cas Granje

European Commission (1986-);  Director, Latin America, Europe Aid Cooperation Office, European Commission (2007-). 
FRANCE/BRAZIL
Professor Alfredo Valladão

Professor and Director, Mercosur Chair, Institute of Political Studies (Sciences Po), Paris;  Coordinator, Working Group on EU-Mercosur Negotiations and the International Conference of Forte Copacabana on ‘Defense and Security European-South American Dialogue’.
GERMANY
Professor Dr Günther Maihold

Deputy Director, German Institute for International and Security Affairs.
Dr Hildegard Stausberg
Columnist, Die Welt;  Member of the Executive Board,  Kölner Presseclub.  Formerly:  Frankfurter Allgemeine Zeitung:  Latin American Editor;  Mexico and Central America Correspondent. 
MEXICO
Dr Denise Dresser

Professor of Political Science, Instituto Tecnólogico Autónomo de México (1991-);  Political Columnist, ‘Reforma’;  Political Analyst;  Associate Editor, Los Angeles Times.
Dr Tomislav Lendo Fuentes
Director-General (Speeches), Office of the President of Mexico.
Ambassador Andrés Rozental
Non-Resident Senior Fellow, The Brookings Institution;  Governor, International Development Research Centre of Canada;  Chairman, ArcelorMittal Mexico.  Formerly:  Founding President, Mexican Council on Foreign Relations (2002-07);  Ambassador-at-Large and Special Envoy for President Vicente Fox (2000-01).  Author.
HE Mr Arturo Sarukhan
Ambassador of Mexico to the United States of America.
PERU
HE Ambassador Ricardo Luna

Ambassador of Peru to the United Kingdom and Ireland (2007-).  Formerly:  Ambassador to the United Nations (1989-92);  Ambassador to the United States (1992-99).
SOUTH AFRICA
Dr Lyal White

Research Associate, Institute for Global Dialogue.
 
UNITED KINGDOM
Mr Nicholas Baring CBE

Chairman, Cusichaca Trust;  Member, Council of Management, Architectural Heritage Fund (1987 );  Chairman, Fitzwilliam Museum Trust (2004-).
Dr Peter Collecott CMG
HM Diplomatic Service (1977-);  Ambassador to Brazil (2004-).
Professor Joseph Foweraker
St Antony’s College, Oxford:  Director, Latin American Centre;  Professor of Latin American Politics;  Professorial Fellow.
The Rt Hon The Lord Garel-Jones
Managing Director, UBS Investment Bank;  Member of the Board, Iberia Lineas Aereas de Españia SA;  Vice-President, Canning House.  Formerly:  Member of Parliament (Conservative) Watford (1979-97).
Mr Richard Gott
Honorary Research Fellow, Institute for the Study of the Americas, University of London.  Formerly:  Latinof  America Correspondent, The Guardian.  Historian.
Dr Simon Harkin
HM Diplomatic Service (1989-).  Head, South America Team, Foreign and Commonwealth Office, London (2008-).  Formerly:  Head of Chancery and DHM, Berne (2001-06);  Head, Mexico and Central America (1998-2000).
Dr John Hughes
HM Diplomatic Service (1973-);  Ambassador to Argentina, Buenos Aires (2004-).  Formerly:  On Secondment, Shell (2003-04);  Ambassador to Venezuela (2000-03).
Dr Charles Jones
Reader in International Relations, Centre of International Studies, University of Cambridge.  Formerly:  Director, Centre of Latin American Studies, University of Cambridge.
Professor George Philip
London School of Economics:  Professor Latin American Politics, Department of Government (2001-);  Vice-Chair, Appointments Committee (2007-).
Dr Timothy Power
Director, Brazilian Studies Programme, St Antony’s College, University of Oxford (2008-);  University Lecturer in Brazilian Studies and Fellow of St Cross College, University of Oxford (2005-).
Mr Michael Reid
Americas Editor, The Economist (1999-).  Formerly:  Bureau Chief, Sao Paulo (1996-99), Consumer Industries Correspondent (1994-96), Mexico and Central America Correspondent (1990-94).
UNITED STATES OF AMERICA
Ambassador Harriet Babbitt
 Member, American Bar Association Task Force on the (Inter)American Convention on Human Rights (2008-);  Member, Board of Advisors to the North American Center on Transborder Studies (2006-);  Attorney at Law, Washington DC;  Board of Directors, The National Democratic Institute for International Affairs.
Dr Leonardo Martinez-Diaz PhD
Political Economy Fellow, Global Economy and Development Program and Deputy Director, Partnership for the Americas Commission, The Brookings Institution;  Consultant, Independent Evaluation Office, International Monetary Fund;  Luce Fellow in Indonesia. 
Dr Jennifer McCoy
Professor of Political Science, Georgia State University (2006-);  Director, Americas Program, The Carter Center, Atlanta (1998-);  Executive Director, Friends of the Inter-American Democratic Charter and Council of Presidents and Prime Ministers of the Americas.
Dr Shannon O’Neil
Douglas Dillon Fellow for Latin America Studies, Council on Foreign Relations.  Formerly:  Director, Independent Task Force on US Policy Toward Latin America, Council on Foreign Relations. 
Dr Robert Pastor
Professor of International Relations, Founding Director, Center for North American Studies and Co-Director, Center for Democracy and Election Management, School of International Service, American University (2002-).
Dr Marifeli Pérez-Stable
Vice-President for Democratic Governance, Inter-American Dialogue;  Professor, Florida International University;  Editor;  Columnist, The Miami Herald.
Ms Susan Segal
President and CEO, Americas Society/Council of the Americas.  Formerly:  Partner, Chase Capital Partners (1997-2002).
UNITED STATES OF AMERICA/MEXICO
Dr Francisco González
Riordan Roett Professor of Latin American Studies, Johns Hopkins University.
SWITZERLAND/UNITED STATES OF AMERICA
Mr Iván Rebolledo 

Managing Partner, TerraNova Strategic Partners LLC;  President, Bolivian-American Chamber of Commerce (2003-);  Independent Consultant;  Chair, Board of Directors, Global Goods Partners;  Director, Fundacion AlvarAlice.
UNITED STATES OF AMERICA/UNITED KINGDOM
Dr Diana Negroponte
Senior Fellow, Brookings Institution;  Trustee, Freedom House, Opportunity International;  Active Builder with Habitat for Humanity International.  Author.