Latin America Transformed: Globalization and Modernity (Arnold Publication)

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List of tables xiList of figures xiiiAbout the authors xvPreface xix

PART 1: GLOBALIZATION AND MODERNITY 1

1 Latin America transformed: globalization and neoliberalism 3Robert N. Gwynne, Cristóbal Kay

Unravelling the concept of globalization in Latin America 5Globalization and the contemporary relevance of structuralism and dependency theories 11Globalization in the neoliberal era 14Social bases of neoliberalism 17Conclusion: a paradigm shift in theory and policy 19

2 Modernity and identity: cultural change in Latin America 22Jorge Larraín

Introduction 22The Latin American trajectory to modernity 24Some specific elements of Latin American modernity and culture 32Conclusion 38

3 Structural reform in South America and Mexico: Economic and Regional Perspectives 39Robert N. Gwynne

Historical contexts 43Economic policy change 46Impacts and problems of neoliberal reform 50Neoliberalism and economic spaces 57Conclusion 63

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Contents

4 Globalization, neoliberalism and economic change in Central America and the Caribbean 67Thomas Klak

A region of small and dependent states 69Development policies prior to neoliberalism 73The debt crisis and the neoliberal remedy 76The meaning and impacts of globalization 77The neoliberal development model 80Cuba: island socialism amid global capitalism 84Migration and transnationalism 87Regional trading blocs 87The growing drug economy 90Conclusion 91

5 The urban revolution 93Alan Gilbert

Urban growth during the twentieth century 94Explanations for urban growth 95Rural–urban migration 98The geography of urban growth under the new economic model 101The urbanization of poverty 102Differential patterns of urban change 104An unpredictable future 114

6 The political economy of sustainable development 117Warwick E. Murray and Eduardo Silva

Natural resource use – economy or environment? 118Political-economic issues and implications 122Whose sustainability? The Chilean fruit export boom 124Environmental issues and implications 128The politics of natural resource extraction 133Conclusion 135

PART 2: POLITICAL TRANSFORMATIONS 139

7 Authoritarianism, democracy and development 141Eduardo Silva

Political economy and the state 141Democracy, authoritarianism and development 143Conclusion 154

8 The new political order: towards technocratic democracies? 157Patricio Silva

Neoliberalism, modernization and democracy 157The depoliticization of society 159Political legitimation and consumerism 162The technocratization of policy-making 164

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Disenchantment 166The future of democracy in Latin America 168

PART 3: SPACE, SOCIETY AND LIVELIHOODS 171

9 Livelihood transitions, place transformations: grounding globalization and modernity 173Anthony Bebbington

Conceptualizing livelihoods in Latin America 174Livelihoods since neoliberalism 181Livelihood politics 183Livelihoods, NGOs and development 185Globalization and livelihoods in Latin America 188Conclusion 191

10 Civil society, grassroots politics and livelihoods 193Sarah A. Radcliffe

Civil society in Latin America: social difference, rights and the state 194Civil society mobilization in the 1970s and 1980s 196Civil society and the transition to democracy 202Civil society and social difference 202Conclusion 207

11 Urban livelihoods, employment and gender 210Sylvia Chant

Household livelihoods 210Urban employment 215Gender and the urban labour market 221Conclusion 228

12 Rural livelihoods and peasant futures 232Cristóbal Kay

The lost promise of agrarian reform 232Globalization, neoliberalism and agriculture 234Peasant futures: a permanent semi-proletariat? 240The new peasant movement: indigenous and environmental dimensions 246Conclusion 249

PART 4: LATIN AMERICAN FUTURES 251

13 The alternatives to neoliberalism 253Robert N. Gwynne and Cristóbal Kay

The neoliberal model evaluated 253Alternatives to neoliberalism 259

Bibliography 268Index 311

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1.1 Increasing asymmetries in the world economy, 1978–2001 83.1 Population and production in North and South America, 1965–2001 413.2 South America and Mexico: peak inflation years between 1970 and 1993 and inflation

average, 1984–93 443.3 Chronology of trade liberalization in Latin America, 1985–91 493.4 Latin America: export growth during the 1980s and 1990s 523.5 Latin America: changes in labour market indicators during the 1990s 543.6 Latin America: open urban unemployment, 1985–2000 553.7 Latin American labour markets, 1990–99 563.8 Contribution to total manufacturing employment by size of firm, 1990s 593.9 Latin America: employment growth by sector, 1990–97 604.1 Basic indicators for Central American and Caribbean countries and territories 70–14.2 Trade dependency: selected Central American and Caribbean countries in

comparative perspective 724.3 Central American and Caribbean trading blocs: intra-regional exports as a percentage

of total exports, selected years 885.1 Latin America: urban share of population in selected countries, 1930–2000 955.2 Latin America: annual population growth, 1990–95 965.3 Economic growth in selected Latin American countries since 1950 985.4 Urban growth in major cities and countries of Latin America, 1950–2000 1015.5 Poverty and inequality in Latin America during the 1990s 1035.6 The incidence of poverty in Latin America, 1970–99 1045.7 Foreign direct investment: Chile, Colombia and Mexico, 1990–2001 1055.8 Chile, Colombia and Mexico: export performance, 1965–2001 1055.9 Chile, Colombia and Mexico: development of manufacturing exports, 1965–2001 1055.10 Chile, Colombia and Mexico: manufacturing value added, 1950–99 1065.11 Chile, Colombia and Mexico: economic growth by decade since 1980 1065.12 Mexico: population growth rates in the major cities, 1950–2000 1075.13 Mexico: growth of the maquiladoras, 1966–2002 1075.14 Mexico: poverty and inequality, 1963–2001 1085.15 Chile: annual population growth of the largest cities, 1952–92 1095.16 Chile: poverty and inequality, 1970–2001 1105.17 Colombia: the economy, murders and internal displacement, 1990–2001 1125.18 Colombia: annual population growth largest cities, 1951–93 1125.19 Colombia: poverty and inequality, 1978–99 1146.1 Export specialization in Latin America, proportional values, 2000 121

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List of tables

11.1 Latin America: key labour market aggregates, 1990–99 21311.2 Level and composition of unemployment in urban and rural areas of Latin America,

1990–99 21611.3 Percentage of male and female labour force in the informal sector 22011.4 Women’s share of labour force, and key occupational and sectoral characteristics 22211.5 Wage differentials in paid employment by gender and age cohort 226

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1.1 Latin American countries and capital cities 43.1 Schemes of economic integration in Latin America 403.2 Hemispheric representation according to income and population size 423.3 Latin America: export markets, 2001 533.4 Assembly industry and the Mexican border towns 623.5 The economic power of Chile’s regions 644.1 The small countries of Central America and the Caribbean 684.2 The weekly banana shipment from Dominica to Britain 754.3 Electronics assembly in Costa Rica 794.4 Dominica’s non-traditional industrial exports 824.5 Cuban economic growth rates, 1985–2002 856.1 Components of sustainable development 1196.2 Este valle está bajo Control 1256.3 The output of plantation forestry in Southern Chile 1308.1 Graffiti saying ‘Death to the Guerrillas’, Central Colombia, 2001 1619.1 A livelihoods framework 1779.2 Male and female market traders, Otavalo, Ecuador 18711.1 Low-income settlement, Querétaro, Mexico 21311.2 Home-based commerce, Puerto Vallarta, Mexico 21411.3 Home-based footwear production, Léon, Mexico 21711.4 Home-based services – hairdressing, Puerto Vallarta, Mexico 22112.1 Man and machete, Liberia, Costa Rica 23712.2 Seasonal female labour in one of Chile’s Fruit-Packing Plants 23812.3 Truck bringing cane workers home from a day in the fields, Liberia, Costa Rica 23912.4 Inside a smallholder’s greenhouse, Peumo, Chile, 1996 24313.1 The results of foreign direct investment in Chilean agriculture 25413.2 The informal sector in action 25613.3 Elderly beggars, Quinché, Ecuador 257

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EDITORSRobert N. Gwynne is Reader in Latin American Development at the School of Geography,University of Birmingham. In recent years, he has also been Visiting Professor at the Catholic Universityof Chile. His research interests focus on industrialization in the developing world and on the impactsof neoliberalism and globalization on regional and rural development in Latin America. He is theauthor of two books (Industrialisation and Urbanisation in Latin America; New Horizons? Third WorldIndustrialization in an International Framework) and has recently co-authored Alternative Capitalisms:Geographies of Emerging Regions (2003, Arnold) with Thomas Klak and Denis Shaw. In addition he haswritten numerous articles in both geography and Latin American journals and chapters in a widerange of edited books.

Cristóbal Kay is Associate Professor in Development Studies and Rural Development at theInstitute of Social Studies in The Hague. He has held lectureships in the University of Chile and theUniversity of Glasgow and has been Visiting Professor at the Catholic University of Peru. He is co-editor of the European Review of Latin American and Caribbean Studies and was the editor of TheEuropean Journal of Development Research. His books include Latin American Theories of Developmentand Underdevelopment, Labour and Development in Rural Cuba (joint author), Development and SocialChange in the Chilean Countryside (co-editor) and Globalisation, Competitiveness and Human Security(editor).

CONTRIBUTORSAnthony Bebbington is Professor in the Institute for Development Policy and Management,University of Manchester. Previously he was Associate Professor of Geography at the University ofColorado at Boulder, and has also worked at Cambridge University, the World Bank and the OverseasDevelopment Institute. In recent years he has held fellowships at the Center for Advanced Studies inthe Behavioral Sciences at Stanford, and the UN Food and Agricultural Organization in Chile. Hisresearch in Latin America has addressed: NGOs and rural social movements; poverty and rurallivelihoods; agricultural development; and more generally the links between developmentinterventions and political economy. He is married with two young daughters.

Sylvia Chant is Professor of Development Geography at the London School of Economics andPolitical Science. She has specialist interests in gender and development, with her most recent booksincluding Women-headed Households: Diversity and Dynamics in the Developing World, Three Generations,Two Genders, One World (with Cathy McIlwaine), Mainstreaming Men into Gender and Development:Debates, Reflections and Experiences (with Matthew Gutmann), and Gender in Latin America (inassociation with Nikki Craske). She has worked mainly on Latin America (Costa Rica and Mexico), but

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About the authors

has also conducted research in the Philippines. Recently she embarked on work on youth, gender andlivelihoods in sub-Saharan Africa with her LSE colleague, Dr Gareth A. Jones. Between 2003 and 2006,Professor Chant will be engaged in comparative research on inter-generational and householddimensions of gender and poverty in Africa, Asia and Latin America under the auspices of a three-yearLeverhulme Major Research Fellowship.

Alan Gilbert is Professor of Geography at University College London. He is the author or editor ofthirteen books and more than one hundred chapters and articles. His latest book is the Latin AmericanCity (2003). His expertise is principally in the area of housing, urbanization and urban management inLatin America and South Africa. He has acted as a consultant and researcher for the IDB, World Bank,and UNHabitat for whom he has recently completed a report on rental housing.

Thomas Klak is Professor of Geography at Miami University and Adjunct Professor of Geographyat Ohio State University. His research analyses the theories, discourses, practices, and ecologicalconsequences of development and urban sprawl. He is the editor of Globalization and Neoliberalism:The Caribbean Context (1998), and co-author of Alternative Capitalisms: Geographies of ‘EmergingRegions’ (2003) and The Contemporary Caribbean (2004).

Jorge Larraín is Head of the Department of Social Sciences at the University Alberto Hurtado,Santiago, Chile and Emeritus Professor of Sociology at the University of Birmingham. His presentresearch interests focus on culture, modernity and identity in Latin America, especially Chile. His booksinclude The Concept of Ideology; Theories of Development, Ideology and Cultural Identity and Identity andModernity in Latin America.

Warwick E. Murray is Senior Lecturer in Human Geography at Victoria University, New Zealand.In 1997, he gained his PhD from the University of Birmingham (UK), which built on a year’s fieldworkin Chile investigating the impacts of neoliberalism on small farmers. He has held lectureships at theUniversity of the South Pacific (Fiji) and Brunel University (UK), and has extended his research onglobalization, political economy and rural development to the Pacific Islands and Rim. His work hasbeen published in journals including Economic Geography, European Journal of Development Research,Journal of Peasant Studies and Journal of Rural Studies. In 2002 he co-edited (with Jonathan Barton) aspecial edition of the Bulletin of Latin American Research entitled ‘Chile: A Decade in Transition’. He iscurrently Managing Editor of the academic journal Asia Pacific Viewpoint.

Sarah Radcliffe teaches Latin American studies, and social and cultural geography, at theDepartment of Geography, University of Cambridge. Her current research interests includeindigenous development and transnationalism, theories of the state and citizenship, and gender anddevelopment. Her books include ‘Viva! Women and popular protest in Latin America’ (Routledge, 1993)and ‘Remaking the nation: place, identity and politics in Latin America’ (Routledge, 1999).

Eduardo Silva is Professor of Political Science and Fellow of the Center for International Studies atthe University of Missouri, St. Louis. He is author of The State and Capital in Chile, and co-editor ofOrganized Business, Economic Change, and Democracy in Latin America and Elections andDemocratization in Latin America, 1980–85. In addition to contributions to edited volumes and publicaffairs pieces, his articles have appeared in World Politics, Comparative Politics, Development and Change,Global Environmental Politics, Journal of Latin American Studies, Journal of Interamerican Studies and WorldAffairs, Latin American Politics and Society, Bulletin of Latin American Research, Latin American ResearchReview, and the European Review of Latin American and Caribbean Studies.

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Patricio Silva is Professor of Modern Latin American History at both the Department of LatinAmerican Studies and the Institute of Social and Cultural Studies, Leiden University. His recentresearch has focused on the technocratization of the political arena and civil-military relations inseveral Latin American countries. He is co-editor of several books, including The Soldier and the Statein South America, The Politics of Expertise in Latin America and Designers of Development: Intellectuals andTechnocrats in the Third World.

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Welcome to the Second Edition of Latin America Transformed. Four chapters (5, 9, 11 and 13) arecompletely new and the other nine chapters have been updated, with most of them considerablyrevised and changed. In addition, all chapters now have recommended web sites for readers toconsult, along with suggestions for further reading. The maps and diagrams have been produced byKevin Burkhill and Anne Ankcorn at the University of Birmingham.

As editors we were very gratified by the many favourable reviews that the First Edition received. Itsaim was to make more comprehensible the radical series of transformations that had taken place inthe economic, political, social and cultural life in Latin America in the last quarter of the twentiethcentury. It adopted a political economy approach in order to unravel such concepts as globalization,neoliberalism and modernity and how they related to the transformations that Latin America wasexperiencing.

In the Second Edition, we have maintained the importance of this political economy perspective inthe first two parts of the book. All chapters have been significantly updated and revised, and there isone completely new chapter (The urban revolution, by Alan Gilbert).

We think that the Second Edition is a considerable improvement on the First Edition in that wemore systematically introduce another dimension – that of understanding the dynamics of people’slivelihoods. The third part of the Second Edition focuses on how people weave their way through,make sense of and live out the structural transformations that are taking place at the level of the city,the countryside, the state or world economy. The emphasis is on how people construct theirlivelihoods from below, albeit framed within these wider political and economic structures. In this partthere are two completely new chapters (Livelihood transitions, place transformations, by AnthonyBebbington; and Urban livelihoods, by Sylvia Chant) and the other chapters have been substantiallyrevised.

One criticism of the First Edition was that it lacked a conclusion. In this Second Edition, the editorshave grasped the nettle and, in part four, discuss the political economy of Latin America’s future. If theanalysis proves prescient, we may later be asked to do a Third Edition!

Robert N. GwynneCristóbal Kay

September 2003

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Preface


1

GLOBALIZATION AND MODERNITY


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Globalization has been associated with a series of economic, political, social and culturalmetamorphoses in Latin America. This book aims to explain the various components of thesemetamorphoses, explore theoretical debates and contribute to a greater understanding of howthese transformations are affecting the people of Latin America (see Figure 1.1).

It could be argued that studies on societal transformations in contemporary Latin America havebeen characterized by their strong fragmentation along disciplinary lines. Since the early 1980s,political scientists have directed their attention to the processes of democratic transition andconsolidation taking place in a large number of countries (see Chapters 7 and 8). During the sameperiod, economists have focused on analysing the policies of macro-economic adjustment and tradeliberalization implemented in order to regenerate economic growth across the continent (seeChapters 3 and 4). Meanwhile, several sociologists and social anthropologists have begun, in recentyears, to examine the nature of the social and cultural transformations generated by modernizationand the increasing globalization of Latin American societies (see Chapters 2, 10 and 12). Geographershave tried to examine change at different scales of analysis and by foregrounding place and livelihoodsin their analysis (see Chapter 9).

There are many ways of examining how transformations have occurred in Latin America andthe Caribbean in the past few decades. Political economy provides one set of tools. Part 1 of thisbook uses a political economy approach in order to unravel the concepts of globalization andmodernity and how they relate to economic, political, social and cultural change in the region. Theemphasis is on interpreting the broad structures that frame the several transformations that aretaking place. These interpretations cast their analysis at a macro-level, creating arguments that seekto explain the transformations in the region by reference to international, national and regionalprocesses.

In the first two parts, all authors attempt to contextualize their different disciplinary foci within abroad political economy approach that consciously tries to integrate political, economic, social andgeographical phenomena. In several chapters, key theoretical perspectives and debates, as far as theyexist, are used to analyse these transformations in a critical manner. Other chapters, while discussingtheoretical issues, present more empirical evidence to examine the various transformations of LatinAmerica and discuss the adequacy of current theories.

Another dimension is to focus on how people weave their way through, make sense of, rework andlive out these structural transformations. Part 3 aims to understand the dynamics of people’slivelihoods. The emphasis in these chapters is on how people construct their livelihoods from belowand within the existing structural constraints of the current phase of globalization. We hope that, byhaving chapters that rely on one or the other of these two dimensions, this book will provide a morecomprehensive picture of Latin American transformation. The challenge is to focus on the weave thatknits together global and local networks and which has produced and continues to generatedistinctive chronologies of place and livelihoods.

1Latin America transformed: globalizationand neoliberalism

Robert N. Gwynne, Cristóbal Kay

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Mexico City

Havana

Santo Domingo

TegucigalpaSan SalvadorGuatamala City

Managua

San JosePanama

Caracas

Bogota

Quito

Lima

La Paz Brasilia

Asuncion

SantiagoBuenos Aires Montevideo

BELIZE

GUYANA

SURINAMEFRENCHGUIANA

MEXICO

GUATEMALA

EL SALVADOR

HONDURAS

NICARAGUA

COSTA RICAVENEZUELA

COLOMBIA

ECUADOR

PERU

BOLIVIA

CHILE ARGENTINAURUGUAY

PARAGUAY

BRAZIL

DOMINICAN REPUBLICCUBA

Figure 1.1 Latin American countries and capital cities.

UNRAVELLING THE CONCEPT OF GLOBALIZATION IN LATIN AMERICAThe concept of globalization has been strongly linked to the economic (see below), but in this bookwe aim to emphasize the political, social, environmental and cultural components of globalization aswell. The globalization of politics has impacted upon Latin America in such diverse forms as the shiftto systems of democratic governance and greater concern for human rights (see Chapter 8).Meanwhile, global environmental concerns (such as global warming) have impacted upongovernment and public attitudes to the environment in many countries, while the growth of mediaemanating from the core economies (and most particularly the United States) is transforming socialcustoms and cultural practices in much of urban Latin America (see Chapters 2 and 5). One oughtto add that there is also evidence of local reactions to the processes of globalization, as with the risein grassroots movements representing local environmental issues (see Chapter 6) and indigenousmovements (see Chapter 10).

In terms of economic globalization, it should be emphasized that capitalism has always been aninternational system. However, today, the international integration of the world-market economy isprogressing at a very rapid pace. This process encompasses economic transformations in production,consumption, technology and ideas. Many social scientists define the current reality as one ofunprecedented globalization and call for new forms of global governance (Soros, 2002). The idea thatwe have entered an era of globalization is so often repeated in the news media and in scholarship thatit has the status of a truism, so obvious that it is beyond refute or need for empirical substantiation.Many observers go one step further, presenting globalization as an unquestionable empiricalmanifestation of contemporary capitalism. Against this trend, there is now also a powerful anti-globalization movement that receives considerable media attention (see Box 1.1).

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BOX 1.1 The anti-globalization movement

The process of globalization has unleashed an anti-globalization movement, largely situated in thecountries of the North. In the past decade, it has organized major protest actions in Seattle,Washington, DC, Genoa and other cities where international organizations such as the WorldBank have organized key meetings. The anti-globalization movement is a broad coalition of a greatvariety of groups who wish to voice their concern about the negative impact of the process ofglobalization on such issues as the environment, labour rights, working conditions and the culturalidentity of groups and nations. However, these anti-globalization protests have not yet coalescedinto a permanent and coherent social movement. While it may not have fundamentally contestedor changed the global capitalist system, it has been relatively successful in raising morewidespread concern about the negative consequences of the globalization process. A major anti-globalization movement in the South is being shaped by the Social Forum, which has so far hadthree gatherings in Porto Alegre, Brazil. Thousands of representatives of NGOs, trade unions, andother organizations from the North and the South meet during a week or so to discuss a greatvariety of issues concerning the economic, social and political impact of globalization andneoliberalism on mainly the peoples of the South. It attempts to forge an international movementthat counters the power of transnational corporations and the policies pursued by governmentsin the North and the South, which try to further neoliberal globalism. These anti-globalizationgatherings and protest movements view globalization as an umbrella term that covers a variety ofcurrent transformations which they attribute to the spread and intensification of capitalism, andwhich they view as having deleterious effects on peoples, cultures and the environmentthroughout the world.

Theses of globalization

It may, therefore, be useful to refer to some of the key discourses on globalization in the socialscience literature (with reference to Latin America, see Harris, 2002) . This will demonstrate thatglobalization is a contested concept with a range of arguments and interpretations associated with it.One attempt at classifying the interpretations of globalization was that of Held et al. (1999), whoargued that there were at least three such discourses, or as they call them, theses: hyperglobalist,sceptical and transformationalist.

The hyperglobalist thesisAccording to the hyperglobalist thesis, globalization defines a new epoch of human history in whichtraditional nation–states have become unnatural, even impossible units in a global economy (Luard,1990; Ohmae, 1995). The key assumption is of movement towards global markets and global prices.In this model, national economies become ‘subsumed and rearticulated into the international systemby international transactions and processes’ (Michalak, 1994: 53). Although nationally determinedpolicies still operate, they are subordinate to wider international determining factors. The key actorbecomes the transnational corporation (TNC), detached from constraints of government regulationand unconstrained by any specific national base. The TNC can thus be seen as the single mostimportant force in economic restructuring both between and within nation–states.

This thesis privileges an economic logic to globalization and argues that economic globalization isbringing about a ‘denationalization’ of economies through the establishment of transnational networks ofproduction, trade and finance (Strange, 1996; Deardorff and Stern 2000). Held et al. (1999) maintain thatwithin this framework, at least two discourses prevail. On the one hand, there is the neoliberal version,which welcomes the triumph of individual autonomy and celebrates the dominance of the marketprinciple over state power that such a thesis of globalization implies (Ohmae, 1995). On the other, thisthesis has neo-Marxist adherents for whom contemporary globalization represents the triumph ofoppressive global capitalism (Peet and Watts, 1993; Petras, 1999). Petras and Veltmeyer (2001a), indeed,would argue that globalization constitutes a new form of imperialism for the twenty-first century.

The steady erosion of old hierarchies and the generation of new patterns of regional winners andlosers are emphasized. A new global division of labour replaces the traditional core–peripherystructure and a more complex architecture of economic power evolves. In the creation of these newworld geographies, the neoliberals stress advantages in global competition. Some spaces within acountry may be made worse off as a result of such competition, but other spaces will have acomparative advantage in producing certain goods for global markets. The neoliberals tend to see allcountries (rich and poor) benefiting from globalization, although within each country significantrestructuring will take place. In contrast, the neo-Marxists believe that global capitalism creates andreinforces structural patterns of inequality both between and within countries.

The sceptical thesisFacing the tidal wave of globalization discourse, a few sceptics have countered that many of thefundamental features and empirical manifestations of global capitalism today remain much as theywere in the nineteenth century (Hirst and Thompson, 1999; Wallerstein, 2000). Hirst and Thompson(1999: 2) argue that in some ways ‘the current international economy is less open and integratedthan the regime that prevailed from 1870 to 1914’. Using statistical evidence of world flows oftrade, investment and labour from the nineteenth century, Hirst and Thompson argue thatcontemporary levels of economic interdependence are by no means historically unprecedented. Thesceptics think that ‘true’ globalization must imply a fully integrated world economy, which remains along way into the future. One crucial economic factor of the world economy, labour, remainsrelatively immobile, particularly compared with capital.

More generally, this thesis sees the world economy as one in which the principal economic entitiesare still states, and their governments are involved in facilitating the process of increasing economic

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interaction at the global scale. International phenomena are outcomes that emerge from the distinctand different performance of national economies (Michalak, 1994). This can explain the increasingimportance of trading blocs in the contemporary world. It could be argued that individual states makesignificant efforts to come together in regional groupings in order to achieve greater economicstability within a world economy that is increasingly uncertain as markets (and thereby prices) becomemore ‘global’ in character.

Sceptics emphasize the enduring power of national governments to regulate international economicactivity. Thus, they regard the early twenty-first century as indicating only heightened levels ofinternationalization. Economic interactions occur between predominantly national economies,although some of these economies may link together into trading blocs where the law of ‘one price’can become a reality (unlike in the global arena). However, it could be argued that the law of ‘oneprice’ has so far only been achieved in the European Union, where full labour mobility within thetrading bloc distinguishes it from other examples. Sceptics see globalization as increasinglymarginalizing the countries of the world periphery. Globalization provides economic growth for coreeconomies and certain countries of the semi-periphery, but a whole series of economic and politicalfactors retard the economic growth of the poorer countries of the world, most notably in Africa.

The transformationalist thesisThis thesis sees globalization as a powerful transformative force which is responsible for a massive‘shake-out’ of societies, economies, institutions of governance and world order. The direction of this‘shake-out’ remains uncertain, since globalization is conceived as an essentially contingent historicalprocess replete with contradictions. ‘At issue is a dynamic and open-ended conception of whereglobalization might be leading and the kind of world order which it might prefigure’ (Held et al.,1999: 7). Contemporary processes of globalization are historically unprecedented, such thatgovernments and societies across the globe need to adjust to a world in which there is no longer aclear distinction between international and domestic, external and internal affairs (Rosenau, 1997).This thesis emphasizes the continuation of global divergence – increasing inequalities between andwithin countries. Distinctions between North and South or First World and Third World ‘overlookthe ways in which globalization has recast traditional patterns of inclusion and exclusion betweencountries by forging new hierarchies which cut across and penetrate all societies and regions of theworld’ (Held et al., 1999: 8).

Globalization in this bookWhat is interesting from a Latin American viewpoint is that most perspectives (apart from thehyperglobalist) do not see global convergence (that is, fewer inequalities between and withincountries) resulting from globalization. Growing inequalities appear to be the result of production,exchange and finance becoming increasingly transnational in dimension. We tend to favour thetransformationalist thesis, in which a great variety of outcomes is possible. Some countries, regions,communities and households will benefit economically from being more closely linked to thefortunes of the global economy, but others (and perhaps the majority in Latin America) will bedisadvantaged. As a result, globalization is associated with new patterns of global stratification inwhich some states, societies and communities are becoming increasingly enmeshed in the globalorder while others are becoming increasingly marginalized (Held et al., 1999: 8). Our main critique ofthe transformationalist approach is that it does not foreground the reaction of local communitiesand individuals to what they regard as the overwhelming force and reach of global economicprocesses; in Part 3 we attempt to confront this limitation.

Globalization and differentiation within Latin America

Divergence between countries and unevenness between different regions of the world, therefore,have become interwoven with globalization. Some argue that, as a result, ‘globalization’ (a wordwhich implies convergence) can be a misleading term for the unfolding process. Table 1.1 gives some

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indication of the increasing asymmetries between the core economies of the world on the onehand, and the semi-peripheral and peripheral countries of Latin America on the other (for a fulldiscussion of these concepts from world systems theory, see Gwynne et al., 2003: Chapter 2). InTable 1.1, the Latin American semi-periphery is represented by the six countries with the highestGross National Product (GNP) per capita in 2001; they are Argentina, Uruguay, Chile, Brazil, Mexicoand Venezuela. Meanwhile, the periphery is represented by the six poorest countries of LatinAmerica and the Caribbean, with World Bank data sets for the years in question. This category thusincludes Haiti, Honduras, Bolivia, Guatemala, Ecuador and El Salvador.

The evidence for increasing divergence between Latin American countries on the one hand, and thecore or developed economies on the other, is indisputable. Already in 1978, the per capita incomeenjoyed by inhabitants of the core economies of the world economy was virtually five times that ofthe semi-periphery of Latin America and 12 times that of the lowest income economies. By 1990, afterthe lost decade (see Chapter 3), the ratio had increased to virtually eight and 27 times respectively.Since 1990, the ratios have stabilized to a certain extent. Indeed, the changing ratios between the coreeconomies and the semi-peripheral countries of Latin America between 1990 and 2001 showedsome indication of convergence (ratio A–B in Table 1.1).

However, it should be borne in mind that this period is followed by severe economic crises in twoof the semi-peripheral countries in question, Argentina and Venezuela. After 2001 the shift todivergence has probably resumed apace. This volatility in economic relationships between core andsemi-periphery introduces the concept of truncated convergence (ECLAC, 2002a). This conceptacknowledges that there will be periods in which convergence may occur, but that these will berelatively short-lived and temporary. Nevertheless, it should be emphasized that the divergence

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TABLE 1.1: Increasing asymmetries in the world economy, 1978–2001

Year 1978 1990 2001

A – Per capita income of US$7,899 US$20,945 US$30,406six core economies

B – Per capita income of US$1,602 US$2,721 US$4,373six Latin American countries with highest GNP

C – Per capita income of US$676 US$770 US$1,227six Latin American countrieswith lowest recorded GNP

Ratio A–B 4.9 7.7 7.0

Ratio B–C 2.4 3.5 4.2

Ratio A–C 11.7 27.2 29.0

A – six core economies: USA, Japan, Germany, UK, France, Italy.B – six Latin American countries with highest GNP per capita in 2001: Argentina, Uruguay,

Chile, Brazil, Mexico, Venezuela.C – six Latin American countries with lowest recorded GNP per capita in 2001: Haiti, Honduras, Bolivia,

Guatemala, Ecuador, El Salvador (no data set available for Nicaragua and Cuba).Sources: World Bank (1980), (1992) and (2003b).

between the core economies and the six poorest countries of Latin America has continued toincrease and has reached extreme levels – by 2001 the mythical average inhabitant of the coreeconomies was nearly 30 times better off than those living in the poorer countries of the Caribbean,Central America and the Andean region.

As well as asymmetries between regions in the global economy, there are growing asymmetrieswithin Latin America and the Caribbean. The data in Table 1.1 distinguishes between the performanceof countries of the semi-periphery and periphery within Latin America (ratio B–C). The divergencebetween the richer and poorer countries of Latin America continued to grow apace – a virtual doublingof the divergence ratio in 23 years to reach a ratio of 4.2 by 2001. In this book, we make the distinctionbetween the larger countries of South America and Mexico (Chapter 3) and the smaller countries ofCentral America and the Caribbean (Chapter 4). Larger countries have been more successful atindustrializing and developing more complex economic structures; they have slightly more room formanoeuvre in a globalized world than smaller countries. Meanwhile, as Tom Klak argues in Chapter 4,the smaller countries are economically vulnerable, not only in terms of traditional sectors such asagriculture, but also as regards new sectors such as garment assembly and offshore finance.

What is true is that the Latin American periphery and semi-periphery are becoming increasinglydifferentiated. Those spaces (whether at the scale of the nation–state, region or city) that arebecoming both more fully inserted into the global economy and more able to achieve a sustainedimprovement in international competitiveness, seem to be operating like new growth centres withinLatin America, attracting capital, technology and labour (if the latter’s mobility is allowed). To whatextent are these new centres linked to the growth in manufacturing or service activity? Analysis of thenature of export growth within Latin American countries still reveals that:

• the export profile of virtually all of the smaller countries of Latin America is dominated byprimary products, much as it was in the 1950s;

• the export profile of the larger, more-industrialized countries of Latin America is characterized bylabour-intensive consumer products or components. Certainly the case of Mexico, and particularlythe type of industrialization experienced in its northern cities, has been well documented in thisrespect (Sklair, 1989).

Nevertheless, both large and small states in Latin America must increasingly pursue national goalsand objectives within globally defined parameters and structures (Watson, 1996). The consequenceof being more fully inserted into the global economy means less and less room for policymanoeuvre. In part, this is because the governments of developing countries are more dependenton the policy approval of the global institutions that ‘supervise’ the world economy (such as the IMF,the WTO and the World Bank) and on the investment decisions of transnational companies that canbe strongly swayed by the verdicts of international institutions.

Latin America in its global context

The fall of the Berlin Wall and the crisis of the Soviet world in the late 1980s have reasserted thedominance of the world capitalist system and emphasized the importance of economic success inestablishing nodes of power in the world. The demise of the bipolar world, which had been based onCold War political ideologies, shifted the emphasis to the variations of political economy within thecapitalist world system. Some have argued that the world is now tripolar (Preston, 1996), centred on:

1 North America, with the USA, in particular, re-emphasizing its global hegemonic power in bothpolitical and economic matters.

2 Japan and the first-generation newly industrializing countries (NICs) of East Asia, such as Taiwanand South Korea. These countries had formerly been closely linked politically to the USA in thebipolar world. This region has emerged as a global economic pole, deriving its power from itssuccess in manufacturing in general, and knowledge-intensive industries in particular.

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3 The European Union, a regional bloc in the process of both enlargement and deepening, and withincreasing links to Eastern Europe and parts of the former Soviet Union.

There are at least two important characteristics of this tripolar world relevant to Latin America.First, transnational corporations from these three poles have identified hinterlands or spheres ofinfluence, where they can subcontract labour-intensive operations and extend the regional marketsfor their products. European corporations have identified Eastern Europe; firms from the key EastAsian NICs have targeted China and the second-generation NICs of East Asia (such as Malaysia andThailand). North American corporations have identified Latin American countries in this respect.

Second, the great majority of direct foreign investment (DFI) during the 1980s and 1990s of thelarge transnational firms originating in the three poles has been in countries of the other two poles(Hirst and Thompson, 1999). This cross-investment has been particularly noticeable for firms from theEast Asian pole (that is, Japanese and South Korean firms investing in North America and Europe);North American firms have tended to concentrate on DFI in Europe, and European firms in NorthAmerica. The important issue for Latin America has been that major corporations from NorthAmerica and the other two poles have often preferred to cross-invest rather than to invest in LatinAmerica. In the two peak years of global investment (1999 and 2000), only 7.8 per cent of theUS$2580 billion of DFI was directed to Latin America. Meanwhile, the North American and WestEuropean poles received 80 per cent of this investment (ECLAC, 2003a: 23).

There are three spaces in Latin America which have maintained significant amounts of DFI: Brazil,Mexico and offshore financial centres. The sheer size of Brazil’s market (a population of 175 million in2002) has attracted a wide variety of investment. Between 2000 and 2002 Brazil received 30.6 percent of the US$235 billion of the DFI channelled into Latin America (ECLAC, 2003a: 32). Most of thiswas directed to the metropolitan areas and cities of Brazil’s south-east region where manufacturingactivity and high-order services are highly concentrated at the national scale. Meanwhile, since Mexiconegotiated to become a member of the North American Free Trade Area (NAFTA) in the early1990s, European, Japanese and North American firms have increased their investment in the country,particularly in the Mexican North. These investments reflect TNCs trying to gain favoured access tothe key US market from a proximate location with relatively low labour costs. In the first three yearsof the twenty-first century, Mexico received 22.4 per cent of Latin American DFI (ECLAC, 2003a: 28).Meanwhile, offshore centres, such as the Cayman Islands, have continued to gain greater proportionsof DFI targeted at finance. Between 2000 and 2002, offshore financial centres received nearly 20 percent of Latin American DFI (ECLAC, 2003a: 13). Overall, then, virtually 75 per cent of Latin AmericanDFI is now invested in south-east Brazil, northern Mexico and a handful of offshore financial centresin the Caribbean.

In the globalizing tripolar world, how then can we interpret the geography of Latin America? Howare its component parts being integrated within the global economy and the global political system?The key political and economic relationship is that with the United States, the dominant player in theglobal economic and political system of the early twenty-first century. There are then importantpolitical and ideological issues at stake. However, it would seem that Latin American countries seethemselves, after the demise of both the Second World and the military dictatorships of LatinAmerica, as more influenced by US policy. There are some variations within Latin America. Somecountries have become closer to the United States partly due to stronger economic links, such asMexico (see above) and Chile (with the signing of a free trade agreement). Other countries (such asArgentina and Venezuela) have had more fluctuating relationships due to a range of ideological andpolitical differences. Brazil has generally attempted to steer a more distant but consistent course in itsrelationship with the USA.

Nevertheless, economic relationships between North America and Latin America are asymmetrical.Exports from Latin American countries to the USA (outside those of Mexico and Brazil) are mainly inthe form of primary products, with manufactured products dominating in imports from the USA.

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Exports to the USA are also lower than US exports to Latin America. The US trade surplus with LatinAmerica is in contrast to its long-standing trade deficit with Japan and East Asia. Nevertheless, theimportance of Latin American trade to the US economy is low – only about 8 per cent of its exportsgo to Latin America and the Caribbean (excluding Mexico). Meanwhile, the three countries of theNorth American Free Trade Area (the USA, Canada, Mexico) are the dominant destinations forexports from the Central American and Andean countries – nearly 50 per cent of their exports goto NAFTA. Only the export trade of Mercosur countries (Brazil, Argentina, Paraguay, Uruguay) is notdominated by NAFTA.

The trade of goods and services and the movement of capital are very mobile between LatinAmerica and the United States. However, this is much less true for labour. In a truly globalized andmarket-oriented world, labour should also be free to move as labour represents a key factor ofproduction – and neoliberal economic models are supposedly based on the free flow of factors ofproduction between countries. Indeed, international business seems to depend on executives,professionals and workers migrating from one part of the world to another. However, such labourmobility is restricted to travel within the core economies or to travel by people from core economiesto developing countries. For labour in Latin America, there is little opportunity for legal migration tocore economies unless the migrant is professional, highly skilled or owns considerable capital. Illegalmigration is an option for unskilled labour, as with migration of Mexicans and Central Americans to theUSA, but this produces another set of problems and insecurities (see Chapter 10).

GLOBALIZATION AND THE CONTEMPORARY RELEVANCE OFSTRUCTURALISM AND DEPENDENCY THEORIESAs authors, we have been interested in exploring the continued relevance of theories ofdevelopment that have emerged from Latin America (Kay and Gwynne, 2000). We have argued thatLatin American theories of structuralism and dependency would seem to have more relevance in aperiod in which the forces behind global capitalism have been less restrained than when thesetheories were originally formulated. However, few commentators have attempted to go back to thesetheories and relate them to development issues raised by globalization (notable exceptions areMunck, 1999; Frank 1991; and dos Santos, 2002a). This seems a serious omission given that thesetheories saw the problems of under-development and development within a global context. Thefollowing section highlights some themes in which these theories would appear still to have relevance.

Increasing asymmetry and the role of the state

A central vision of structuralism was its conceptualization of the international system as beingconstituted by asymmetric centre–periphery relations. Similarly, dependency theory took as itsstarting point the world system rooting under-development within the unequal relationships withinit. The economic divide and income gap between the centre or developed countries and theperiphery or under-developed countries have widened continually, especially during the debt andadjustment decade of the 1980s, thereby vindicating the predictions of structuralist and dependencytheories as opposed to the neoclassical and neoliberal theories which foresaw convergence.

Nevertheless, within the peripheral or dependent countries, a few have succeeded in achievingremarkable and consistent high rates of economic growth in the past three or four decades, as well asimprovements in equity. This is the case of the first generation of East Asian NICs such as South Korea,Taiwan, Hong Kong and Singapore. In particular, the larger countries of South Korea and Taiwan,through their spectacular export-oriented industrialization success, have acquired semi-peripheralstatus and may be considered as core economies (Gwynne et al., 2003). In this sense, the structuralistand ‘associated-dependent development’ view of Cardoso (1973) is more relevant as compared withFrank’s (1967) ‘development of under-development’ version of dependency, which is at odds with thedevelopment achieved by these countries (see Kay, 1989, for a full exposition of these theories).

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It has to be stressed that such a dramatic transformation in East Asia was possible due to the centralrole played by a national developmentalist state with a forceful industrial policy (imposed aftersweeping land reform) in the pursuit of international competitiveness and growth (Gwynne, 1990; Kay,2002a). This has confirmed the position of structuralists and dependentistas who pointed to theimportance of the state in promoting development. But the East Asian model has shown that this stateintervention has to be selective and temporary, ensuring that firms acquire internationalcompetitiveness within a specified period.

Contrary to initial claims by neoliberals, the success of the NICs of East Asia was state-inducedrather than market-driven, as expressed so well by Wade’s (1990) phrase of ‘governing the market’.The World Bank has tried to accommodate some of the many critics of their initial interpretations ofthe NICs with their ‘East Asian miracle’ study (World Bank, 1993) by recognizing the influence of thestate. But this has in turn spawned further criticisms as the basic argument of the World Bank has notchanged as they continue to argue that the less state intervention the better. In our view, the role ofthe state in peripheral economies is crucial so as to ensure competitiveness and guard against theincreasing vulnerability of each country in a globalizing world economy.

Financial vulnerability and dependence

The Latin American debt crisis of the 1980s and its aftermath can be seen as a further illustration ofthe contemporary relevance of dependency theory. With the vast increase in capital mobility and itsavailability in the world economy since the 1970s (see Gwynne et al., 2003: 120), the economies ofdeveloping countries have become more and more dependent on foreign capital. This greatlyincreased their exposure and vulnerability to changes in world capital markets and substantiallyreduced their room for policy manoeuvre. In the aftermath of the debt crisis the internationalfinancial institutions were by and large able to dictate economic and social policies to the indebtedcountries, especially the weaker and smaller economies through structural adjustment programmes(SAPs). While Brazil and Mexico were able to negotiate better terms with the World Bank andforeign creditors, Bolivia and other small countries were unable to do so.

Since the debt crisis, there have been significant fluctuations in the capital flows to Latin America. Inshort, they have experienced both feast and famine. This is extraordinary given that most countrieshave followed the Washington consensus (see below) and liberalized financial markets in order toattract international capital. Net flows (the balance between outflows and inflows) of private capitalinto Latin America averaged only US$8.2 billion yearly between 1982 and 1989 in the aftermath ofthe debt crisis. This well-documented famine in capital inflows was followed by the inflow of privatecapital rising steadily through the 1990s. By the end of the 1990s they averaged virtually US$110billion a year (World Bank, 2001a); virtually 75 per cent of these flows in 1998 and 1999 came fromdirect foreign investment. Subsequently net flows have declined substantially, although the significanceof direct foreign investment in terms of the overall inflow of capital has remained (ECLAC, 2003a: 13).

What are the explanations for this volatility in capital flows? The impact of the financial crises insome key Latin American countries on the behaviour of international investors provides one reason.The Brazilian devaluation of January 1999, the first Argentine crisis of October 2000 and the secondand prolonged Argentine crisis that started in late 2001 are cases in point. It could be argued thatinternational investors have shifted from risk-taking strategies in the 1990s to risk-aversion strategiesin the early part of the twenty-first century. There is also the problem of contagion. When a financialcrisis breaks out in one Latin American country, international investors not only withdraw funds fromthat country but also from its neighbours (even if there is no apparent financial problem in thoseneighbouring countries). Bankers argue that contagion is partly linked to liquidity constraints – whenthe price of a particular instrument falls, they are obliged to sell other types of holdings in order torestore their own liquidity. Furthermore, bankers not only use similar risk assessment systems but alsoevaluate the performance of investments over short periods of time. These factors exacerbate theeffects of contagion both within and between Latin American financial markets.

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The debt crisis and its aftermath demonstrated the impacts of the volatility of capital flows,particularly those from short-term credit. Meanwhile, in the 1990s, the rise and fall of portfolioinvestment added a further volatile component. Such volatility can have serious implications onnational economies through their impacts on exchange rates. For example, when net capital inflowsgrow, the value of the domestic Latin American currency also rises, creating an overvalued exchangerate (which in turn has a negative effect on exports). However, when net capital inflows decline(sometimes leading to net capital outflows), the value of the domestic Latin American currency candrop precipitously as the domestic currency is sold by international investors. Such a roller-coasterpattern tends to deepen recessions and require painful economic adjustments (Griffith-Jones, 1998).

It has been argued that Latin American countries should adopt a fixed exchange rate in order toreduce the impacts of such volatility. However, the extreme financial disasters that followed the endingof the Chilean fixed exchange rate in June 1981 and the Argentine fixed exchange rate in November2001 (after nearly ten years of operation) demonstrate that this is a problematic conclusion. It couldbe argued that Brazil has weathered a number of financial crises in the past decade due to its policyof a floating exchange rate. There has been a high volatility in capital flows and exchange rates but afinancial crash (as in Argentina after 2001) has been avoided.

Nevertheless, this shows the heightened vulnerability to and dependence of Latin Americancountries on the sharp swings in capital flows. The failure to expand national savings through the 1990sand early twenty-first century has increased this vulnerability. The only point of optimism is that sincethe late 1990s, direct foreign investment has become the main component of net inward flows toLatin America (ECLAC, 2002a: 62). Because these flows are linked to physical investments, theirvolatility is less than those of portfolio investment and short-term capital flows. Overall, though, mostof Latin America remains highly dependent on international financial markets, which in turn impose aseries of constraints on Latin American governments. The populist Brazilian President, Luis Inácio ‘Lula’da Silva, was quick to recognize this not only during his presidential campaign of 2002 but also duringhis early period of office.

Unequal exchange

Recent studies have confirmed the deterioration of the periphery’s terms of trade in relation to thatof the core economies (ECLAC, 2002a: 38), a fact first highlighted by structuralism and incorporatedinto dependency’s unequal exchange theory. This does not necessarily mean that foreign exchangeearnings have declined – often the case has been the contrary due to the continued rise in thevolume of commodity exports from the periphery. But it does mean that a substantial part of theperiphery’s economic surplus is transferred to the core economies, further strengthening the powerof the core’s capitalist class.

The lesson continues to be that Latin American countries should shift their export structure tohigher value-added commodities and services rather than continuing to export basic primarycommodities which can lead to resource depletion and negative environmental consequences. Itshould not be forgotten that structuralist theorists were among the first to argue that Latin Americangovernments should encourage industrial exports which they saw as the next phase of the region’sindustrialization process (Kay, 1989: 40). However, governments (apart from Brazil and Mexico) failedto act, or did so too timidly. Some countries that tried to diversify into manufacturing exports werehampered in their efforts by protectionist measures from the US government.

Technological dependence

Dependency writers put particular emphasis on technological dependence. Structuralists hadpointed to the weakness of the Latin American ISI process in the 1960s and 1970s (Jenkins, 1977;Gwynne, 1985) due to the difficulties it was experiencing in moving from the consumer goodsindustries to the capital goods industries, which are the source of some of the new technologies. Thelarger countries, such as Brazil, had managed to develop a substantial intermediate goods industrial

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sector, for example, the steel and chemical industries (Baer, 1969). Despite the increasing presenceof transnational corporations (TNCs) in Latin America, there has been little technological diffusion,which has confirmed dependency theory’s critique of TNCs. Government policy has failed todevelop an indigenous technological capacity in Latin America and could have acted more decisivelyto ensure that TNCs made a contribution to this process.

Nevertheless, Brazil and to some extent Mexico have acquired some competitive technologicalcapacity largely as a consequence of a deliberate industrial policy (Gereffi, 1994). With the newbiotechnology, electronics and communications revolution the more advanced economies have gaineda further competitive advantage in the generation of new technological capabilities over LatinAmerican countries. This has increased further the latter’s technological dependence (Castells andLaserna, 1995). Through the remittances of royalties, profits and interest payments Latin Americancountries continue to transfer a significant net economic surplus to the core economies in general andthe United States in particular. Such surplus transfers arising from technology payments, foreigninvestment and the unequal exchange in foreign trade mean a significant reduction in funds whichcould have been used for domestic investment within Latin America.

Globalization: constraints and opportunities

Neither structuralism nor dependency theory foresaw the rapid growth of world trade in the post-war period. This has acquired a new dimension in the present phase of globalization with its timeand space compression, and the more recent impetus to liberalization of the world economy withthe reduction of barriers to the mobility of goods, services and capital across frontiers, therebycreating new opportunities for international trade and foreign investment.

These globalization forces have certainly reduced even further the room for manoeuvre of nationaldevelopment policies as compared with the ISI period, thereby confirming one of the key tenets ofdependency theory. Today, international market forces rule with even greater strength than in the pastand national states have to take even greater consideration of these global market forces than before,as otherwise they can be faced with large withdrawals of foreign capital (as in the case of Mexico andArgentina during the 1994–95 and 2001–3 financial crises, respectively), the wrath of the internationalfinancial institutions and difficulties with international firms and investors.

Meanwhile, the reinforcing processes of globalization and liberalization have opened up new exportopportunities for Latin American economies and have attracted increasing amounts of foreigninvestment to the region. In some Latin American countries the export sector has been able to give anew dynamism to the national economy. This dynamic capacity of the world trade system has beenunder-estimated by structuralists and seen as having negative consequences by some dependencywriters. While some of these misgivings are justified, it has detracted from focusing more firmly on thekey issue of the domestic policies pursued by the state and the class and other social forces whichshape those policies, as well as the internal market forces in the periphery.

GLOBALIZATION IN THE NEOLIBERAL ERAIn the years since the first edition of this book, the limits of the neoliberal process of globalizationhave become much more evident. In many Latin American countries, opposition to the negativeeffects of the neoliberal policies has become more vocal and grown in strength. The most dramaticsituation has been in Argentina, which defaulted on its debt in late 2001, unleashing a major socialand political crisis after exposing the fragility of the economy (Tedesco and Dinerstein, 2003).Hundreds of thousands of protesters took to the streets not only in Buenos Aires but throughoutmost major cities of Argentina, clamouring for a change in economic policy as well as for a renewalof the country’s political leadership (Burbach, 2002). There was a succession of five presidents in afew weeks; all were unable to deal with the spontaneous political mobilizations among the workingand middle classes and which took place largely outside the traditional political system. The economy

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plummeted by 20 per cent of its GNP, unemployment rose to over 20 per cent of the labour forceand poverty shot up to include about half of the total population. The country’s fall from its premierposition within Latin America could not have been more painful and demoralizing. Althoughneoliberal policies might not be fully responsible for the crisis, they were certainly a major factor inthe country’s downfall. For several years the IMF had shored up the Argentinean economy withgenerous loans, exacerbating the malaise and postponing the implementation of necessarycorrective measures. At the time of writing, the country, which the IMF and neoliberals had heraldedas one of the model countries, still has not found a way out of the crisis, although the country seemsto have left the worst behind.

Definitions, economic characteristics and variationsThe use of the term neoliberal has numerous problems in terms of its ideological connotations. Forexample, in international policy circles, the term Washington consensus (Williamson, 1990) tends tobe used, indicating virtually the same package of reforms. In their original formulations, neoliberalreforms have normally emphasized economic reforms as opposed to social policies or politicalreform (Kay, 1993). Hence, perhaps, some writers have talked about ‘the new economic model’(Bulmer-Thomas, 1996b). The economic package of reforms has focused on at least five main areas:fiscal management, macro-economic stability, privatization of state firms, labour markets and tradeliberalization.

As governments became committed to neoliberal policies during the 1990s, they tended to stressthe political and economic advantages of creating a more technical, strict and transparent approachto macro-economic management in order to improve the running of the national economy. Thus,fiscal reform has emphasized the need for the reduction of budget deficits, the creation of strongbudget and tax offices and, even, an independent central bank (as in Chile in 1989). In countries suchas Argentina and Peru, Treasury ministers used this policy in order to justify the slashing of publicexpenditure, particularly in economic sectors – but also in social areas. However, as neoliberalpolicies evolved during the 1990s, the need to increase public spending in social areas, such aseducation, health and welfare, became more of a priority, as in Chile under the Concertacióngovernment.

One key concern of the IMF in relation to Latin America was that of high inflation. The IMF stronglyemphasized policies that would reduce inflation and subsequently maintain price stability. It highlightedthe importance of the relationship between the growth of the money supply and inflation. Highinflation would discourage investment and therefore have a negative impact on growth. Thus, moneysupply became the crucial variable for governments to measure and regulate. This meant reducing thefiscal deficit as this was one of the main sources of monetary expansion. Strict control of the moneysupply normally led to high interest rates, particularly in the early stages of reform, again dampeningdown investment.

The reduction in the powers of the state in the neoliberal model was further justified throughprivatization. In some countries, most notably Argentina, policies of privatization became intimatelylinked to those of fiscal reform. Privatization had the objective of eliminating supposedly inefficient andinsolvent state enterprises, thereby reducing government expenditure. Furthermore, the sale of thesefirms to the private sector was supposed to boost income for government during economicrestructuring, when government finances were at their most vulnerable. In Argentina, the funds fromprivatization tended to be classified as government income – rather than being saved in a StabilizationFund for future use. When there were no more state enterprises to privatize, the Argentine Treasurythus faced two immediate problems – a significant drop in annual income and the lack of any savingsto draw on from a Stabilization Fund. Privatization also introduced the need to create strongregulatory bodies so that competition would be ensured in areas of potential monopoly (such aselectricity production and distribution), and that the private sector companies would actually workmore efficiently than the companies from the former public sector.

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Another key neoliberal reform was that of restructuring labour markets. New wage andemployment bargaining systems were introduced, giving more power to employers and less to tradeunions. New employment laws were passed in order to make labour markets more flexible and toreduce the social security contributions and responsibilities of employers. Overall, these reforms haverestructured labour markets in favour of employers, as they have gained a more flexible system ofhiring and firing and lower wage and non-wage costs (see Chapters 11 and 12).

Private sector employers were seen as the key targets of trade reform. Trade reforms wereconcerned with making Latin American economies more outward-looking and private sector firmskeener on becoming more competitive in the international market place. Trade liberalizationemphasized the need to promote exports (partly through the use of more effective exchange rates)and to reduce tariffs on imports. Such reform aimed to create more international competition forfirms so that they could change their focus from producing for just the home market to supplyingglobal markets. At the same time, governments were supposed to avoid direct interventions in theeconomy (such as through industrial policy) and to encourage the inward flow of direct foreigninvestment from TNCs.

These were the core of the neoliberal reforms that were put into place to varying degrees in LatinAmerican countries (Edwards, 1995; Thorp, 1998). These transformations in political economy werenot similar in all countries. The commitment to and the extent of neoliberal reform in Latin Americavaried substantially in the 1990s. There was a difference between Chile (with over two decades ofreform and a shift from authoritarian to democratic governance), Argentina and Peru (late butcommitted converts) and Venezuela (where conversion to neoliberal reform between 1989 and 1992was short-lived and was closely linked to corruption) (Stallings and Peres, 2000). Finally, the Brazilianconversion to a form of neoliberalism under President Cardoso in the 1990s indicated theconsolidation of the neoliberal paradigm on the continent (Cammack, 1997). Thus, overall the shift inpolicy package has been distinctive. Why have these reforms become so widespread?

Global factors

Why has neoliberalism become the dominant paradigm in Latin America? There are perhaps tworelevant geographical scales upon which to attempt an answer : the global and Latin American. At theglobal scale, the package of economic reforms was strongly supported by international institutionssuch as the World Bank and the IMF – hence the relevance of the label that the consensus wasforged in Washington (Williamson, 1990, 1993). These international institutions gave strong externalsupport for the adoption of a neoliberal framework. The technocracies of these institutionscombined with networks of economic and political advisers throughout Latin America to activelypush for reform, particularly in the wake of the debt crisis.

The neoliberal model had surprising converts in other parts of the world. The late 1980s and early1990s saw the collapse of the Soviet system and the very different economic model of state directionand central planning. The introduction of market reforms in Eastern Europe and the countries of theformer Soviet Union, and the apparent vigour with which governments and the populace shifted fromplanned to market economies gave neoliberal reform considerable impetus in Latin America (Stiglitz,2002). Latin America could also look to the economic success of certain East Asian countries, whichhad embarked on outward-oriented policies since the 1960s (though with strong state involvement),thus justifying more export-oriented strategies for Latin American countries (Gereffi and Wyman,1990; Jenkins, 1991).

Continental factors

At the Latin American scale, there were a number of relevant historical and comparative factors. Inthe 1980s, neoliberal policies provided a framework to extricate Latin American economies fromthe severe debt crisis of that decade, in which access to external finance was suddenly curtailed (seeChapter 3). In many countries, the adoption of a new paradigm also constituted a wider response to

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the perceived economic failure of the previous political economy paradigm of inward orientation(Kay, 1989; Dietz, 1995). The intellectual justification of inward orientation came from structuralismand dependency theories (Kay and Gwynne, 2000).

The decade of the 1990s witnessed big advances in the globalization of the Latin Americaneconomy, with capital flows, trade and investment increasing significantly (ECLAC, 2002a). The inward-oriented model was effectively cutting Latin American economies off from the advantages (andproblems) of being more fully inserted into a globalizing world economy. Neoliberal policies providedthe framework for Latin American economies to increase trade with other world regions and increaseinward investment and capital inflows from firms and banks in those regions.

Furthermore, there is the question of the link between neoliberal reform and governance. Duringthe late 1980s and 1990s, the link between neoliberal policies and democratic governance hasbecome particularly strong in Latin America (Haggard and Kaufman, 1995) – particularly throughtransitions to democracy in former authoritarian governments (see Chapter 7). There have beensignificant shifts from authoritarian to democratic governance in all Southern Cone countries andBrazil during the 1980s and 1990s. In all cases there has either been a shift towards or maintenance ofneoliberal economic policies in the aftermath of the democratic transition (see Chapter 8). Shifts toneoliberal reform did not always come immediately. In the mid- to late 1980s, heterodox stabilizationplans were attempted in Argentina with the Plan Austral and the Plan Cruzado in Brazil. However,these plans met with failure and thus allowed the neoliberal paradigm to gain further influence. Itcould be argued that the failure of these stabilization plans helped to persuade the population that thebitter pill had to be swallowed. There was no soft option to the shock treatment in order to stop thetrend of rampant inflation.

Political parties that have come to power after the demise of the authoritarian governments thatinstigated neoliberal policies have subsequently maintained them (as in the case of the ‘Concertación’governments in Chile since 1990). These parties have argued that democratic governance allows forand encourages greater public participation and representation in the policy process.

SOCIAL BASES OF NEOLIBERALISMIn order to consider the present nature of neoliberalism and its future sustainability, it is importantto assess how firm the bases of consensus for this paradigm are and what are the challenges to thisconsensus. Has any social consensus been achieved in order to support the neoliberal order, or is itjust a technocratic consensus of government circles and their advisers (see Chapter 7)?

The technocratic and economic base

It has been argued that the growth of technocratic support for the neoliberal model emerged as areaction to the deficiencies of the previous inward-oriented paradigm based on protected marketsand industrialization. Economic growth based on ISI had encountered both economic and politicaldifficulties (Gwynne, 1985). The technocratic argument was that due to the power of the state inthe ISI model, opportunities for private investment were crowded out, fiscal budgets werecharacterized by permanent and large deficits, inflation tended to be high and the firms engaged inISI production (whether public or private) had become inefficient and uncompetitive internationally.

These economic difficulties were compounded by the political. Industrial firms continued todemand higher rates of protection in order to survive, which discriminated against exporters andagricultural producers. In some countries, the emergence of a substantial industrial base had given riseto an industrial working class that was gaining in political significance. Meanwhile, industrial firmsemphasized the high social contributions that they were burdened with and complained about theexpensive nature of the rudimentary welfare states that were being created.

The technocratic forces that came to favour neoliberal strategies were not only defined by whatthey were against but also by what they were for. The theoretical attraction of free market models,

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a smaller state and the importance of achieving macro-economic stability were some of the mainthemes (Gwynne, 1990). The great majority of technocrats had been research students in theeconomics and business schools of US universities (Centeno and Silva, 1998). Before the debt crisis,such technocrats had presented neoliberal policy alternatives but had been unable to commandsufficient political support for their implementation. After the debt crisis, this changed dramatically andthey became the main agents of economic change not only through direct political appointments(such as Treasury ministers) but also through the range of advisers and civil servants required bygovernment (see Chapter 8). They became part of an international network of advisers, all broadlysympathetic to market-oriented solutions, macro-economic reform and outward orientation as a wayout of the debt crisis.

In spite of delays, the evolution of this new government technocracy has occurred in most LatinAmerican countries. In Argentina and Peru it was delayed until the early 1990s, in Brazil until the mid-1990s. In these countries, the technocratic elements supporting more market-oriented policies had tostruggle for the policies to be put in place – against the continuation of both populist and inward-oriented policies. Indeed, in Peru, it should be remembered that Fujimori actually came to power onthe back of a populist agenda in the 1990 election; it was only after extensive consultations withinfluential international institutions and networks of Latin American (and Peruvian) technocrats thathe was converted (and forcefully) to the neoliberal agenda. Thus, technocrats became influentialagents in the installation of the new paradigm.

There was an important distinction as to whether the technocratic force pushing the neoliberalagenda was linked to democratic or authoritarian governments. Within democratic structures,government ministers and technocrats needed to explain and justify the concepts behind radicalpolicy changes to a wide public. Within authoritarian governments, such changes were imposed fromabove, often with little justification or consultation. Technocrats within authoritarian governmentstended to become more dogmatic as a result, able to impose theoretically consistent policies butunwilling to listen and react to the many who suffered from the fundamental restructuring of theeconomy. Meanwhile, technocrats within democratic governments have often been both less rigidlyideological in their policy formulation and more willing to adapt policy to political realities (seeChapter 8).

The social and political base

It is worth emphasizing that the neoliberal model had little social and political base in the earlystages of its evolution – apart perhaps from a limited number of entrepreneurs associated withexport industries. In general, entrepreneurs in the protected sectors of agriculture, finance andindustry were not supportive of more outward-oriented policies as this would bring increasedcompetition and would change their political influence in relatively closed markets. How did thesocial and political base develop?

In many countries, it developed as a response to the impacts of the debt crisis and the need to shiftpower to export-producing sectors and, subsequently, to foreign investors – both in terms of financeand productive capital. During the 1990s, there was a surprising extension of the political base ascentre-left coalitions and governments (as in Chile and Brazil, for example) were converted to moresocially responsible modes of neoliberal economic reform (Demmers et al., 2001). A range of socialdemocratic parties adopted the Washington consensus (Bresser Pereira, 1996), although theyemphasized the need for social policies and welfare programmes to smooth over the hardships of thetransition and the restructuring process. The expansion of the political base supporting neoliberalreform gave it a wider sense of social support and legitimacy during the 1990s.

In the early twenty-first century, this range of support has dwindled, particularly in those countriesthat have experienced financial crises (most notably Argentina). New centre-left parties that havebeen elected into government, such as the Workers Party in Brazil, have targeted policies that focuson reducing the dramatic inequalities inherent in Latin American societies (such as Lula’s campaign

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against hunger in Brazil in 2003) and have kept their broad adherence to the technocratic elements ofthe neoliberal economic agenda more in the background. The achievement of macro-economicstability that helped the neoliberal programme generate wider legitimacy during the 1990s has thusbeen interpreted as a necessary building block for governments who aim nevertheless to target moredirectly the huge social problems that confront them (Ocampo and Franco, 2000).

CONCLUSION: A PARADIGM SHIFT IN THEORY AND POLICYLatin America has thus experienced a paradigm shift in both theory and policy. Two immediateconclusions can be mentioned in this context. First, there is the comparison between the theoreticalsources for the two recent paradigms; whereas important elements of structuralism anddependency originated from within Latin America, the present neoliberal paradigm has been drivenmore by external sources. Second, the inward-oriented paradigm had been the dominant one of thetwentieth century (stretching from the 1930s to the 1980s); this may lead one to see the newneoliberal paradigm as the one that will be more representative of the twenty-first century. We willreturn to this issue in Chapter 13.

This has opened a new chapter in Latin America’s evolution, particularly in terms of forming newrelations with the world economy. It can be termed a paradigmatic change and related historically toLatin America’s insertion into the global economy of the nineteenth century. While Latin America’seconomies at that time could rely on the comparative advantages of its natural resources, theimportant issue today is how competitive advantages can be generated and created – at the level ofboth the nation–state and the firm. This requires new conceptualizations. Structuralism under-estimated the key importance of competitiveness of the world market in transforming economies andsocieties. Structuralism thought that Latin American economies could shield themselves from globalforces and that they could continue to rely on comparative advantages in minerals and basic primaryproducts while promoting inward-oriented industrialization.

In contrast, the ‘pure’ form of the neoliberal model believes in completely opening up nationaleconomies to global markets without state mediation. It therefore seems willing to sacrificeuncompetitive sectors (most notably in industry) to foreign competition. The corollary for this hasbeen a return to relying on natural resource advantages and what has come to be known as non-traditional exports (see Chapter 12). Some key leaders in Latin America (such as Cardoso in Brazil)and neostructuralist thinkers (see Chapter 13) have seen the need for the state to bring about thenecessary institutional changes for the Latin American economies to build up competitive advantages.The need to be part of the world market is now fully accepted, but it is also identified that there is acrucial role for the state in (for example) developing human resources. This can be seen as aninterpretation of the East Asian model of economic success based on industrial competitiveness andits application to Latin America (Fajnzylber, 1990a, 1990b; Gwynne, 1990).

Such social reconstruction can be very painful, affecting many layers of society – the industrialworking classes (as industrial plants are closed or modernized), the state-employed middle classes (asgovernments privatize and reduce employment in the public services) and uncompetitive (ofteninward-oriented) sectors of the capitalist class. In the main, this process has been driven by highlycentralized national governments and has often operated in the form of a state-driven socialrestructuring. This has occurred in authoritarian governments, most notably that of the Pinochetdictatorship in Chile (1973–90). However, democratically elected governments also initiated market-orientated reforms and even managed to be re-elected on such a platform (Menem in Argentina,Fujimori in Peru and Cardoso in Brazil). It could be argued that such governments have requiredstrong presidential systems in order to succeed.

The model of state-driven social restructuring has responded to the exigencies of the global marketand the pulling down of the economic barriers between the national economy and the world market.In a way, it has represented a repressive approach to the demands of the social losers of the new

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economic model. This social restructuring has had varying impacts on different social groups and hasvaried from country to country. On the whole, less protection has been given to certain sectors (suchas the industrial working class, the peasantry and indigenous groups) than to others (such as theentrepreneurial middle class and the new financial groups that have emerged). The capitalist class hasbeen more able to readjust to the changing circumstances and realities of the international marketand, as a result, has not only expanded in size and influence but has also become the key nationalwinner of the paradigmatic shift. Ultimately, it is transnational capital that has reaped the benefits andconsolidated its global power with the neoliberal turn.

FURTHER READING

Buxton, J. and Phillips, N. (eds) 1999 Developments in Latin American political economy: state,markets and actors. Manchester University Press, Manchester, and St. Martin’s Press, New York.Focuses on the interaction of the state and the market as well as on traditional and emergingactors such as the military, guerrilla movements, NGOs and women.

Chase, J. (ed.) 2002 The spaces of neoliberalism: land, place and family in Latin America. KumarianPress, Bloomfield, CT. Explores the various ways that households, communities, women and ethnicgroups deal with market relations and state policies in everyday life.

Green, D. 2003 Silent revolution: the rise of market economics in Latin America. Second edn., LatinAmerica Bureau, London, and Monthly Review Press, New York. A popular and well-written criticalanalysis of Latin America’s neoliberal economic reforms.

Gwynne, R. N., Klak, T. and Shaw, D. J. B. 2003 Alternative capitalisms: geographies of emergingregions. Arnold, London. Examines the effects of globalization and economic and politicaltransformation in Latin America and the Caribbean, and compares them with those occurring inEast Central Europe, the former Soviet Union and East Asia. In this sense, it provides a uniqueapproach in terms of books published in both geography and the social sciences.

Kay, C. 1989 Latin American theories of development and underdevelopment. Routledge, London. Thisstill provides the most comprehensive and systematic introduction to Latin American theories ofdevelopment. The origins of structuralist and dependency theories are scrutinized alongside thoseof marginality and internal colonialism.

Kirby, P. 2003 Introduction to Latin America: twenty-first century challenges. London and ThousandOaks, CA: Sage Publications. A comprehensive, accessible and engaging overview of the economic,social and political forces shaping contemporary Latin America.

Munck, R. 2003 Contemporary Latin America. Houndmills, Basingstoke and New York: PalgraveMacmillan. A lively, concise and readable text that provides a general introduction to the region.

Swanson, P. (ed.) 2003 The companion to Latin American studies. Arnold, London, and OxfordUniversity Press, New York. An original companion to literary and cultural studies that situates theregion in its historical, social, political, literary and cultural context.

WEBSITES

Consejo Latinoamericano de Ciencias Sociales, http://www.clacso.org/, is the site of theLatin American Council for the Social Sciences with links to member research institutionsthroughout the region. Many of its books can be downloaded.

Economic Commission for Latin and the Caribbean, http://www.eclac.cl/, probably has themost economic and social data on Latin America that is available from its publications, particularly in

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http://www.clacso.org/

http://www.eclac.cl/

its annual Statistical Yearbook for Latin America and the Caribbean. Most of its recent publications canbe downloaded.

Facultad Latinoamericana de Ciencias Sociales, http://www.flacso.org/, is the site of theLatin American Faculty of Social Sciences which has research centres in various Latin Americancountries and offers postgraduate study programmes.

Inter-American Development Bank, http://www.iadb.org/, has data and analyses on mainlyeconomic affairs.

Latin American Network Information Center, http://lanic.utexas.edu/, perhaps the richestInternet site on Latin America for information and analysis on a great variety of topics, and links toother useful websites. A good starting point for those interested in Latin American studies.

Latin American Studies Association, http://lasa.international.pitt.edu/, the website of thelargest association of Latin Americanists in the world.

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http://www.flacso.org/

http://www.iadb.org/

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INTRODUCTIONThis chapter will concentrate on contemporary issues of modernity and identity in Latin America sincethe 1970s. However, it must be pointed out that since the beginning of the nineteenth century modernityhas been presented in Latin America as an alternative to identity, as much by those who are suspiciousof it as by those who badly wanted it at all cost. In part, this has been the result of essentialist conceptionsof cultural identity which freeze its contents and do not consider real cultural change. If identity isconsidered to have been fixed during colonial times in a traditional and deeply religious mould once andfor all, then any modernization started after independence could only be achieved at its expense.

But this opposition between modernity and identity is also a consequence of the fact thatmodernity in Latin America has been often conceived as a process intrinsically connected with thetrajectory of Western societies (Europe and the United States) in which a particular set of institutionsallowed the development of a market economy, a democratic polity and an autonomous scientificknowledge. Instead of conceiving of modernity as a way of dealing with basic problematics of social lifewhich seek autonomy in the political and epistemic fields and rational control in order to satisfy basicneeds, it confuses the particular institutional answer of Western societies with a general and necessaryfeature of modernity (Wagner, 2001a, 2001b).

This leads to an over-simplified conception of modernity which totally conflates its differenttrajectories in a single Western model which has to be accepted by all. This means that it has to bebrought from outside into Latin America, thus seeming to be totally alien to it. Hence it appears toexist in the region in conflict with its true identity. Some oppose it for this reason and others want toimpose it in spite of this reason. The former believe that modernity cannot succeed in Latin America;the latter believe that Latin America’s identity has to be dismantled. Both recognize the existence of aconflict which has to be resolved in favour of one or the other. Modernity and identity are conceivedas absolute phenomena with opposite roots.

Contrary to these positions which present modernity and identity in Latin America as mutuallyexcluding phenomena, I would like to show their continuity and interconnection. The same historicalprocess of identity construction has been, from independence onwards, a process of construction ofmodernity. It is true that modernity was born in Europe, but Europe does not monopolize all itstrajectory (Wagner, 1994; Therborn, 1995). Precisely because the search for autonomy and rationalcontrol can lead to alternative institutional solutions, modernity has been actively and not passivelyincorporated in Latin America. There are important institutional differences with Europe and theUnited States, of that there is no doubt. But this does not mean that Latin America has totally failed tomodernize. Latin America has a specific way of being in modernity. Latin American modernity is notexactly the same as European or North American modernity; it has its own trajectory. But because ithas frequently tried to copy North American or European institutional models, it is neither purelyendogenous nor entirely imposed from without, some call it subordinate or peripheral (Parker, 1993:81; Brunner, 1994: 144).

2Modernity and identity: cultural change in Latin America

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Elsewhere I have argued (Larraín, 2000) that within five distinct stages, Latin America has beensimultaneously modernizing and constructing its cultural identity, and yet these two phenomena, inspite of being intimately interconnected, have been persistently perceived as opposing alternatives.Whether identity or modernity are favoured is not entirely a random process. Theories that privilegemodernity tend to crop up and are more prevalent in times of accelerated development andeconomic expansion. Theories that emphasize identity have emerged with greater force in periods ofcrisis in which economic growth and general welfare stall or decrease.

BOX 2.1 Stages of the Latin American trajectory to modernity (source:Larraín, 2000: 7–8, 22–4)

In Latin America’s independent history there have been roughly five alternating stages (to which asixth could be added):

1. from independence to 1900: a period of expansion: oligarchic modernization;2. from 1900 to 1945: a period of crisis: the end of oligarchic domination and the emergence of

populism;3. from 1945 to 1970: a period of expansion after the Second World War : developmentalism;4. from 1970 to 1990: a period of crisis: dictatorships and the ‘lost decade of the 1980s’;5. from 1990 to 2000: a period of expansion: neoliberalism;6. from 2000: still within a neoliberal orientation, a period of crisis sets in. The consequences of it

are still hard to assess (see Chapter 13).

The criteria for periodization are complex and try to link four main factors: (1) economic trends; (2)cultural developments; (3) political changes; and (4) key international events. The assumption is madethat when there are important changes occurring in all these variables which more or less coincide ata particular time, then a new stage appears. But obviously there is hardly ever a perfect match andchanges occurring in certain variables may be displaced in time in relation to those occurring in others.For example, if we focus on the second period entitled ‘the end of oligarchic domination’, from aneconomic and international point of view it seems to start in 1914, from a cultural point of view it hasalready been present since 1900 and in the sphere of politics it seems to start in the 1920s in somecountries and in the 1930s in others. Hence the dates 1900–45 are only a rough approximation.Nevertheless, at the heart of the stage, the changes in all four factors are deeply interrelated. The stagewhich appears to have started in 2000, mainly because of the economic and political crises in LatinAmerica, will not be dealt with since it is still very hard fully to anticipate its effects and to determineits main characteristics.

I shall very briefly review the first three stages in order to concentrate on the last two (1970–2000).Yet before doing this it is perhaps useful to be more explicit about the connection between thesestages and the process of globalization. If one of the effects of globalization is the diminishing powerof local circumstances in the life of whole regions so that they are increasingly affected by whathappens elsewhere, then these stages show the deep impact of certain international events on LatinAmerica. The process of independence at the beginning of the nineteenth century was greatlyinfluenced by the Napoleonic invasion of Spain and its main ideas were drawn from the FrenchRevolution, British liberalism and French positivism.

The second stage of crisis reflected the impact of the First World War, the Russian Revolution andthe Great Depression of the 1930s. The expansion of North American and European capitalism afterthe Second World War brought about the third stage of development and modernization in LatinAmerica. The world recession, the end of the Fordist period and the rise in oil prices in the 1970s

affected the fourth stage of negative growth and reinforced the prevailing pattern of dictatorships. Theboom of world capitalism and the overwhelming tide of neoliberalism in the 1990s, deeply affectedthe fifth stage of Latin American modernization.

THE LATIN AMERICAN TRAJECTORY TO MODERNITYFrom independence to 1900: oligarchic modernization

Two features of this stage must be underlined. First, at this time liberal ideas are adopted, lay educationexpands, a free press is established, a republican state is built up and democratic forms of governmentare introduced. However, all this occurs alongside substantial restrictions for the wider participation ofthe non-educated classes. Second, contrary to the US trajectory, industrialization was postponed andreplaced by a raw material exporting system which did little to modernize the productive sectors.

Latin American modernity during the nineteenth century was more political and cultural thaneconomic and, generally speaking, very restricted. In spite of these limitations. The modernizationsintroduced went hand in hand with a reconstitution of cultural identity in which the values of freedom,democracy, racial equality, science and lay education attempted a considerable advance. This wasparticularly notable in comparison with the prevalent values of colonial times that were heavilyinfluenced by a monopolistic Catholic religion, closely related to political authoritarianism, not veryopen to scientific reason and steeped in slavery, racism and the Inquisition.

The eighteenth-century French Enlightenment, British liberalism and, particularly, the Positivismderived from Auguste Comte, played a very important ideological role in this process. Just as much asthe Creoles wanted freedom to trade with Britain and the rest of Europe, they also wanted culturalfreedom from the tutelage of the Church. They thought the new ideas were their only hope, to bringabout ‘order and progress’ to the newly emerging republics. Not that the new Enlightened values andpractices totally displaced the colonial cultural pole, but at least they modified and transformed it insome important respects.

Pro-modern thinkers of the time felt that modernity could only be achieved as long as the Indo-Iberian cultural pattern was totally replaced by a new one, but were unable to see how deeplyinfluenced by the old racist prejudices they still were. At the same time, their vision of modernity wasshaped by the naïve wish to become a true image of the United States or Europe. Latin America wasstill to be civilized and its barbaric cultural features eradicated. Sarmiento is the most representativewriter of the time. He explicitly argued that the real struggle in Latin America was one betweencivilization and barbarism (Sarmiento, 1945: 58). The former was represented by Europe and theUnited States, the latter was the result of Latin American racial inferiority. This vision was more or lessshared everywhere in Latin America by other positivists.

It is therefore not surprising that one of the policies they proposed to modernize Latin Americaconsisted in improving its racial composition by means of European white immigration (Sarmiento,1993: 408). For Sarmiento, another way of compensating for Latin America’s racial inferiority was‘instruction, education diffused through the mass of the inhabitants’ (cited by Martínez Estrada, 1968:134, 137). Modernization, therefore, depended upon Latin Americans being able to replace theircolonial and racial heritage by means of immigration and/or scientific education. For nineteenth-century Latin American authors there was clearly a need to achieve modernity by destroying thecolonial cultural identity. But obviously, it was not easy to dismantle such an identity and theythemselves unwittingly shared its racism and elitism.

The opposition between barbarism and civilization was not only explicitly developed in criticalessays, but was also an important subtext of many romantic literary works of the time. UnlikeEuropean Romanticism, which wanted to escape from civilization to find refuge in nature, LatinAmerican Romanticism wanted to escape from the isolation and barbarism of nature. For example, inJosé Mármol’s novel Amalia (1945), civilization is represented by a small group of intellectuals to whichthe three protagonists belong. They struggle against the tyrant Rosas but in the end succumb and are

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killed. They appear surrounded and confronted by the hostile pampa, Rosas and his black and mulattoagents, gauchos and Indians, all of which represent barbarism.

From 1900 to 1945: the crisis of oligarchic modernity

By the turn of the century oligarchic power had begun to crumble, the so-called ‘social question’comes to the fore, new populist regimes emerge which widen the franchise and incorporate middleclasses into government, and the processes of import-substituting industrialization are initiated. Thus,while in Europe an economic and political crisis of liberal industrial capitalism is experienced (Polanyi,1957: 29), in Latin America it is the prevalent oligarchic and aristocratic agrarian export-orientedsystem which enters into its terminal phase and incipient industrialization processes start with somesuccess.

This stage of crisis and change in Latin America is accompanied in its beginnings by the emergenceof anti-imperialist feelings, by a new revaluation of mestizaje, by a new indigenista current of thoughtthat criticizes the discrimination of the Indian communities, and by a growing social consciousnessabout the problems of the working class. In general, most of these trends showed a renewed interestin Latin America’s specific cultural identity and opposed the kind of modernity offered by the NorthAmerican or European models.

At this time, a realist tendency in the writing of novels develops and expresses in a literary form theturbulence of these times. This realism could be rural, naturalist, social or indigenista (Franco, 1980:215–61). In general, the various forms of realism are related to the difficult times of change in whichthe old Latin American order is beginning to be challenged, thus producing a crisis of identity. Thesenovels do not offer clear-cut solutions to the problems of identity but hint at different possibilitieswhich stem from the virtues of popular characters and geographical places (Xirau, 1992: 185–203).

At the beginning of the century, in the context of North American expansionism, a group ofintellectuals raised their voices against the United States and its hegemonic aspirations in relation toLatin America. José Martí of Cuba, Ruben Dario of Nicaragua, José Vasconcelos of Mexico, RufinoBlanco Fombona of Venezuela, Manuel Ugarte of Argentina joined their critical voices to that of theUruguayan José Enrique Rodo. The latter achieved an enormous influence with his book Ariel, whichwas published in 1900. It criticized ‘nordomanía’, the Latin American inclination to copy foreign models,especially North American, and advocated a return to its own reality (Rodó, 1993: 304–17).

Against the positivist idea that mestizaje degenerated the race, Vasconcelos (1927: 14; 1993: 339)celebrated the values of mestizaje and of the Latin race and contrasted them to the characteristics ofthe Saxon race. In a similar vein, the works of indigenista authors like Valcárcel (1925) advocated areturn to Indian values and customs in opposition to the European cultural heritage.

Later on, and in the context of the Great Depression, this difficult period seems to promote verypessimistic discourses which underline the negative features of Latin American identity or try torescue the Hispanic features of the Latin American character (Eyzaguirre, 1947; Lira, 1985). Thus, forinstance, Martínez Estrada (1946) focused on the idea of resentment as best expressing the LatinAmerican ethos and Alcides Arguedas (1975) described the duplicity of the Bolivians. The Hispanistcurrents of thought regretted the conscious neglect of the Hispanic culture and attributed to it theLatin American failure to make a worthwhile cultural contribution. Although these harsh self-criticisms did not seem to leave room for any pride in Latin American identity, they still wanted toemphasize the peculiarities of the Latin American cultural identity as against the European pattern.The point was to explain why Latin America was different and why modernity could not succeed orhad failed.

From 1945 to the 1970s: industrial expansion

A third stage from the end of the Second World War can be recognized, characterized byconsolidated democracies, a wider participation and important processes of modernization of the

socio-economic base. Growing industrialization and expanded patterns of consumption, educationand urbanization should be emphasized. The expansion of the mass media and of radical politicalmovements seeking profound structural reforms are also noteworthy (García Canclini, 1989: 81–2).Most states developed interventionist and protectionist policies which controlled much of economiclife and introduced some aspects of a welfare state in health, social security and housing. In spite of allthis, the benefits of modernity continued to be highly concentrated and the masses of the peoplecontinued to be excluded from them.

The process of modernization and change was accompanied and promoted by modernizing ideasand theories coming from abroad. Essay writing was replaced by the irruption of the social sciences.They propounded the dismantling of the traditional agrarian cultural identities and their replacementby modern values and institutions. First, came the ideas of the North American sociology ofdevelopment, usually called the ‘modernization theories’ in the 1950s. These put forward the idea thatLatin America was in transition from a traditional to a modern society and that Western industrialsocieties were the ideal model which would inevitably be reached. The modernization process wasconceived as a historical necessity which would repeat the same stages previously experienced byadvanced societies. A more critical local variant, the pioneering economic work of the EconomicCommission for Latin America, focused on the existence of a centre–periphery world system whichfavoured the central industrial countries. This is why it propounded the idea that Latin America had tomodernize its societies by switching from a raw material export-oriented economy to an industrial-led economy (Gwynne, 1985).

The disillusion with the results of import-substituting industrialization processes in the 1960s andearly 1970s led to ideas of imperialism and dependency and to the resurgence of Marxism andsocialism. A powerful critique of the capitalist system as unable to deliver economic development inthe conditions of the periphery predominated (see Chapter 1). Capitalism, it was said, did not work inLatin America because it was dependent upon the main industrial centres. The aim of socialist projectswas to struggle against dependency to bring about a more autonomous national development.

In spite of the widespread prevalence of social analyses centred on Latin American development,the issue of identity was present in two forms. On the one hand, implicit in the various modernizingapproaches, there was a project for a new identity, a kind of developmentalist identity whose goal waseconomic development, in which the state played a central role and the value of equality was veryimportant. The economic system continued to be capitalist but the modernizers wanted to humanizeit, and by following populist policies they wanted to protect the workers and redistribute nationalincome in their favour. On the other hand, it was also possible to find during this period a few workswhich more directly tackle the issue of culture and identity (Martínez, 1987: 221–35). Yet just as in thesecond half of the nineteenth century, Latin American identity was again defined in terms of anopposition to Europe, which represents, if not civilization per se, at least a culture with a positive self-affirmation and self-confidence which Latin America lacked.

Thus, Ernesto Mayz Vallenilla (1959) would argue that the Latin American has a permanentdissatisfaction with the present and is searching for the new. Caturelli (1961) would affirm that theLatin American ‘is the unrealised, the purely virtual, the imperfect, the immature, the essentiallyprimitive’ (1961: 41). Murena (1954), in his turn, would maintain that Latin Americans were expelledfrom Europe (paradise) due to a second original sin, thus leaving history and the Spirit behind. OctavioPaz’s classic The Labyrinth of Solitude (1950), is another expression of these feelings of uprootednessand abandonment which appear at this time. The Latin American is in search of his/her origins, and canbe compared to an orphan who is conscious of having been uprooted and needs to start a passionatesearch. At the same time the Latin American rejects the past, condemns his/her origins and renegeson his hybridity. All these approaches express a conflicting view in which the admiration for Europeanculture is mixed with the feeling that Latin America’s identity cannot find its own course. Hence theambivalence which in some cases leads to a proposal of total rupture (Murena) and in others to atotal fusion (Mayz, Caturelli, Paz).

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Corresponding with the Latin American post-war economic boom there emerged a notableliterary boom which gave Latin America’s literature a universal dimension. On the emergence of thisnew literary wave the expressions ‘magic realism’ (Asturias) or Carpentier’s ‘real marvellous’ which hadbeen used to refer to Latin American literature in the 1940s, resurfaced again. In the new novelsfrequently fantastic and incredible things occur. Mythical cities like Comala, Macondo and Santa Maríaappear which symbolize Latin America’s isolation disrupted by the external forces of modernity, orrepresent in a concrete form relevant parts of its historical past.

In its content, the Latin American novel of this time does not necessarily reflect favourably upon theprocesses of modernization that were occurring but rather critically questions the injustices andproblems which Latin American peoples suffer. Although the new novel breaks with the realism andsocial denunciation typical of the first half of the twentieth century, it clearly has a political dimension(Martínez, 1987: 39-40, 238–40). Carlos Fuentes has defined this dimension in terms of an interest inexploring ‘the problem of power in the Hispanic world’ (Martínez, 1987: 240). For Vargas Llosa thepoint is rather that great novels often appear in moments which precede profound historicaltransformations: ‘when the world they reflect finds itself in a state of decomposition, when itsfoundations are eroded and when that world will justly disappear’ (Vargas Llosa, 1974: 37).

From 1970 to 1990: dictatorships and the ‘lost decade’

By the beginning of the 1970s a new phase can be identified, characterized by a slowing down ofeconomic growth and a falling rate of profit in industrial nations. In Latin America the processes ofindustrialization and development lost their dynamism; economic growth came to a standstill and evenbecame negative during the 1980s, and, as a consequence, social and labour agitation becamewidespread. The international recession resulted in unemployment, inflation and increased politicalinstability everywhere. Radical social movements and parties which had been getting stronger sincethe 1950s accentuated their demands for changes in social relations and justice. The challenge of theChilean socialist experiment and of populist experiences of the left elsewhere precipitated a series ofconfrontations which ended in a wave of military dictatorships. It started with the 1964 military coupin Brazil and was followed by coups in Argentina (1966 and 1976), Bolivia (1966), Peru (1968),Ecuador (1972), Chile (1973) and Uruguay (1973).

Dictatorships changed the direction of economic policies by opening up their countries to foreigninvestment and international markets. They implemented in practice the first neoliberal ideas. But ittook many years before a new stage of expansion began to yield some economic fruit and someimprovement for the common people. In the case of the Chilean dictatorship, it took the first fouryears (1973–77) for the harsh economic policies to begin to have some acceptable results, only toplunge again into a deep financial crisis in 1982 (Moulian, 1997: 201–12).

It has to be remembered that during the 1980s, the so-called ‘lost decade’, Latin America sufferedeconomic decline. From the point of view of political and social modernity, dictatorships meant animportant regression insofar as they abolished democratic institutions, systematically violated humanrights, dismantled forms of social participation and consistently sought to destroy social organizationsrepresenting the poorest sectors of society. The exclusion of wide social sectors increased asunemployment levels soared and salaries plummeted. And yet, simultaneously, a new boomingconsumer society for the relatively well-off was created.

The market-oriented consumer society of material and symbolic goods which had grown in the1950s and 1960s became consolidated in the 1970s and 1980s. But the irony of this new stage is thesimultaneity of the massive expansion of television, publicity, production of compact disks, etc., and thepresence of dictatorships and repression. In the Brazilian case, Ortiz has argued:

the cultural movement post-64 is characterised by two sources which do not exclude each other : onthe one hand it is defined by the political and ideological repression, on the other, it is a moment ofthe Brazilian history in which more cultural goods are produced and diffused. (1988: 114–15)

This also happened in Argentina and Chile, but it was in Brazil where the interest in culture of theauthoritarian state is most evident in the creation of new cultural institutions: Conselho Federal deCultura, Instituto Nacional do Cinema, EMBRAFILME, FUNARTE, Pró-Memória, etc. (ibid.: 116). Themilitary government believed that communications and media were crucial for national integration.

The mass culture undergoes an enormous expansion in Latin America as shown by the growth inthe number of TV sets from 31.2 million in 1980 to 64.8 million in 1990.

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BOX 2.2 Mediazation of modern culture (source:Thompson, 1990, 1995)

Mediazation is ‘The general process by which the transmission of symbolic forms becomesincreasingly mediated by the technical and institutional apparatuses of the media industries’(1990: 4). This process comprises that the media are increasingly shaping the way in whichcultural forms are produced, transmitted and received in modern societies and the modes inwhich people experience events and actions which occur in spatially and temporally remotecontexts (1990, 12–20, 225–48; 1995: 46).

Television became the most important means of cultural consumption in Latin America (Marin,1999: 257–9). Large international conglomerates start controlling the media and the popular massculture of the continent. But at the same time a true cultural industry emerges in Latin America whichproduces cultural goods for the mass market. Its best expression is the telenovela (soap opera), a genrewhich Chile, Mexico, Brazil, Argentina, Venezuela and Colombia develop and export. While the NorthAmerican soap opera is addressed mainly to a female public in the afternoon, the Latin Americatelenovela is a massive ‘prime-time’ early evening product (Ortiz, 1988: 145).

The ambivalence of Latin American modernityThe exhaustion of the state-led pattern of industrialization in the 1970s, and the succession of militarycoups which followed, started a process of re-appraisal among intellectuals which was reinforced by asense of continuous failure. The deep crisis went hand in hand with a profound identity crisis, whichwas marked by pessimism and renewed doubts as to whether the road to modernity that had beenfollowed could be wrong. The rise and fall of so many intellectual fashions and the persistence ofenormous economic problems and widespread poverty, not to speak of the brutal activities of militarydictatorships, could not but raise doubts as to whether the relentless pursuit of Westernmodernization could bring about any real solution.

Three overlapping types of critique emerged which emphasized:

1 the opposition of Latin American identity to modernity;2 the lack of authenticity of Latin American modernity;3 its unexpected results due to telluric factors (those which come from an all-powerful and

uncontrolled nature).

Among the latter is what Brunner has aptly called ‘macondism’ (1994: 167), which grants a superiorexplanatory power to Latin American literature. For instance, Ainsa (1986: 23) has argued that LatinAmerican identity has best been defined and expressed by its literature which shows societiesprofoundly influenced by telluric factors of portentous and enigmatic character. Macondo is themetaphor for the magic and marvellous character of Latin America, full of mysteries, which challengesthe purely rational understanding of it. For Brunner Macondo means that foreigners will not fullyunderstand Latin America and that ‘they will not be able to impose upon us a pattern ofmodernization which does not fit into our mystery’ (1994: 172). Macondism is therefore moredefensive than conservative. It does not deny the possibility of modernization, but suggests caution,

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because Latin America is supposed to be the world of the unexpected and of uncontrollable telluricforces.

It can be suggested that this is the implicit position of the authors of the so-called literary boom ofthe 1960s who continued to publish their novels during the 1970s and 1980s. I have already suggestedthat the novels of the 1960s were suspicious of modernizing processes. In this respect there is littledifference between them and the novels of this period, apart from the fact that the new novels andshort stories can now focus on the reality of dictatorships. Good examples are La Casa de los Espíritus(1983) by Isabel Allende and El jardín de al lado (1981) by José Donoso. They are deeply marked bythe tragic events, human rights violations and exile brought about by military dictatorships. Yet theseterrible events continue to be treated within the framework and with the peculiarities of the newnovel, only that there is no longer the same interest in experimentation as in the 1960s. Ainsa hascalled these works the ‘narrative of internal resistance’ (1986: 502).

Octavio Paz, Carlos Fuentes and Richard Morse, in their turn, highlight the idea that Latin America’smodernizing processes have not been entirely genuine and authentic. They argue, in various ways, thatLatin America has had fundamental difficulties in modernizing in accordance with the European model.For Paz the main cause of this is that Spain and Latin America could not carry out in depth the Weberianprocess of rationalization because they did not experience the Enlightenment in the eighteenth century:

at the moment that Europe opens up to the political, scientific and philosophical critique thatharbingers the modern world, Spain closes itself in and encloses its best minds in the conceptualcages of Neo-scholasticism. We, Hispanic peoples, have not succeeded in being really modernbecause, unlike the rest of the Western peoples, we did not have a critical age. (1990: 44)

For Paz (1990) there is a big difference between North America and South America. North Americaspeaks English and is the daughter of the tradition that founded the modern world, especially its threefundamental processes: the Reformation, democracy and capitalism. South America speaks Spanish orPortuguese and is the daughter of the Catholic monarchy and the Counter-Reformation.

In a similar way, Carlos Fuentes (1990) argues that Latin Americans are sons of the Spanish Counter-Reformation, a veritable wall erected against modernity, and that often they prefer ‘preserving theweight of anachronistic societies’. However, he also suggests that Latin Americans often have violentlyreacted against tradition, by adopting in an uncritical fashion the last version of Western modernity:‘we are a continent in desperate search of its modernity’ (Fuentes, 1990: 12–13).

The ambivalence of Latin American modernity is also the argument of the historian Richard Morse:the Weberian process of disenchantment of the world never could be completely internalized in LatinAmerica, not even by its most modern sectors. Once more, the reason is sought in the Spanishrejection of the scientific and religious revolutions, which impedes the long-lasting implant of Europeanindividualism and utilitarianism (Morse, 1982: 178).

The diagnoses of these three authors is quite similar, but their conclusions differ. Morse (1982: 162,200, 218), the most optimistic, believes that as a result of the lack of complete assimilation of what hecalls ‘the great Western design’, Latin Americans develop a rationality of ‘compromise’ and that thestructure of their character is better prepared to ‘preserve humanity’ within industrial society. Fuentes(1990: 14) suggests that Latin America’s cultural continuity will provide the only solution for the future,but has some doubts and wonders whether ‘we could transpose into political life the strength ofcultural life and between both of them create development models more akin to our experience, toour being’. Paz is the most pessimistic and concludes that Latin America has reached only a pseudo-modernity:

the liberal revolution, initiated with independence, did not result in the implant of a true democracy orthe birth of a national capitalism, but in a military dictatorship and in an economic regimecharacterised by the latifundia and the concessions to foreign consortia and enterprises, especiallyNorth American. (1979: 63)

Paz’s point is that liberalism proved barren in terms of the evolution of Latin American culture andcould not compare itself with colonial poetry or pre-Columbian architecture. And yet the new liberalvalues masked the old pre-modern realities and this would have been the beginning of inauthenticity.The consequence is that:

At the beginning of the 20th century we were already installed in full pseudo-modernity: railways andlatifundia, democratic constitution and a caudillo in the best Hispanic-Arab tradition, positivistphilosophers and pre-Columbian caciques, symbolic poetry and illiteracy. (1979: 64)

Finally, modernity has also been attacked for supposedly negating Latin American identity. Methol Ferré(1981) and Morandé (1984: 144–5) criticize modernization processes in Latin America for they wouldoppose its true religious identity. Modernization, as has occurred in Latin America, would beantithetical to its most profound being insofar as it has sought its ultimate foundation in the EuropeanEnlightenment. According to Morandé, Latin America’s intellectual elite were unable to recognize theirdeepest cultural roots, thus leading their countries into modernizing experiments which, by ignoringLatin America’s true identity, could only fail. For Morandé and Methol Ferré, the identity denied by anatheistic modernity has a privileged reservoir in popular religiosity.

These theories are certainly improbable. The problems pointed to by Paz, Fuentes, Morse andMorandé, are not necessarily an expression of the failure of modernity in Latin America, but anexpression of Latin America’s specific manner of being in modernity. They confuse a crisis of modernitywith scepticism about the possibility of a true modernity.

New conceptions of Latin American identityThe doubts about and reactions against modernity are also lived as an identity crisis. In the 1980sforms of neo-indigenismo and religious fundamentalism emerged which wanted to go back to asupposedly original cultural identity which could make up for the failures of modernity. The neo-indigenistas resorted once more to exploring the Latin American origins and the forgotten culturalpatterns present in the Indian communities, in the hope of finding there the elements of a newalternative way ahead, which included community-oriented and ecological dimensions.

Luis Guillermo Lumbreras, for instance, argued that the whole process of development in LatinAmerica has been misdirected from the start and the only solution is to recover ‘the knowledge of ourancestors’ and ‘to make use of that knowledge’ (Lumbreras, 1991: 22). Anibal Quijano (1988: 62; 1991:34–8), in his turn, makes a critique of instrumental reason and dreams of a utopia constructed uponthe basis of an alternative historical reason. This reason comes from the past and was cultivated by theIndian communities, but also has roots in the present: the solidarity, collective effort and reciprocityremain alive in the mass of the urban poor, in their popular kitchens, in their co-operatives and in theirforms of organization to survive. In this contemporary current one still finds the idea that LatinAmerica’s future depends on it being true to some age-old Indian traditions or principles which wereforgotten by instrumental reason, alienated Enlightened elites, and neoliberal modernizing attempts.

Morandé (1984: 144–5) argues that what is typical of Latin American identity was formed from themeeting of Indian cultures and the Catholic religion. This occurred orally – the Indians did not havewritten texts – and so the result was an ethos, a founding experience of togetherness which has fouressential characteristics:

• It was formed before the Enlightenment.• It has a necessary Catholic underlying structure.• It prefers sapiential to scientific knowledge.• It is best expressed in popular religiosity.

According to Morandé, Latin America’s intellectual elite were unable to recognize their own identity,thus leading their countries into modernizing experiments which, by ignoring Latin America’s trueidentity, could only fail. Contrary to the Protestant work ethic and the need to save and invest as a

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proof of salvation, Latin American culture puts an emphasis on work as sacrifice and on religiousfestivities as ritual squandering. Basically, Latin Americans are not supposed to be motivated bytechnical progress, and the subordination of their ethos to instrumental rationality is a form ofalienation, a mistake punished by chronic failure.

According to Morandé, this does not necessarily mean that the Latin American identity is anti-modern.He argues that Latin American identity was created within a different kind of modernity: the Catholic,Counter-Reformationist, Spanish, Baroque modernity. What threatens Latin American identity is not justany kind of modernity but the modernity which entails a process of secularization, the modernitystemming from the Enlightenment. It follows that, given the Catholic substratum of this identity,secularization is not just a threat to the Church but, more fundamentally, a threat to Latin Americanculture itself. This irreligious threat succeeded in converting the Latin American elites to instrumentalreason, but it did not succeed against the popular religiosity of the mestizos, which has resisted all attacks,to remain even today the most spontaneous and genuine expression of the cultural ethos.

Yet by the end of the 1980s and in spite of these attacks against modernity, the project of rapidlymodernizing even at the cost of identity was becoming dominant in Latin America, supported by theincreasingly overwhelming success of neoliberalism. Notwithstanding this, both sides seem to share theidea that modernity is something external, which either has to be prevented from expanding in orderto preserve identity or has to be brought about at all cost in order to change the old identity.

From 1990 onwards: the neoliberal stage

The stage which opens up after the end of dictatorships continues with, and accelerates, economicand political modernization under the influence of an already consolidated neoliberal ideology. Oncemore the concerns about identity recede as the neoliberal optimism gets the upper hand everywhere.The free market and open economy policies produced an expansion of primary exports but also inmost countries a significant reduction of industrial production and industrial employment. Mexico andBrazil managed, after a while, to expand their industrial exports. The rest, on the contrary, followed amore radical laissez-faire model. Although exports of primary products became more diversified, theywere associated with declining levels of industrial production and employment. In this, the LatinAmerican trajectory to modernity (with the exception of Mexico and Brazil) is very different from theAsiatic one where the state assumed a very important role in the acquisition and adaptation of first-class technologies and in the promotion of industrial exports (Gwynne, 1996a: 228–9, 220).

These economic processes now occur in a new political context which values democracy,participation and respect for human rights. The democratization of the state in Latin America hasmade some progress but many problems still remain. In some cases, like the Chilean one, the formerdictatorship left a constitution and laws full of undemocratic elements which it is hard to change.

It is not surprising at this time that some authors openly propound the idea that Latin America mustabandon its old identity in order to be able fully to enter modernity. Claudio Véliz (1994), for instance,maintains that the main problem that modernization has in Latin America is the cultural resistancewhich the essential Latin American identity has opposed to it. Véliz agrees with Morandé that LatinAmerican identity is Baroque, but he sees it as an obstacle to development. The failure of Latin Americato modernize until the 1990s is due to its own Baroque identity, to its aversion to risk and change, toits distrust of the new, to its preference for stability and central control, to its respect for status and oldloyalties. Nevertheless, after many centuries of resistance to change, the magnificent baroque dome hasbegun finally to deteriorate and crumble under the impact of banal cultural artefacts coming from theAnglo-Saxon world, from trainers to toasters and computer graphics. Véliz advocates in the 1990s anAnglo-Saxon kind of modernity. This goes to show that in his view, the process of modernization in LatinAmerica is externally led and antagonistic to its cultural identity (1994: 219–22).

Even postmodernism is received in Latin America in a way that does not antagonize modernity. Formany authors like Brunner and Lechner, postmodernism seems to be a particular way or modalitywhich modernity assumes in the Latin American periphery. They even find in Latin America

postmodern features avant la lettre and tend to relate the new dynamism and openness of LatinAmerica’s modernization processes with these postmodern features. Many writers have used thetenets of postmodernism to underpin neoliberal positions (Hopenhayn, 1993: 101–9). Whereas inEurope postmodernism can represent an option for identity against modernity, in Latin Americapostmodernism, barring some exceptions, supports modernization against identity.

However, as in other times of accelerating development and economic expansion, a new kind ofidentity seems to be implicitly advocated and discursively constructed by the neoliberal project. Itsbearer is the figure of the successful and innovating entrepreneur and its promise is widespread (creditcard) consumption as the linchpin which could deliver the masses. Individual success, conspicuousconsumption and privatized welfare come to replace equality, state-sponsored welfare, fairness andgeneral austerity. The point now is no longer justice, full employment or industrial development, butrather to become winner nations comparable with the Asian Tigers.

The 1990s in Latin America witnessed an enormous expansion of television and other communicationtechnologies such as cable and satellite TV, videocassette recorders, DVD players, and so forth. Aninteresting aspect of the Latin American consumption of television in the 1990s is the fact that locallyproduced programmes outperform in the ratings the US-produced programmes. In Brazil seven of thetop ten programmes in home ratings in the first four months of 1997 were nationally made, of whichthe top two were telenovelas (Marín, 1999: 293). In Chile, in 1998, more than 60 per cent of the 50,000hours of transmitted programmes are nationally made. If prime time is taken into consideration (whenmore than 70 per cent of television sets are turned on), then during some months of the same year,81 per cent of programmes were nationally made (Catalán and Souza, 1999: 6–7). In Mexico,Argentina and Colombia something similar occurs. Television has also become the first source ofinformation for Latin Americans.

In literature new trends are apparent. Of course the old guard who became famous in the 1960scontinue to produce novels that sell very well all over the world, but in the 1990s it is possible todetect the emergence of younger authors who write novels and stories with a different perspective.Politics is not one of their main concerns and they tend to be shaped by the new emergentindividualism. This is reflected in their outlook towards life and in the kind of narrative they write. Theyno longer want to continue with the tradition of magical realism, nor are they concerned with nature,rural society, left-wing politics or Latin American identity.

Fuguet and Gómez, the editors of a new compilation of stories and members of this generation putit like this:

the great theme of Latin American identity (who are we?) seemed to give way to the theme ofpersonal identity (who am I?). The stories of McOndo are centred on private and individual realities.We suppose that this is one of the legacies of the world privatising fever. (1996: 15)

They accept that they live in a world of McDonald’s, malls and computers and that present-day cultureis a mass hybrid culture controlled by the media. What they consider as Latin American is thesupposedly more genuine Indian, left-wing, folkloric or rural traditions.

The new authors write about modern life in the cities, about the middle or upper classes. Theprotagonists in their novels and stories come from the upper classes. It can be said, therefore that thefiction written by these authors, as much for its private topics and depoliticization as for its new kindof upper-class protagonists, contributes to shape the new forms of identity which are emerging fromthe neoliberal period.

SOME SPECIFIC ELEMENTS OF LATIN AMERICAN MODERNITY AND CULTUREThe combined construction of modernity and identity in Latin America which I have exploredhistorically in five stages has produced certain specific features and characteristics which can be

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presented more systematically. These cultural features should not be essentialized; they are the resultof history and they can change, be modified or even disappear altogether. But they still have animportant presence today and are the results of a specific historical evolution. I have selected thosecharacteristics which seem most relevant and which mark a contrast with other trajectories tomodernity. I make no claim to being exhaustive.

Clientelism, traditionalism and weak civil society

The first feature I would like to refer to is clientelism or cultural and political personalism. This isconnected with the populist stage but its effects have remained until today. Recruitment of civilservants, university lecturers and mass media journalists continues to be done through clientelistic orpersonalist networks of friends and supporters. The processes of public openness for a job are absent,scarcely developed or work in a purely nominal fashion when procedures are ‘fixed’ to favour a pre-selected individual. Clientelistic recruitment flourishes in Latin America and shows as much theabsence of normal channels of social mobility as the narrowness and high competitiveness of politicaland cultural environments.

Education, acquired skills and personal achievements are not enough to secure access to certainpolitical or cultural jobs. Well-placed ‘contacts’, ‘godfathers’ or ‘friends’ are required to facilitate entry.Because the system depends on the patronage of certain individuals who exercise institutional power,it secures the personal loyalty of the recruited and favours institutional immobility. Thus, veritableinstitutional fiefdoms are created which, because of their discriminatory character, are almostimpenetrable for those who do not belong to the group that controls them.

A second feature could be called ideological traditionalism. In putting forward his theory oftransition to modernity Germani spoke in the 1960s of the ‘fusion effect’, by means of which modernvalues could be reinterpreted in contexts different from developed societies, with the result thattraditional structures were reinforced (1965: 104). A particular form of this fusion effect wasideological traditionalism which was that leading groups accepted and promoted changes necessaryfor development in the economic sphere, but rejected changes required for such a process in otherspheres (Germani, 1965: 112).

In late modernity a similar phenomenon takes place which consists in that certain leading groupsadvocate total freedom in the economic sphere but appeal to traditional moral values in otherrespects. Thus, they emphasize almost a religious respect for authority and order, the traditional familyand the national heritage, or they may even cast doubts about democracy and oppose, for instance,divorce laws or the decriminalization of adultery for women. A good example of this is Chile whereadultery was a crime for which women only could be punished until 1995, and where until this veryday, a divorce law has not been passed due to Catholic and conservative opposition.

These fusions are not exclusive to the developing world. However, traditionalism in Latin Americahas stronger institutional bases than in Europe or the United States. One of them is the extraordinarypower and influence of the traditional Catholic Church over political and legislative matters. This canbe explained by the privileged role which the Catholic Church has played since colonial times in themaintenance of social and political order. The Church and religious mechanisms have played a centralrole in the exercise of authority and the political control of people.

A significant phenomenon which differentiates Latin American modernity from others is the lack ofautonomy and development of civil society. In Latin America, civil society is weak, insufficientlydeveloped and very dependent upon the dictates of the state and politics. This is a consequence ofthe absence of strong and autonomous bourgeois classes developing the economy and culture ofsociety independently from politics and any state support. Brunner (1988: 33) rightly argues that incontrast to the modernity of central or core countries, Latin American modernity suffers from a‘voracity of politics which swallows everything and behind which everyone seeks protection orjustification: equally entrepreneurs, intellectuals, universities, trade unions, social organizations, clerics,the armed forces’.

Universities, institutes and even the media are vulnerable to or depend upon state action. It is notrare to find that a good number of research and consultancy institutions depend almost exclusivelyupon services rendered under contract to various state organizations. Many cultural centres aredirectly created by local governments and managed by the political majority which controls them.Hence politics exercises a disproportionate influence upon civil society and cultural institutions.

Authoritarianism, legalism and masked racism

One cultural aspect which has survived from colonial days, at times in a moderate form, at other timesin a more extreme form, is authoritarianism. This is a trend which persists in the political field, in theadministration of public and private organizations, in family life and, in general, in Latin American culturewhich concedes an extraordinary importance to the role of, and respect for, authority. Its origin isclearly related to three centuries of colonial life in which a strong Indo-Iberian cultural pole wasconstituted which accentuated religious monopoly and political authoritarianism. As De Imaz has putit, ‘for three centuries there existed a clear relationship between political authoritarianism and thelegitimating role of the Inquisition’ (1984: 121).

Flores Galindo has documented how the seventeenth-century religious congregations’s persistentstruggles against idolatry in the central sierra of Peru had the connotation of political control: ‘therelative precariousness of the military system forced an apparent hypertrophy of religiousmechanisms, so that, in that way, through fervour or more frequently fear, control over men could besecured’ (1994: 66). In spite of the democratizing influences of Enlightenment thought which certainlyachieved some partial moderation of the authoritarianism of the Indo-Iberian cultural pole fromindependence onwards, its cultural force has not easily been extinguished in Latin American social andpolitical life.

In the particular case of Chile, various authors have highlighted the historically crucial role ofPortales’s strong and authoritarian government in the formation of the Chilean state (Edwards, 1987;Góngora, 1981). Portales’s central idea was that, due to a lack of republican virtues, democracy in themid-nineteenth century had to be postponed and unconditional obedience to a strong authority hadto be established. The action in favour of the public good of such authority could not be hindered bylaws and constitutions. It divided the country between the good (men of order) and the bad(conspirators to whom the rigour of the law had to be applied) (Góngora, 1981: 12–16). It is notsurprising that General Pinochet’s regime should have frequently invoked such a conception in the latetwentieth century.

A feature that also comes from colonial times and has survived in different ways until today is apeculiar approach to principles, laws and norms whereby they tend to be formally upheld butpractically flouted if they go against your interests. The origins of this tendency are many. On the onehand, it had to do with the plight of the Indians who were forced to convert to Catholicism underduress. In order to save their lives many of them formally accepted the new religion but secretlycontinued to practise their own, often using the same Catholic ceremonies or liturgical celebrationsfor their own purposes. On the other, a similar form of pretence was also practised by the Spanishconquistadors whenever they were faced with royal decrees and laws, which in themselves might havebeen very just and good, but which having been drawn up too far away, could not be practicallyimplemented without causing damage to conquistador interests. This was expressed by the traditionalformula ‘se acata pero no se cumple’, which in respect of any such royal command roughly meant ‘it isobeyed but not implemented’. This happened invariably with respect to legislation meant to protectthe indigenous peoples from the abuses of the conquistadors.

Almost without a doubt the king and his administrators knew that this was going on, but they tooturned a blind eye in the belief that the crown’s own interest would be affected if they demanded totalcompliance with the royal edicts. García de la Huerta (1999: 123) has suggested that this chain ofcomplicity in the flouting of the law might have also reached the highest ecclesiastical hierarchy. Theinteresting thing about these procedures is that the practical unwillingness to comply with the law did

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not question its validity or legitimacy, but on the contrary, had to proclaim respect for the norm.Principles are transgressed but in such a way that they are simultaneously recognized, thus keeping theappearance of respect. This is crucial because in this way the principle of authority, so important inLatin America, is not violated. This feature accounts for both excessive legalism, the formal andritualistic adherence to the norm, and readiness to ignore it in practice. Examples of this are foundeverywhere in contemporary Latin America. It can be seen, for instance, in the way in which LatinAmerican Catholics profess their obedience to the Pope’s teachings about contraception, butmassively use it, often with the complicity of local priests. It can also be seen in the wonderfuldeclarations about human rights which appear in many regional constitutions while at the same timethe governments which made them systematically violate human rights in practice.

Another important feature is masked racism. The existence of racism in Latin America is welldocumented, even though it is a relatively neglected area of social sciences and generally is notperceived as an important social problem. It is clear, though, that from very early days, there was inLatin America an exaggerated valuation of ‘whiteness’ and a negative vision of Indians and blacks.

BOX 2.3 Racism denied

Flores Galindo (1994: 215) has observed that:

In Peru nobody would define himself or herself as a racist. Nevertheless, racial categories not onlytinge but sometimes condition our social perception. They are present in the configuration ofprofessional groups, in the messages transmitted by the media or in the call for beauty contests . . .racism exists notwithstanding racial terms, suppressed in the procedures of public identification, donot have official circulation. Yet a masked and even denied phenomenon, does not cease to bereal.

Raúl Béjar (1988: 213–14) has argued that in the case of Mexico:

it is a commonplace to say that in this country there is no racial discrimination . . .; [yet it ispossible to affirm that] prejudice has grown in the cultural history of Mexico . . . [and that thisaffects] especially the Indian or quasi Indian . . . blacks . . . and Chinese.

As pointed out earlier, various governments attempted to ‘improve the race’ by means of ‘whitening’policies which favoured European immigration in the late nineteenth and early twentieth centuries. Incontemporary Latin America, spatial segregation exists in the form of Indian areas being the poorestand most abandoned. Meanwhile, shanty towns in cities contain a bigger proportion of people withdarker skins, be they Indians, mestizos, mulattos or blacks. There is no equality of opportunity for them.Some surviving Indian groups constitute true internal colonies, geographically segregated, oppressedby mestizos, and subject to special laws and forms of administration. Nevertheless, the very fact ofmestizaje and that in many cases social classes overlap with gradations in the skin colour (the darkerthe skin, the lower the class) leads frequently to affirmation of racism.

This has even a base in the social sciences, which have often underlined the differences between theSpanish treatment of Indians and blacks and the British treatment of them. Gilberto Freyre, in hisclassic book Casa Grande e Senzala (The Masters and the Slaves, 1946) argued that the treatment ofslaves in Brazil was better than in North America, especially due to closer, even sexual, relationshipsbetween masters and slaves in the plantation economy. Many historians and social analysts havesubsequently noted that whereas in North America the white settlers imposed their separation fromIndians and blacks, in Latin America a wide process of mestizaje took place, thus producing acontinuum of racial gradations. From this the myth arose that in Latin America a ‘racial democracy’

existed and that racism was a problem for other countries (Cubitt, 1995: 122–6). This idea continuesto be believed today and shows its prevalence in that, with the exception of some degrees inanthropology, there is a significant absence of courses and studies on Latin American race problemsin social science degrees.

Exclusion and solidarity

One of the most decisive features of Latin American modernity is the great extent of social marginalityand the informal economy. In spite of the obvious progress of modernization and the dynamism ofcapitalism in the area, they have never been able to reach most of the population. A high proportionof the economically active population has never gained access to formal productive work andtherefore lives a life of exclusion and marginality, in casual petty trade or petty criminal activities (for afuller discussion, see Chapter 11). In some countries like Peru, it is estimated that more than 50 percent of the economically active population fall into this category. About 25 per cent of the populationof Latin America’s major cities have no proper jobs, earn no regular income, and live in slums locatedon the periphery of big cities, in conditions of extreme poverty, thus constituting a marginal underclass.The problem is compounded by the absence of an efficient and extended welfare state.

This is why it is imperative for many people who suffer from poverty and social exclusion toorganize a complex system to survive. Hence the emergence of the informal economy, of privateorganizations such as work co-operatives, popular kitchens, and a series of practices based onsolidarity, reciprocity and mutual aid. This does not necessarily indicate the emergence of an alternativerationality to modern instrumental rationality, as many authors in the 1980s suggested (Quijano, 1988;Parker, 1993); on the contrary, it can even be considered an expression of the same rationality insofaras it resorts to the only means that make possible a precarious survival in very difficult circumstances.

The phenomenon of exclusion as much as the phenomenon of solidarity has important effects onthe processes of identity construction in vast popular sectors. The former clearly has negative effectsin that individuals become accustomed to the idea that they are surrounded by a hostile and unfairworld in which, whatever their personal effort, positive results are never guaranteed. The link betweenaction and result is broken; the external world appears uncontrollable, and therefore everything thathappens tends to be conceived in terms of fate or luck. When someone learns that his/her efforts areuseless, a disposition could emerge which in social psychology has been called the ‘learnedhopelessness syndrome’ (Montero, 1987: 29–41), which is characterized by a fatalistic conception oflife, by a lack of plans and a passive attitude which derive from a situation in which the individual hasceased to believe that his/her personal effort can change or influence the things that happen.

On the other hand, the experience of solidarity and communal participation in the resolution ofproblems could partially return trust in that the external world is not seen as always hostile andthreatening, and common actions can achieve positive results for all. These experiences return toindividuals the sense that what happens is related to their own actions and that they have animportant responsibility in the construction of their own destiny. Collective actions in solidarity restorea sense of individual value and relink individual effort to positive result. From learned hopelessness itis then possible to go to learned hope. The lack of equality of opportunity, access to jobs and socialsecurity for vast sections of Latin American society has made solidarity and popular collectiveorganizations for survival an almost permanent feature of Latin American modernity and identity.

Politics

It is also necessary to refer to the fragility of the political institutions in Latin American countries (seeChapters 7 and 8). Since independence Latin America has seemed to the world a continent ofrevolutions and caudillos, military coups and conspiracies, where the institutional order is permanentlyunder threat. So much so that important scholarship has been devoted to explain Latin America’ssystematic political instability (Huntington, 1968; Kling, 1970). The wave of military dictatorships in the1970s and the 1980s included countries like Chile, which had had a reputation for institutional stability

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since independence. True, Latin America now has returned to democracy, but the symptoms ofinstitutional weakness remain quite evident, especially in Argentina, Venezuela, Colombia, Peru andmost of Central America (apart from Costa Rica).

Although since the beginning of the 1990s there has been a marked revaluation of formaldemocracy and of respect for human rights in Latin America, there has been also a simultaneous lossof prestige by politicians and, more recently, an increasing distrust of traditional politics in general. Insome relatively stable and economically successful countries like Chile, this has led to a relativedepoliticization of society, in particular of the young. In other countries like Argentina, Peru, Brazil andVenezuela, which are less stable and suffer enormous economic problems, there has been a processof repoliticization directed against traditional politics and increasingly assuming a new populist slant.The election of Lula da Silva in Brazil, Chavez in Venezuela and Gutierrez in Ecuador (the last twowithout significant party support), coupled with the close possibility of similar events in Argentina,Paraguay and Peru, show this new trend which puts the political system under pressure and challengesthe neoliberal policies of the 1990s.

The religious factor

Finally, religion is a crucial dimension of Latin American identity. There are at least three importantreligious sources in Latin America: the African, the Indian and the Christian. The complexity of thereligious phenomenon and the variety of religious identities in Latin America are of such magnitudethat I cannot adequately deal with them here. Thus, I have chosen to concentrate on religious identitiesof Christian origin, which are undoubtedly the most important ones since they affect the vast majorityof the Latin American population.

In colonial times a religious identity was constructed in Latin America which had authoritarian andintolerant features, and opposed scientific endeavours and privileged external rites. The presence ofthis Catholic element in Latin American identity was very deep and persistent and in many ways stillshows its strength in several respects. Given the centrality of Catholicism for Latin American identity,it is not surprising that the process of secularization started much later and has been slower than inEurope. Nevertheless, its advance can be noticed in the progressive displacement of Catholicism asthe central element of the region’s cultural identity. From being the principal nucleus of all aspects ofculture, Catholicism became a particular identity, one cultural element among many others of variouskinds. In this sense, secularization has not meant the end of religion or religious sentiments in LatinAmerica, but rather the loss of centrality of a narrow Catholic religious world-view and the arrival ofpluralism.

The traditional Catholic identity in Latin America has been challenged not just by the process ofsecularization but also by the construction of new religious identities. The most important has beenthe Pentecostal movement in the 1980s and 1990s, which is rooted in the poorest sections of society.It is politically more conservative and focuses upon personal conversion and a change of lifestyle. Theadvance of the Pentecostal movement has been spectacular on all fronts, as much in the number ofpastors and new members as in the number of churches and the frequency of religious practices. Thebiggest growth has occurred in Brazil, Chile, Nicaragua, Guatemala and Costa Rica.

Several explanations have been put forward for the extraordinary success of Pentecostalism in LatinAmerica. Many of them use the old Weberian scheme which sees Latin America as a region intransition from traditional society to modernity. Lalive (1975: 86), for instance, has argued thatPentecostalism offers a refuge to the poor by allowing them to recreate within the congregation a kindof traditional society which gives them security and strength to bear the discriminatory features of thenew modern society in the making. David Martin (1990: 13) puts forward the thesis thatPentecostalism in Latin America is the vanguard in the religious field of a vaster penetration of Anglo-Saxon values which would allow its change towards modernity and development. The Weberian thesisdoes not explain why it is Pentecostals and not historical Protestants who succeed in attracting thepoorest urban sectors. This suggests that there must be something special about Pentecostalism, a

particular ability to translate the Protestant message into the forms of expression of popular culture(Sepúlveda, 1996: 95–7).

CONCLUSIONLooking at the Latin American trajectory to modernity, it is possible to affirm that it has been animportant part of the process of identity construction: it does not oppose an already-made-in-the-past, essential and immovable cultural identity, nor does it entail the acquisition of an alien identity(Anglo-Saxon, for instance). Modernity and cultural identity are both processes which are beinghistorically constructed and which do not necessarily entail a radical disjunction even if there aretensions between them. The features of Latin American modernity which I have explored constitute,for better or worse, important elements of Latin American cultural identity today. But of course,nothing prevents their critical appraisal or their change in the future. Nevertheless, there has been amanifest tendency among Latin American intellectuals to consider modernity as something externaland in opposition to identity. This never entirely resolved dialectic between modernity and identity isultimately a major feature of Latin American culture.

FURTHER READING

Larraín, J. 2000 Identity and modernity in Latin America. Polity Press, Cambridge. This book furtherdevelops the views on identity and modernity in Latin America expressed in this chapter. It maintainsthe thesis that cultural identity is being permanently constructed and that it has done so not inopposition to but inextricably linked to the processes of modernization.

Miller, N. 1999 In the shadow of the state – intellectuals and the quest for national identity intwentieth-century Spanish America.Verso, London. This book seeks to explore the role of intellectualsin the construction of national identities in the twentieth century, especially in Chile, Cuba,Argentina, Mexico and Peru.

Paz, O. 1967The labrynth of solitude. Allen Lane, London. This is a Latin American classic which dealswith Mexican identity but could be extended to the rest of Latin America.

Véliz, C. 1994 The new world of the Gothic fox. University of California Press, Berkeley, CA. Thisproposes the thesis that the arrival of modernity in Latin America means the necessary dismantlingof its old baroque cultural identity.

WEBSITE

Latin American Network Information Center, www.lanic.utexas.edu, an initiative of theUniversity of Texas at Austin, facilitates access to Internet-based information on Latin Americanculture and literature.

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In the past 20 years, Latin America has undergone the most significant transformation of economicpolicy since the 1930s. A series of structural reforms has changed the economies of South Americaand Mexico from being closed and state-dominated to being more market-oriented and more opento the rest of the world. National economies have become more closely integrated into the worldeconomy – particularly through cross-border flows of trade, investment, financial capital andtechnology. These reforms have often been labelled neoliberal due to their emphasis on increasing theinfluence of markets and decreasing the significance of government in economic decision-making.Reform has caused economies to become more closely inserted into the process of globalization, aprocess which has brought very varied results to the peoples of Latin America (Stiglitz, 2002).

The nature and impact of these economic reforms in South America and Mexico are the centralquestions being addressed in this chapter. In this book, South America and Mexico are examinedseparately from the smaller countries of Central America and the Caribbean. These latter countrieshave traditionally been much more closely integrated into the global economy. In Chapter 4, TomKlak argues that the close global integration of these small countries provides the key to theirhistorical and present vulnerability and can thus be seen as a colonial and neo-colonial vestige.Meanwhile, South America is characterized by one very large economy (Brazil) and by a largenumber of medium-sized economies (see Table 3.1); Mexico constitutes the second largest LatinAmerican economy after Brazil.

There are, of course, themes which link the smaller to the larger countries of Latin America and theCaribbean and, in turn, connect them both to countries in the global economic core of NorthAmerica. One theme is that of hemispheric integration, which is set to start off officially in 2005 withthe signing of the Free Trade Area of the Americas (FTAA). This is due to link up five major schemesof regional integration:

1 The North American Free Trade Agreement (NAFTA) – started 1993 – Canada, USA, Mexico.2 The Central American Common Market (CACM) – started 1960 – Guatemala, El Salvador,

Honduras, Nicaragua, Costa Rica (see Chapter 4).3 Caricom (Caribbean Community) – Caricom’s precursor, Carifta, began in 1965 and laid the

foundations for Caricom’s establishment in 1973 – members include Barbados, Guyana, Jamaica,Surinam, Trinidad and Tobago and others (see Chapter 4).

4 The Andean Community (formerly the Andean Group) – started 1969 – Venezuela, Colombia,Ecuador, Peru, Bolivia.

5 Common Market of the Southern Cone (Mercosur) – started 1990 – full members areArgentina, Brazil, Paraguay and Uruguay; associate members are Chile and Bolivia.

Figure 3.1 shows the schemes of economic integration.

3Structural reform in South America andMexico: economic and regionalperspectives

Robert N. Gwynne

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Figure 3.1 Schemes of economic integration in Latin America.

NAFTA is the only example so far of a scheme of economic integration involving two advancedeconomies and one emerging or developing economy. The differences in income and standard of livingare substantial; in 2001, purchasing power parity per capita in the USA was four times that in Mexico(see Table 3.1). Such differences have limited the focus of NAFTA very much to trade rather than todeeper forms of economic integration; for example, there are no future provisions for labour mobilitywithin NAFTA (particularly from Mexico to the USA and Canada) – in contrast to the nature ofeconomic integration in the European Union as it has expanded southwards and eastwards.

The promised FTAA will replicate in many different ways the Mexican relationship with NorthAmerica since 1993 for all other countries in the western hemisphere. In 2001, the sheer size of theUS economy not only made it 16 times the size of the Mexican economy but virtually nine times thesize of all ten South American countries combined (see Table 3.1). Further economic integration in theAmericas will inevitably be framed by very strong asymmetries, particularly in trade and flows ofcapital, technology and people. These asymmetries will be replicated in the relationships between thetrade groupings that become part of the FTAA. The combined GDP of NAFTA’s three countries is 13times greater than that of the four countries of Mercosur and Chile and an emphatic 40 times greaterthan that of the five countries of the Andean Group; there are even greater differences with thecountries of Central America and the Caribbean.

However, in terms of population, the relationship between North America and South Americalooks much more balanced (see Figure 3.2). The population total of North America (excludingMexico) is in fact lower than that of the ten countries of South America (see Table 3.1). Nevertheless,inequalities in standard of living between those countries are already remarkable, and distincthierarchies of living standards are being created. In terms of per capita purchasing power parity (see

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TABLE 3.1 Population and production in North and South America, 1965–2001

Country Population GDP ($bn) GDP, average annual per cent growth Purchasing power(millions) parity of GNI

per capita

2001 2001 1965–80 1980–89 1990–2001 2001

USA 284.0 10,171.4 2.7 3.3 3.5 34,870Canada 31.0 677.2 4.8 3.4 3.0 27,870Mexico 99.4 617.8 6.5 0.7 3.1 8,770North America 414.4 11,466.4 4.7* 2.5* 3.2* 23,837*

Brazil 172.6 502.5 9.0 3.0 2.8 7,450Argentina 37.5 268.8 3.4 −0.3 3.7 11,690Venezuela 24.6 124.9 3.7 1.0 1.5 5,890Colombia 43.0 83.4 5.7 3.5 2.7 5,980Chile 15.4 63.5 1.9 2.7 6.4 9,420Peru 26.1 54.0 3.9 0.4 4.3 4,680Uruguay 3.4 18.4 2.4 0.1 2.9 8,710Ecuador 12.9 18.0 8.8 1.9 1.7 3,070Bolivia 8.5 8.0 4.4 −0.9 3.8 2,380Paraguay 5.6 6.9 7.0 2.2 2.0 4,400South America 349.6 1,148.4 5.0* 1.4* 3.2* 6,367*

Ranked by GDP within each region* unweighted averageSource: World Bank (1991; 2002a).

Table 3.1), the average Chilean had an average income nearly one-quarter that of the average UScitizen in 2001, while inhabitants of Bolivia had an average income only one-quarter of those of Chile.Such data hide significant variations in income distribution within countries, but we will return to thisissue later in the chapter.

In order to contextualize and explore the impacts of neoliberal reform, both in terms of nationaleconomies and of economic spaces within those economies, this chapter will be divided into foursections:

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population of over two million). Source: World Bank (2003)

1 The historical context of the shift to economic reform.2 The nature of economic policy change, with particular reference to the power of the multilateral

institutions, theoretical justifications for neoliberalism and the opening up of Latin America.3 The impacts and problems of neoliberal reform, particularly in terms of economic growth,

investment, employment, income distribution and poverty.4 The impact of neoliberalism on economic spaces within Latin American countries and on the

private sector firms that should be the key actors in the process of economic growth under themarket-oriented models.

HISTORICAL CONTEXTThe neoliberal paradigm replaced a previous economic paradigm that had been in place in LatinAmerica since the 1930s. The previous paradigm was based more on inward orientation and thegreater intervention of the state in economic matters. It is worth briefly reviewing this previousparadigm before analysing the distinctive characteristics of the present one. The origins of inwardorientation lie in the continent’s reactions to the crisis of the Great Depression of 1929–33. Beforethen, Latin American governments had generally supported free trade and close integration with theworld economy (Bulmer-Thomas, 1994; Thorp, 1998). Economic growth in Latin America in thenineteenth and early twentieth centuries had been closely linked to the rapid expansion in worldtrade and to the increasing flow of investment capital from such core economies as Britain. LatinAmerican countries became inserted into an international economy in which they exported rawmaterials (mineral and agricultural) and imported manufactured goods. The First World War and itsaftermath, in which European countries engaged in protectionism, dampened the enthusiasm foroutward-oriented policies in Latin America. However, it was not until the Depression and the morethan halving of world trade that Latin American governments reacted with dramatic changes in theireconomic policies.

Between 1928 and 1933, the value of Latin American exports declined from about $5 billion to$1.5 billion (Bulmer-Thomas, 1994). This was partly due to a decline in volume. Export volumesdeclined by 22 per cent in Latin America as a whole between 1928 and 1932, although somecountries fared much worse; the volume of Chile’s exports (dominated by copper) fell by nearly 70per cent. In addition, export prices were in free fall, declining by two-thirds between 1928 and 1932.

The severe crisis in the world economy and the high dependency of Latin American countries onthat economy suddenly demonstrated the extreme vulnerability of their economies. Through the1930s and subsequent decades, Latin America tried to restrict interaction with the world economy,particularly in terms of trade, investment and the transfer of technology. Tariffs, quotas and exchangecontrols provided protection from foreign competitors by making the entry of foreign goodsexpensive or impossible. Latin American entrepreneurs reacted to the scarcity of goods and the levelof protection by producing goods that had previously been imported. As a result, industrial productionand employment grew rapidly in most South American countries.

Industrialization was seen as a key to future economic development within this inward-orientedframework. Policy leaders argued that all developed countries had industrialized behind highprotective tariffs and that it was only after a country had developed a more mature industrial structurethat it could become involved in the freer trading of goods (Prebisch, 1950). In order for SouthAmerican countries to achieve a more mature industrial structure, the political consensus was thatgovernments should actively intervene not only through the elaboration of industrial policy but alsothrough the creation of state-owned development corporations. Governments drew up strategicplans for industrial sectors and facilitated investment in key industries, such as steel, where it wasthought that national private investors might be unwilling to venture.

The modernization of the state through industrialization became a key theme of the inward-oriented period. In Brazil, for example, the crucial role of industrialization in the rapid accumulation of

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capital and in improving national technological capabilities, and the pivotal role of the state in facilitatingsuch development, were central tenets of contrasting governments stretching from the 1930s to the1970s – such as the regimes of Presidents Vargas, Kubitschek and Geisel. Between 1950 and 1978,manufacturing GDP in Brazil expanded ten times in real terms (Gwynne, 1985: 36) – equivalent to anaverage annual growth rate of 8.5 per cent over the three decades. These rates were unprecedentedglobally until the growth of East Asian NICs after 1960 and China after 1980. Although Brazil provedthe most successful at industrializing, manufacturing GDP also expanded significantly in the otherSouth American countries and Mexico (ibid.: 36–8). It is misleading to characterize the inward-oriented phase as one of low economic growth. Indeed, growth rates in the 1960s were higher thanthose of the 1990s for many countries in Latin America.

Governments also became more actively involved in economic development because of the way inwhich the world economic crisis had so seriously affected their economies. Governments were forcedto make some response to the two pressures that the world crisis inflicted on the economies of theircountries. First of all, there was the external imbalance, the collapse of national earnings from exportsand the drying-up of capital inflows from international sources. Second, and even more serious forgovernments, was the internal imbalance – the decline in government revenues due to the critical fallsin the volume of export and import taxes. In this sense, state intervention in the economy and theincreased rate of import taxes (through tariffs) can be seen as part of governments’ attempts to solvetheir own huge financial problems. Questionable policies, such as multiple exchange rates and theprinting of excess money, can often be attributed to governments reacting to serious financial crises.These policies tended to become embedded in the history of inward orientation. Between 1971 and1982, Edwards (1995: 83) found that ‘in some countries money creation accounted, on average, foralmost one-fourth of government revenues’.

This leads us to note the economic problems that came to characterize the paradigm of inwardorientation, most notably that of inflation. Inflation can be divided into two categories – high inflation(annual price rises of between 10 and 50 per cent) and hyperinflation (above 50 per cent). Table 3.2shows that only two countries (Paraguay and Colombia) in South America did not suffer fromhyperinflation between 1970 and 1993 in the latter stages of inward orientation. Four countries hadrecorded annual inflation levels of over 1000 per cent, with two countries (Bolivia and Peru) recording

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TABLE 3.2 South America and Mexico: peak inflation years between 1970 and 1993 and

inflation average, 1984–93

Country Peak inflation Inflation average, 1984–93and year, 1970–93

Bolivia 8,170.5 (1985) 1,051.6Peru 7,649.6 (1990) 1,283.7Argentina 4,923.6 (1989) 1,811.5Brazil 2,500.0 (1993) 1,944.8

Chile 2,650.0 (1973) 1,119.5Mexico 2,159.2 (1987) 1,152.9Uruguay 2,129.0 (1990) 1,175.5Ecuador 1,185.7 (1988) 1,144.5Venezuela 1,181.0 (1989) 1,134.0

Paraguay 1,144.1 (1990) 1,124.5Colombia 1,132.4 (1990) 1,124.8

Sources: Edwards (1995); Gwynne (1976).

figures around the 8000 per cent mark – when prices increase by over one-fifth each day of the year!It becomes very difficult for both producers and consumers to live through such periods. Speculationtakes hold of the economy and savings rapidly become worthless. Very high price rises not only createeconomic but also political instability.

There are three significant areas in which high inflation and hyperinflation cause economic damage:

1 Increasing uncertainty. Uncertainty increased for consumers and producers alike as major shortagesof basic products could occur. Producers linked to international markets, such as throughcomponent supply, faced problems as national prices rose much faster than international ones.

2 Low investment. Entrepreneurs had to adapt to a chronological pattern of boom and bust in whichlow investment became a key problem. In boom periods of inflationary growth, there was littleincentive for entrepreneurs to make long-term investments in expanding capacity as in thedownturn they would be left with spare capacity. Instead, in the boom periods, producers chargedhigh prices (adding to inflation) in order to dampen demand and make high profits. These highprofits during the boom period compensated for the poor returns during the downturn whensales declined and prices had to be kept low to encourage demand.

3 Low savings and capital flight. During this period, inflation rates could be higher than interest rates.Individuals therefore saw themselves as effectively losing money if they decided to save asopposed to spend (and even borrow) money. Because of the predilection to spend rather thansave, periods of high inflation became associated with very low national savings ratios. There wasalso the problem of capital flight (Mahon, 1996). This was because the affluent wished toconserve their savings against high rates of national inflation and found ways of sending thesesavings overseas, preferably to US or offshore dollar bank accounts. By the 1980s, the moreaffluent Argentines, Mexicans and Venezuelans held dollar deposits and other deposits abroadworth nearly as much as their countries’ debt (ibid.).

The legacy of inflation within inward orientation left countries short on national savings andincreasingly reliant on external finance. Indeed, the 1970s and early 1980s became a notorious periodof what could be termed debt-led (and inflationary) growth in Latin America. The end of this periodcame in another dramatic crisis for the continent – the debt crisis that started in August 1982 afterMexico declared a moratorium on its debt repayments. The confused and messy aftermath of thiscrisis was instrumental in causing Latin America as a whole to suffer a decade of stagnation and policyturmoil in the 1980s. The global capital markets that had appeared so benign during the 1970s turnedagainst Latin America in the 1980s. The reliance of Latin American countries on external financebecame the Achilles’ heel of their efforts for economic growth in the 1980s.

Since the 1930s, Latin American governments had tried to protect their economies from thevagaries of the global trading system and from the economic influence of resource and manufacturingTNCs in their economies. They thought that the dependence of their countries on the globaleconomy would thereby be reduced. However, during the 1970s policies of inward orientation andstrict controls on inward investment survived only due to the huge inflow of capital from internationalbanks, recycling the capital surpluses of the oil-rich countries. These flows peaked at nearly $22 billionin 1978, more than ten times larger than at the beginning of the decade. Latin American governmentsfavoured these borrowings as there were no strings attached, such as macro-economic policyrecommendations, as normally came with loans from the IMF and other multilateral organizations.

In retrospect, the Latin American economies were becoming more closely linked to the globaleconomy – albeit in new ways. Governments did not realize that international bank lending, althoughnot strongly regulated at that time, was intimately linked to business confidence. When businessconfidence in Latin America collapsed after August 1982, bank lending, the lubricator of LatinAmerican economies for nearly a decade, dried up virtually immediately. International banks tried todrastically reduce their exposure in Latin America, with policies of no new lending, tight renegotiationsand even insistence on the socialization of private debt – where Latin American governments were

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forced to take responsibility for bad private debts in their country (for which they were not legallybound) as well as the bad public debts for which they were legally answerable (Congdon, 1988).

In similar ways to the Great Depression, Latin American governments faced severe imbalances bothon the external and internal front. Their external accounts were characterized by large currentaccount deficits, partly because of high interest payments and partly because of the drying up of newfunds. Interest payments increased because of high world interest rates in the early 1980s and the factthat most international bank lending in Latin America utilized floating interests rates. In this way therisks of interest-rate movements had been passed on to the Latin American borrower, whether a firmor a government. Internally, Latin American Treasury departments were having to deal not only withbig increases in interest payments on their loans and extreme difficulty in finding new funds, but alsowith the problems of increased expenditure as economic activity declined, state firms declaredincreasing losses and welfare costs rose.

Latin American governments tried to negotiate with the US government for a 1980s’ version of theMarshall Aid Plan, but US government finances in the 1980s were themselves in deficit and weakcompared with their huge strength after the Second World War. With opportunities for bilateral loanslimited, the only possible way to receive some external financing was through loans from multilateralagencies such as the IMF and the World Bank. However, this came with strings attached; in otherwords, Latin American governments would have to impose major economic reforms, even if theywere only short term, in order to receive external financing from these organizations. Most LatinAmerican countries had little alternative but to impose these economic reforms in return forassistance to alleviate their serious financial dilemmas.

However, there was also a general lack of effective regulation and surveillance of foreign finance,which led to greater possibilities for fraud, mismanagement and corruption. These financial dilemmasdemonstrated that Latin America still had a dependent relationship with the world economy; nolonger was this just in relation to trade but also to foreign finance, where shifts in bank confidence andinterest rates could have such a huge impact on the management of national economies. Between1980 and 1986, net capital flows into the continent declined by around 40 per cent, but private netflows from international banks declined by an astonishing 80 per cent, demonstrating the impact ofthe change in perception of Latin America of the international banks.

Crises often reveal the true nature of economic and social relations. In Latin America, they haverevealed that economic performance in Latin America is highly dependent on the relationships oftrade and finance with international firms based in the advanced economies. Furthermore, crises havebeen important in changing the nature of the prevailing economic paradigm. Paradigmatic shifts havenot necessarily been guided by ideology. Rather, the aftermath of crises could be represented as LatinAmerican governments deciding (with different chronologies) to respond in highly pragmatic ways tothe contingencies of global economic crises.

ECONOMIC POLICY CHANGEBy placing the current paradigm of neoliberal economic reform in a historical perspective, it can beargued that the paradigm shift was as much to do with pragmatic considerations of coming to termswith economic crisis and the deficiencies of inward orientation as with the theoretical benefits andideological justifications of closer integration with the world economy and market-led economics.During the aftermath of the debt crisis in the 1980s, Latin American countries suffered a severe lackof capital, which exacerbated the inherited problems of inward orientation – low domestic savings,reliance on external financing, high inflation, low investment rates and stagnant trade. This section willthus examine the nature of this paradigmatic shift in terms of:

1 the power of the multilateral institutions;2 theoretical and ideological elements of the new consensus;3 the opening up of Latin America.

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The power of the multilateral institutions

Multilateral institutions exerted considerable influence in this search for ways out of the debt crisis. Asthe IMF and the World Bank became the main source of new funds for the debt-laden countries ofLatin America, they had the leverage to release funds on condition that each country implementedbasic reforms. These conditions covered highly diverse areas, and sometimes the package includedcontradictory recommendations. However, the emphasis was on achieving export-led growth(through trade liberalization and exchange rate action), improved domestic capital formation (throughtax and financial reforms) and reduction in government intervention in the economy. During the1980s, many governments resisted the implementation of conditional reforms, but others movedfaster than was required by the multilateral agencies (Chile and Mexico, for example).

The IMF and the World Bank were thus attempting to coordinate the international response toLatin America’s debt crisis and introduce their own outward-oriented and market-led solutions to theproblem. The international banking community endorsed this view and strongly urged for the burdenof new financing to be placed on multilateral institutions. Debt-restructuring operations, IMF-sponsored programmes, and World Bank structural adjustment loans were the most importantelements of this strategy; between 1983 and 1988, Latin American countries engaged in 29 debt-restructuring operations with the private banks. Nevertheless, Latin American countries remainedstarved of finance as international banks insisted on debt repayments without new money. It was notuntil 1989 that a breakthrough occurred in the approach to the debt crisis when the internationalcreditors and the multilateral institutions recognized that providing some debt forgiveness could be ineveryone’s interest.

The outcome was the Brady Plan, which encouraged creditors to enter into voluntary debtagreements with the debtor countries. There were two basic mechanisms for alleviating the debtburden. First, the use of debt-reduction schemes based on secondary market operations was activelyencouraged. This technique acquired special momentum after 1988, when, in a number of countries,debt-equity swaps became an important mode for attracting new investment from TNCs andprivatizing state-owned enterprises. Second, direct debt-reduction agreements between theinternational creditor banks and individual countries became more common after the introduction ofthe Brady Plan. Nevertheless, despite this window of debt restructuring, Latin America has remainedheavily weighed down by debt. Total Latin American debt was about US$ 480 billion in 1990 and hadrisen to US$ 780 billion by 2000, equivalent to nearly 50 per cent of continental GDP.

Theoretical and ideological elements of the new consensus

Washington-based multilateral organizations such as the World Bank, the IMF and the IDB (Inter-American Development Bank) were highly influential as both lenders and policy reform advisers in the1980s and 1990s in Latin America. The so-called Washington consensus had three main ideologicalthrusts in terms of economic policy:

1 The opening up of Latin American markets to the world economy through trade liberalization(mainly focusing on imports) and easier foreign direct investment.

2 Reduction of direct government intervention in the economy through privatization as well asincreasing the technocratic role of economic ministries – through imposing fiscal discipline,balanced budgets and tax reform.

3 Increasing the significance of the market in the allocation of resources and making the privatesector the main instrument of economic growth – through deregulation, secure property rightsand financial liberalization.

Such ideological principles were not too different from those of the liberal economists of theeighteenth and nineteenth centuries, such as Adam Smith and David Ricardo – hence they have alsobeen termed the ‘neoliberal manifesto’ and are associated with conservative political forces. There are,

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of course, some crucial differences. The liberal economists favoured mobility of all economic factors ofproduction, including labour. Free international movement of labour has not been part of theneoliberal agenda.

These first-generation reforms were not adopted in a uniform fashion throughout Latin America.Indeed, Stallings and Peres (2000: 20) identify a set of countries that were ‘aggressive’ reformers(Argentina, Bolivia, Chile, Peru) as opposed to others who were more ‘cautious’ (Brazil, Colombia,Costa Rica, Jamaica and Mexico) on the basis of the speed and scope of the reforms. Some statisticalbackground may be useful here (see Table 3.1). The four ‘aggressive’ reformers had experiencedsignificant crises during the 1980s but then experienced rapid growth (an overall average of 4.6 percent per annum) between 1990 and 2001. This pattern will have subsequently changed due toArgentina’s severe economic crisis which began at the end of 2001. In contrast, the ‘cautious’reformers had grown rapidly under inward orientation (average growth rate of 7.1 per cent perannum between 1965 and 1980 for Brazil, Colombia and Mexico) and had recorded significant levelsof growth during the debt crisis (see Table 3.1). Their record under neoliberalism between 1990 and2001 (average annual growth rate of 2.9 per cent) was therefore quite poor in comparison to theirprevious record.

No firm conclusions can be drawn from this comparison between aggressive and cautiousreformers. Aggressive reformers were undoubtedly affected by their miserable performance duringthe debt crisis of the 1980s. Economic growth under neoliberalism was much improved for a decadebut grave doubts over the long-term sustainability of growth for this group of countries have arisensince the onset of the Argentine crisis. Overall, the main aim was to achieve macro-economic stability.Neoliberalism became associated with a narrow focus on lowering inflation to the one-digit level.Fiscal policy emphasized shrinking government deficits, mainly by cutting expenditure rather than byraising taxes or other revenues. Monetary policy was geared toward stabilization and characterized byhigh interest rates (much higher than inflation rates).

It should be pointed out that policy agreement did not stretch as far as exchange rate policy. Insome countries, the exchange rate was fixed at a high (or over-valued) rate in order to lower inflation.In other countries, it was allowed to float downwards in order to maintain internationalcompetitiveness (thereby making exports cheaper) and stimulate economic growth. Stallings andPeres (2000: 24) prophetically noted that ‘the shift from the former to the latter approach usuallyproved to be traumatic’. The Argentine crisis of 2001 was partly caused by the unsustainability ofmaintaining an over-valued exchange rate. Although it had reduced inflation in the 1990s, it wasseverely constraining both export and economic growth by the turn of the century.

The Washington consensus did evolve through the 1990s, incorporating social as well as economicpolicies into its package of reforms. The second-generation of reforms emphasized institutional themesin their economic policy recommendations. The need to build more solid and professional institutionsby government was stressed, such as the creation of independent central banks and stronger budgetoffices. As a reaction to financial crises, the importance of strengthening bank supervision wasemphasized. Finally, there was the need to create more competitive economies not only throughprivatization and deregulation but also through investment in institutions and human resources.

Social policy was supposed to be seen as an integral part of the reform process. As governmentspending in productive activities was reduced, it was argued that this would free up public resourcesfor social expenditure. Improving the central government’s delivery of services in education, health,housing and social security would occur through better facilities, better training of personnel, and soon. Education was seen as a high priority for increased spending as this would develop humanresources. It was hoped that increasing social expenditure would not only lead to higher productivity and sustained economic growth but also to increasing equity and mobility in veryunequal societies. In reality, social spending has declined or stagnated in recent years in many LatinAmerican countries, mainly because debt payment obligations continue while government receiptsincrease slowly.

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In some countries, there was a focus on the decentralization of social services to municipal,provincial and regional levels of government (Nickson, 1995; Angell et al., 2001). More closely linkedtheoretically to the neoliberal model, shifts in social policy involved privatizing some aspects of thedelivery of social services. Some countries (such as Chile) encouraged the growth of private schools,health care and pension systems for those who could afford to pay (Barrientos, 1998). A two-tiersystem of social service delivery thus became more marked with private social services for theaffluent but with the majority of the population having to rely on the public system.

Nevertheless, some dramatic shifts in per capita social expenditure occurred. Between 1990–91and 1996–97, per capita social expenditure more than doubled in Colombia and rose by 61 per centin Chile (Stallings and Peres, 2000: 30). In Chile, the shift from authoritarian to democratic ruleconstituted the key political force. In so doing, Chile became a model for other Latin Americancountries, initiating what Sheahan (1997: 11) called a ‘competitive-plus-social’ combination of policies.On the economic side, the aim was to build up the capacity of the country’s modern sectors so as tocompete better in open international markets. Meanwhile, social programmes aimed at reducing theinequality of opportunities by improving education for the poor ; by redistributing educationalexpenditures to favour primary and secondary education; by providing training to increase jobflexibility; and by promoting community projects and leadership. The Chilean model demonstrates thatpoverty alleviation must involve sustained employment (and wage) growth along with targeted andincreasing social expenditure; unfortunately, Chile is not representative of Latin America as a whole inits success at reducing the incidence of poverty.

The opening up of Latin America

Governments in Latin America see trade reform as beneficial for their countries’ economies in aperiod of rapid globalization. Firms are deemed to become both more efficient and more specializedin terms of production for world markets. Increasing foreign trade (both exports and imports) is seento offer the engine for national economic growth, with the concomitant advantages of increasinginward investment and improving the technological capability of firms through the import andabsorption of new technologies. Trade reform also distinguishes the neoliberal paradigm from that ofinward orientation. Throughout Latin America, tariff and non-tariff trade restrictions have beenreduced and controls on foreign exchange markets lifted, particularly in the smaller countries.

The impact of the debt crisis and its aftermath in the early 1980s provided the catalyst for thisfundamental change in policy. Trade reform offered the possibility for exchange rate devaluation,increased exports and higher trade surpluses, the latter providing a valuable source of finance to startbalancing the current and capital accounts of the indebted Latin American nations. Practically all LatinAmerican countries under review began significant programmes to liberalize their trade regimesbetween 1985 and 1991 (see Table 3.3).

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TABLE 3.3 Chronology of trade liberalization in Latin America,

1985–91

Year Country

1985 Chile, Mexico1986 Bolivia, Costa Rica1988 Guatemala1989 Argentina, El Salvador, Paraguay, Venezuela1990 Brazil, Ecuador, Honduras, Peru1991 Uruguay, Colombia

Source: IDB (1996).

There was a sharp reduction in the levels of tariff protection on imports. Taking the region as awhole, average tariffs declined from 44.6 per cent in the pre-reform years to 13.1 per cent in 1995(IDB, 1996: 98). Another important feature of the liberalization process was the gradual adoption ofmore uniform tariff structures. These provided advantages in terms of administration and transparency,preventing tariff policy from being manipulated by interest groups capable of applying pressure ongovernment policy.

Trade reform was often associated with crucial changes in exchange rates. After the debt crisis, manyLatin American currencies were devalued, and subsequently many were classified as either effectivelyvalued (value of currency broadly in line with the real market rate) or under-valued (value of currencylower than the real market rate). This change made exports from most Latin American countries muchmore competitive and was one of the main causes of rapid export growth in many countries.

IMPACTS AND PROBLEMS OF NEOLIBERAL REFORMWhat have been the impacts of neoliberal reform in Latin America? Have the theoretical argumentsthat have developed in the past 15 years borne empirical fruit in terms of rapid economic growth andreductions in inequality and poverty? At present, any overall evaluation of impacts is very difficult toformulate. There are a large number of reforms and each has a different effect over time and onpotential investors. The chronology of reform can be an important theme, particularly as it relates tothe reaction of firms and their decision-makers – who in the neoliberal model become the majoreconomic actors. For this reason, one could see the shift from closed to more open, market-driveneconomies as a transition process with at least three phases:

1 The initial phase: dominated by negative factors centred on the great uncertainty generated bythe reforms themselves, often compounded by macro-economic disequilibria (such as highinflation) and profound economic restructuring. ‘Faced with this uncertainty, investors reacteddefensively, rationalizing production processes and introducing disembodied technical change toincrease productivity’ (Stallings and Peres, 2000: 35–6).

2 The phase of positive transitory factors: linked to a period when uncertainty declines andnecessary investments begin to grow – investments to reduce costs, upgrade products for export,fulfil privatization obligations, or support the entry of TNCs into new markets.

3 Phase where reforms have been consolidated: investment determined by the ‘normal’ factors thatcharacterize all capitalist economies (for example, macro-economic stability, anticipated demand,relative prices, technological upgrading, and so on). Perhaps, only Chile has reached this thirdphase in which reforms have been consolidated.

Thus, all the other countries are still in the transitory phase. As one probes into individual cases, itbecomes apparent that the take-up of neoliberal reform in Latin America has been veryheterogeneous. The adoption of neoliberal policies has varied greatly in terms of both speed andscope. There have been some countries (most notably Venezuela) that have avoided any intention ofadopting such policies. Other countries, as Stallings and Peres (2000) noted, have been cautious (orslow) adopters of reform – Brazil, Colombia and Mexico, according to their analysis. Meanwhile, therehave been countries that have adopted much of the neoliberal package aggressively, but avoidedaddressing certain key elements of reform during the transition – as with Argentina and itsproblematic exchange rate policy. Other countries have adopted the full range of neoliberal economicpolicies vigorously but have not addressed the subsequent institutional reform – Peru and Boliviamight be included here. This analysis of impacts will continue by focusing on how key economic andsocial indicators have performed under neoliberalism.

Investment and growth

Edwards (1995), the World Bank’s chief economist for Latin America at the time, argued that thepackage of market-oriented economic reforms introduced in the late 1980s and early 1990s would

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transform Latin America from a continent of economic despair to one of hope. Opening LatinAmerican economies to world markets and allowing more freedom to the private sector wouldincrease investment and productivity, and result in higher growth. However, according to the Stallingsand Peres (2000) study of nine Latin American countries, only Bolivia, Chile and Costa Rica weresuccessful in raising their investment rates. Of these three countries, only Chile was able to transferrising investment into high productivity growth. In contrast, in Latin America’s two largest economies,Mexico and Brazil, investment and productivity growth lagged behind so that investment as a share ofGDP is still below 1980 levels. Meanwhile, Chile’s record of investment growth has been impressive.Gross fixed capital formation as a percentage of GDP rose more or less steadily from 17.7 per centin 1985 to 32.2 per cent in 1998 before falling back to under 27 per cent in 2000 (Banco Central,2002a: 77).

Changes in investment and productivity have been insufficient to achieve the rapid rates of economicgrowth required for sustained development. ECLAC (2003b) has suggested that a 6 per cent growthrate is needed to tackle the social issues pending in the region (poverty, unemployment, and others).Referring back to Table 3.1, one can see that only Chile met this criteria for the period from 1990 to2001 and only Peru achieved average growth above 4 per cent a year. Growth rates in the two largesteconomies of Brazil and Mexico averaged less than 3 per cent, which was still higher than for mostother countries of South America. Economic growth, even in the relatively favoured 1990s, wastherefore considerably less than that expected by such World Bank economists as Edwards.

Economic growth of 6 per cent requires a high investment rate – around 28 per cent of GDPaccording to Stallings and Peres (2000: 34). In the peak year (1998) of investment in Latin America, aninvestment rate of only 23 per cent was achieved, and again only Chile was able to achieve the higherlevel. Thus, Latin America under neoliberalism has not produced either the investment rate or growthrate required to make an impact on Latin America’s social debt – unlike East Asia. Even Chile, whichhas the best record of investment and productivity growth in Latin America since 1985, fallsconsiderably behind the investment and growth standards set in such East Asian economies as SouthKorea and Taiwan.

Trade liberalization

According to the econometric and qualitative evidence of the Stallings and Peres (2000: 38) study, oneof the two key reforms that were most important for determining investment patterns was that ofimport liberalization. This reform lowered costs for imported inputs and capital goods and increasedcompetitive pressures. Meanwhile, for export growth to be achieved, a floating exchange rate (thatdoes not become over-valued) is required.

It is interesting to note that trade reform did not bring increased rates of export growth in the1990s (compared with the 1980s) for four countries – Brazil, Colombia, Ecuador and Paraguay (seeTable 3.4). Increasing export growth was, however, recorded in the other countries, with Mexico andChile recording the two highest rates of export growth in the 1990s. Examining the record of thesetwo countries, it could be argued that trade reform, if successful, can bring at least four benefits:

1 A sustained growth in exports. Both countries achieved high growth rates over two decades (seeTable 3.4). Export growth in Chile has slowed since the late 1990s. This may show the difficulty ofmaintaining export growth in countries where resources dominate the export profile.

2 An increasing and more diversified range of exports and less dependence on one or twocommodities. Under inward orientation, Mexico and Chile had relied heavily on oil and copperrespectively for their export trade. Mexican export growth has been dominated by manufacturedproducts, reducing oil to less than 10 per cent of exports. Meanwhile, in Chile, copper constitutedabout 80 per cent of Chile’s exports in 1974 – by 2001, this proportion had declined to 37 percent. Four other specialized areas of export production have developed in Chile – agriculture(mainly fruit), agroindustry (wine, fruit products), fish products and forestry (particularly cellulose).

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3 Increasing and more diversified imports. Import growth should focus on capital goods forinvestment purposes rather than consumer goods. Economic growth in both Mexico and Chilesince 1985 has been based on import growth being dominated by capital goods.

4 Trade with a more diversified range of countries. This applies much more to Chile than Mexico, asMexican trade has become dominated by one partner, the USA (see Figure 3.3). In the case ofChile, trade was formerly dominated by the USA and the main industrial countries of WesternEurope. After trade reform, Chile came to develop additional and significant trading links withother Latin American countries (especially Brazil, Argentina and Mexico) and the industrializedand industrializing countries of East Asia (Japan, Taiwan, South Korea and China).

Trade reform, if successful, can therefore bring a more diversified configuration to Latin Americancountries and their trading relationships with the global economy. Indeed, the international economicdownturn at the beginning of the twenty-first century has demonstrated that ‘economies which areheavily dependent on export earnings from just a few products or markets are more vulnerable thaneconomies with more diversified exports’ (ECLAC, 2003b: 12).

Trade reform can bring problems that are sometimes overlooked by the many internationaleconomists and advisers who actively promote it. Trade liberalization has brought at least threeproblems to those formerly inward-oriented countries that have enthusiastically adopted it:

1 The transition starts with a severe short-term problem of restructuring in terms of investment,production and employment. The reduction of tariffs and non-tariff barriers has a very negativeimpact on investment, production and employment in the formerly protected sectors (such asconsumer-good manufacturing). Meanwhile, investment, production and employment expand onlyslowly in those sectors in which national economies have a comparative advantage in worldtrade.

2 In the smaller countries of Latin America, the growth of diversified or non-traditional exports hastended to be concentrated in primary products. Increased reliance on primary product exportsbrings problems related to the changing terms of international trade. The twentieth century wascharacterized by the long-term deterioration of raw material prices. Price data for 24commodities between 1900 and 2000 showed that the terms of trade for non-oil commoditiesdeteriorated to such an extent that by the beginning of the twenty-first century they represented

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TABLE 3.4 Latin America: export growth during the 1980s and 1990s

Country Average annual export growth Average annual export growth rate (%), 1980–89 (%), 1990–99

Argentina 3.8 8.7Bolivia 1.0 4.9Chile 6.9 9.7Mexico 7.0 14.3Peru −1.6− 9.0Uruguay 4.3 7.0Venezuela 2.8 5.6

Brazil 7.5 4.9Colombia 7.5 5.2Ecuador 5.4 4.4Paraguay 12.2 5.1

Source: World Bank (2000), pp. 294–5.

Structural reform in South America and Mexico: economic and regional perspectives

53

Latin America23%

Other23%

Asia8%

Japan3%

EU22%

US25%

Brazil

Latin America 21%

Other21%

Asia11%

Japan11%EU

20%

US16%

Chile

Latin America 26%

Other12%

Asia3%

Japan2%

EU10%

US47%

Andean Community

Latin America 47%

Other16%

Asia9%

Japan1%

EU16%US

11%

MERCOSUR (excluding Brazil)

US89%

Latin America3%

Other4%

Japan0% Asia

1% EU3%

Mexico

Figure 3.3 Latin America: export markets, 2001 (in percentages of total exports in current dollars, 2001)Source: ECLAC (2003b: 5)

‘less than a third of their pre-1920 levels’ (ECLAC, 2003b: 38). In addition, there is the problem ofhigh price volatility – raw material prices rising and falling with world economic cycles (Maddison,2001).

3 The increasing importance of transnational actors in Latin American economies (Clark, 1997), notonly in terms of TNCs but also in terms of aid agencies and multilateral organizations. TNCs arebecoming increasingly prominent in the marketing of primary product and manufacturing exports,partly because they have the expertise in international marketing, access to capital and relevanttechnological innovation. This indicates a distinct decline in national control over production in theincreasingly crucial export sector.

Trade liberalization is certainly not a panacea for the economic problems of Latin America. It hasbrought greater advantages to the larger, more industrialized middle-income countries of LatinAmerica than to the smaller, less industrialized and lower-income countries of Latin America (seeChapter 4).

Reforms and employment

The economic reforms were expected to have a positive impact on employment through both fastergrowth of output and a shift towards export-oriented production based on intensive use of labour.Some countries did achieve significant growth in employment levels during the 1990s (see Table 3.5).All these countries had enjoyed rapid export growth during the 1990s – Mexico, Chile, Peru andBolivia (see Table 3.4). However, some crucial countries (Brazil, Argentina and Colombia) recordedslow-growing or static employment levels, particularly for wage earners (see Table 3.5). Brazil’s formalsector jobs actually fell in absolute terms during the 1990s (Stallings and Peres, 2000: 46).

Employment growth was to be reinforced by labour market reforms. According to Thomas (1996:86), neoliberal policies targeted labour market distortions by introducing legislation to reduce thepower of trade unions and to reduce the level of legislated minimum wages. Later, however, thearchitects of the Washington consensus viewed the growth of unemployment differently (see Table3.6) and argued that labour reforms had been generally weak in both formulation and execution(Williamson and Kuczynski, 2003).

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TABLE 3.5 Latin America: changes in labour market indicators during the 1990s

Country Occupation Unemployment Wage Real wage Labourlevel employment productivity

Chile + + + + +Argentina – – + = +Bolivia + + – + –Brazil – – = + +Colombia = – – + +Mexico + – = + =Peru + – – + +

+ conditions improved, – they deteriorated, = they remained relatively constant.Occupation level – per cent change in the rate of employmentUnemployment – per cent change in unemployment rateWage employment – growth of wage employment with respect to total employmentReal wage – per cent change in real average wages in the formal sectorLabour productivity – per cent change in average labour productivitySource: Adapted from Stallings and Peres (2000: 47).

Labour markets in Latin America are dominated by the distinction between the formal and informalsectors (see Chapter 11). The International Labour Office (ILO) defines the informal sector asconsisting of low-productivity jobs for which workers receive low wages and no benefits. The ILOmeasures the informal sector by combining jobs of the self-employed, domestic service and micro-enterprises (less than five workers). According to the ILO, nearly 60 per cent of new jobs during the1990s in Latin America were created in the informal sector. Table 3.7 fleshes out this trend by country.Only Chile and Argentina recorded a declining informal sector during the 1990s. In all other countriesit was on the increase. By 1999, the informal sector was greater than the formal sector in Peru andEcuador (and most probably Paraguay and Bolivia for which there is no ILO data), and in all othercountries outside Chile it employed more than 40 per cent of the workforce. The economic crises ofthe early twenty-first century have undoubtedly increased the size of the informal sector, most notablyin Argentina and Uruguay. Thus, alongside slow employment growth in many countries, there havebeen increasing problems in job quality.

In Latin America’s bi-modal labour market, the growth of employment in the informal sector isassociated with the relative fall in the formal sector. Meanwhile, real wages have increased in the formalsector in virtually all countries and been associated in some cases with increases in labour productivity(see Table 3.5). However, this was associated with the decline or stagnation of wage employment inmost countries.

Slow employment growth raised the unemployment rate in the 1990s in most Latin Americancountries. Table 3.6 demonstrates the change in the urban unemployment rate from 1985 (the heartof the debt crisis) to 2000 (marking a decade and a half of neoliberal transition). The weighted averageof urban unemployment in Latin America did decline between 1985 and 1990 but then started to riseagain, so that by the year 2000 its level was higher than that of 1985. Unemployment increased overthis period in all countries apart from Chile and Mexico (see Table 3.6). Urban unemployment datadoes not include under-employment and tends to be based on survey data but, in 2000, six countrieshad unemployment levels over 10 per cent. Thus, the neoliberal model has not provided the jobsrequired to reduce unemployment and has not generated the growth in waged employment requiredas a precondition to reduce inequality and poverty.

Explanations for this poor record of employment growth need to focus on firms and government. In the early stage of transition, there was a severe short-term problem of increased

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TABLE 3.6 Latin America: open urban unemployment, 1985–2000

Country 1985 1990 1995 2000

Argentina 6.1 7.5 17.5 15.4Bolivia 5.7 7.2 3.6 7.5*Brazil 5.3 4.3 4.6 7.5Chile 17.0 7.4 6.6 9.2Colombia 13.8 10.5 8.8 20.4Ecuador 10.4 6.1 7.7 14.9Mexico 4.4 2.8 6.2 2.3Paraguay 5.1 6.6 5.3 9.4*Peru 10.1 8.3 7.9 10.3Uruguay 13.1 9.2 10.8 13.3Venezuela 14.3 11.0 10.3 14.6Weighted Average for Latin America 8.3 5.7 7.2 8.9(includes other countries)

*1999 dataSource: ILO (2000).

unemployment due to the massive restructuring of the economy that the neoliberal reform created.The formal sector was considerably restructured as the economy opened up to overseas markets andforeign competition. Those companies used to producing for protected national markets normally hadto dramatically reduce employment levels. Furthermore, after decades of inward orientation, nationalentrepreneurs were not used to the demands of highly competitive world markets and were wary ofgovernments’ long-term commitment to outward orientation. Thus, as employment declinedsubstantially in formerly protected sectors, it rose only slowly in more export-oriented firms. WhenThomas (1996: 89) focused on labour market restructuring in the early phase of neoliberalismbetween 1980 and 1992, he noted that the main increases in employment were in small firms andown-account workers and that employment in large firms stayed broadly similar.

A second explanation concerns government employment which has declined under the neweconomic model, both through the privatization of state firms and the reductions in the number ofpublic employees. This changed the historic pattern of the state becoming more and more significantas a direct employer. During inward orientation, the state had often been the most importantgenerator of formal jobs in the country (Roberts, 1995: 115). Between 1990 and 1999, the percentageof the urban workforce in the formal public sector declined from 15.5 to 13.0 per cent in LatinAmerica as a whole (ILO, 2000).

Income distribution and poverty

Poverty and inequality have long been distinctive features of Latin American economies. Decades ofgovernment intervention, inward orientation and protected markets did little to reduce inequality.Latin America was the only region in the world where the share of income going to the poorest 20per cent of the population consistently declined between 1950 and the late 1970s (Sheahan, 1987).In the late 1970s, the percentage of income (2.9 per cent) received by the poorest 20 per cent waslower in Latin America than in any other part of the developing world and much lower than that inEast Asia (6.2 per cent). Edwards (1995) argues that liberalization programmes and their effects onpoverty and income distribution must be placed in this context.

Nevertheless, he emphasizes that ‘only to the extent that poverty is reduced and living conditionsof the poor are improved will the structural reforms implemented during the last decade be sustained’(Edwards, 1995: 252). What has been the record of the neoliberal period in terms of reducing poverty

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TABLE 3.7 Latin American labour markets, 1990–99

Country Informal sector (%) Formal sector (%)

1990 1999 1990 1999

Chile 37.9 37.5* 62.1 62.5*Mexico 38.4 40.1 61.6 59.9Uruguay 39.1 43.1 60.9 56.9Brazil 40.6 47.1 59.4 52.9Argentina 52.0 48.0* 48.0 52.0*Colombia 45.7 49.0* 54.3 51.0*Venezuela 38.6 49.1 61.4 50.9Peru 52.7 53.7* 47.3 46.3*Ecuador 55.6 58.6* 44.4 41.4*Latin America (includes other countries) 42.8 46.4 57.2 53.6

*1998Source: ILO (2000).

and inequality? The evolution of labour markets has an important impact on income distribution(Sheahan, 1997). However, we have already noted that the neoliberal model did not generate a goodbalance between the demand for labour and the growth of the labour force. Put simply, the nature ofeconomic production under neoliberalism has not been sufficiently labour-intensive (outside certainregional spaces – see below).

Another link between the labour market and income distribution is the wage differential. Stallingsand Peres (2000: 48–9) demonstrate that this differential increased in the 1990s. Their data pointed toa widening gap in wages based on skill level. The wage gap between university graduates and thosewith 7–9 years of education rose from virtually three to four times during the 1990s in Latin Americaas a whole. The neoliberal model was rewarding those with longer and more specialized educationand acquired skills.

Within the context of the great inequality already characteristic of Latin America, changes in incomedistribution during the 1990s took three forms according to Stallings and Peres (2000: 51–2). First, inBrazil, Colombia and Mexico, inequality continued to increase. Second, there was a pattern of declinein inequality in the early phase of the neoliberal model (attributed to conquering inflation) followedby the reassertion of rising inequality; Argentina, Bolivia and Peru fitted broadly into this pattern. Asustained pattern of declining inequality was found only in Chile.

For those who have investigated the Chilean model more closely, the evidence points to significantreductions in poverty rather than in inequality. The work of Larranaga and Sanhueza (1994)investigated the transmission mechanisms between economic growth (based on the neoliberalmodel) and poverty incidence. They used data from national household surveys in order todecompose the change in the poverty headcount ratio between 1987 and 1992 into a growth anddistributive component. According to their analysis, about 80 per cent of the reduction in povertyfrom 1987 to 1992 was accounted for by the effect of economic growth. Scott (1996: 175) thussuggested that in Chile, ‘trickle-down’ was the major source of poverty alleviation over the period witha tightened labour market acting as the most likely transmission mechanism. Reductions in ruralpoverty were more impressive than that of urban poverty in Chile due to the effects of export-oriented agriculture (Scott, 1996: 171).

Finally, one should consider the role of government social expenditure, which increased in the 1990sin comparison with the previous decade. This helped to lower the very high levels of inequality in theregion (Stallings and Peres, 2000: 56). The principal instrument was the provision of so-called basicservices, especially primary education and health as a high proportion of these services go to poorfamilies. Social expenditure thus had a positive impact on income distribution, reducing the huge gapbetween the income of the highest and lowest income quintiles. However, due to fiscal constraints,increases in social expenditure have been severely constrained in most Latin American countries andhave become more so in the early twenty-first century.

NEOLIBERALISM AND ECONOMIC SPACESThe second half of this book seeks to examine how neoliberalism has affected the livelihoods ofindividuals and households in very local spaces. However, there is another route to the analysis of howchanges in macro-economic policies can affect spaces within Latin American countries. That is throughthe vehicle of evaluating how firms and enterprises react to and are affected by such shifts to market-based and outward-oriented economics; and then how changing firm behaviour impacts uponeconomic spaces on a variety of scales.

Firm responses to neoliberalism

Although the neoliberal reforms did not aim at promoting specific firms, neither were they meant tobe neutral. For example, export-oriented firms were supposed to perform better than those gearedto domestic markets. Firms within certain sectors were also favoured by much greater investment in

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the post-reform period. Thus, in all Latin American countries firms within the telecommunicationssector needed to invest massively in order to modernize during the neoliberal period. Investment byfirms in capital-intensive manufacturing sectors also tended to be dynamic – for example in firmsspecializing in cement, steel, petrochemicals and chemicals. This was particularly the case in Argentina,Brazil, Chile, Colombia and Mexico (Stallings and Peres, 2000: 60). Investment by firms in electricity andtransportation was more variable.

Before neoliberal reform, the process of industrial expansion in Latin America had been engineeredthrough a distinctive institutional structure of firms, often known as the triple alliance (Gwynne, 1985).This was because key firms involved in industrialization could be divided into three – state firms,national private companies and transnational corporations (TNCs). Neoliberal reform was to have asignificant impact on this framework. First of all, widespread privatization was to massively reduce thenumber of state firms in most countries – particularly those involved in feedstock industries, such assteel and petrochemicals. Many strategic oil and mining companies would still remain in state hands afterreform, such as the copper-producing CODELCO in Chile or the oil-producing PEMEX in Mexico.

Furthermore, among large private firms, TNC subsidiaries gained ground in relation to largedomestic corporations. TNC subsidiaries were responsible for much of the investment growth, notonly in the more dynamic areas of manufacturing, but also in mining and telecommunications. Oneexample is that of the Spanish firm, Telefonica, which by 2003 had invested 32.7 billion euros intelecommunication systems in Latin America, most notably in Brazil and Argentina (El País, 2003).Privatizations, the liberalization of regulations that prevented foreign firms from investing in manysectors, and the globalization of important industries combined to strengthen the position of TNCsafter neoliberal reform.

Productivity gains were evenly spread across enterprises in agriculture, manufacturing and services.However, heterogeneity increased within subsectors, such as the contrasts between commercial andfamily farming enterprises. Labour productivity in manufacturing gained ground in certain keycountries during the 1990s, such as in Argentina and Brazil (Stallings and Peres, 2000: 62). However,in other countries productivity declined. As a result, Latin American labour productivity in manu facturing firms was much lower than for equivalent firms in the United States in 1996 – rangingfrom as low as 15 per cent of US levels in Peru to as high as 67 per cent in Argentina. Within someLatin American countries, the gap between the productivity of large firms and that of small- andmedium-sized enterprises narrowed, but performance between countries continued to beextremely dissimilar.

Rapid technological advance occurred mainly among larger firms. The importance of external factorsin the incorporation of new technologies increased in tandem with the investment process. ‘Thegrowing significance of imported capital goods, the substitution for domestic inputs, and theconstruction of technologically advanced plants by foreign firms all resulted in a greater presence offoreign components in the region’s sectoral innovation systems’ (Stallings and Peres, 2000: 61–2). In linewith the neoliberal model, the state reduced its involvement in improving technological capability at thenational level and local private enterprises have not always stepped in to fill the void (Pietrobelli, 1998).

Reforms did not solve, and quite probably increased, two problems associated with the nature offirms in Latin America. First, investment continued to be concentrated among large enterprises thathave not shown the capacity to develop backward and forward linkages with smaller firms. This hasmade the development of localized clusters of technologically dynamic firms (so important inperipheral economic spaces in Europe) much more difficult to achieve (Casaburi, 1999). Second,supplier chains were destroyed by the quest for competitiveness through increasing imported inputs.Agroindustry may be an exception here (Casaburi, 1999) but it was characteristic of firms in otherexport-oriented industries, particularly in the north Mexican border area (Kenney and Florida, 1994;Vellinga, 2000). Although these processes have led to greater localized specialization and higherefficiency, they have not become vehicles for deepening local economic growth and thus have led tothe persistence of the external constraint on manufacturing growth.

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This lack of links between large enterprises and small local firms in export-oriented activities has notonly led to limited cooperation and information exchange between firms at the local level but has alsoproduced negative impacts on local employment growth, given that small firms and microenterpriseshave accounted for more than 100 per cent of net job creation in most Latin American countriesduring the 1990s (see Table 3.8). It is interesting to note the contrast between Mexico and Chile. InMexico, the growth in TNC assembly firms in the northern border area meant that it provided theexception in that medium and large enterprises were the main providers of manufacturingemployment. In contrast, in Chile, where agroindustry and fish products have been two key export-oriented sectors (and in which small-scale suppliers have been important), small enterprises providedthe huge contribution to employment growth.

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TABLE 3.8 Contribution to total manufacturing employment by size of firm, 1990s

Country (period) Wage earners Other Total

Micro- Small Medium-size Unspecifiedenterprises enterprises and large

enterprises

Argentina (1991–97) 1.1 8.1 –11.6 –71.4 –26.2 –100.0Bolivia (1989–96) 11.6 13.8 9.6 n.a. 65.0 100.0Brazil (1993–96) 106.1 53.6 –265.0 –17.7 32.1 –100.0Chile (1990–96) 27.6 122.8 –67.8 1.1 16.3 100.0Mexico (1991–97) 26.4 6.7 42.2 –3.7 28.4 100.0

Micro-enterprises contain up to 5 workersSmall enterprises contain 10 or under in Brazil, 49 or under in Chile, and 50 or under in Argentina, Mexico andPeru.Source: Stallings and Peres (2000: 64).

However, employment growth under neoliberalism has occurred mainly in service rather thanmanufacturing or agricultural enterprises (see Table 3.9). Service firms had a heterogeneousperformance. High quality jobs were created in telecommunications firms, banks and financecompanies, but the bulk of employment growth was in low-skill enterprises. Micro-enterprises offeredthe greatest number of jobs, with most of them operating on an informal basis (Stallings and Peres,2000: 66). The low rate of job creation by large, modern service firms that offered higher wages ledto a widening wage gap between service firms.

Changes to economic spaces

With the consolidation of the neoliberal model in much of Latin America, localities and regions withincountries have become more and more integrated into global (rather than just national) markets. Theshift from inward to outward orientation has meant that spaces within Latin American countries havebegun to specialize in producing goods and services in which they have comparative advantages at theglobal scale. The decisions of individual firms and enterprises become crucial in terms of the nature ofthe insertion of these economic spaces into the wider global economy.

Outward orientation in Latin America along with decisions of firms to invest have led to at least twodifferent patterns of export growth in the larger Latin American countries in the 1990s:

1 Firms investing in renewable resources for subsequent export (and occasionally adding extravalue) in the smaller countries of South America.

2 Firms investing in export-oriented manufacturing. One key example is that of the north Mexicanborder area. Here, TNCs have invested in order to take advantage of closer integration with thehuge North American market.

It should be pointed out that the Brazilian model does not really fit into either of these categories.Here investing firms are still strongly geared to the large Brazilian market but there are neverthelesssignificant exports coming from both manufacturing and resource-based firms.

Economic spaces and resource exportsThe shift to outward orientation in the smaller countries of Latin America has normally beenassociated with the growth of non-traditional exports. These are distinguished from traditionalexports that were able to be traded internationally under the inward-oriented model. Thesetraditional exports were normally raw materials that were traded on world markets despite sufferingfrom overvalued exchange rates in their country of origin. They tended to be non-renewableresources (oil and minerals in particular) whose international price reflected the global balance ofsupply and demand in the commodity rather than the costs of production. In contrast, the growth ofnon-traditional exports is very much influenced by the costs of production of potential exports. Thegrowth of non-traditional exports in both manufacturing and primary product sectors has benefitedfrom trade liberalization and the shift to more effectively-valued exchange rates. Quality and reliabilityof the export product are important considerations as well, but the relative cost of production hasbeen the crucial factor behind firms deciding to invest in the production and export of what are oftenrenewable resources.

Renewable resources include such sectors as agriculture (Gwynne, 1993b), fishing (if extractionrates are controlled), aquaculture and plantation forestry (Clapp, 1995; Gwynne, 1996b). With the shiftto neoliberal policies, these exports have become particularly important for the smaller countries ofLatin America (Barham et al., 1992; Gwynne, 1993a). Carter et al. (1996) point out that from theirearly phases, non-traditional agricultural exports grew very rapidly in such countries as Chile,Guatemala and Costa Rica. However, export growth in these sectors is still ultimately controlled byTNCs (such as fruit TNCs or large corporate retailers from the core economies). As their productsupply is organized through contracts with large numbers of locally-based farming enterprises, TNCscan have huge impacts on how local land and labour markets evolve (Gwynne, 1999; 2003).

The importance of primary resource exports in smaller countries is partly because these countrieshave generally been unsuccessful in promoting manufacturing exports (Gwynne, 1985). For smaller

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TABLE 3.9 Latin America: employment growth by sector, 1990–97

Sector Employment Contributiongrowth to total

Agriculture –0.9 –11.1Manufacturing industry 1.2 9.0Construction 2.8 8.4Commerce, restaurants and hotels 3.5 30.9Electricity, gas and water, transportation, storage and communications 4.9 12.0Financial services, insurance, real estate and business services 6.8 14.0Social, communal and personal services 2.8 40.3Other –3.2 –3.5

TOTAL 2.0 100.0

Source: Stallings and Peres (2000: 67).

countries the previous inward-oriented phase based on manufacturing had been characterized byhigh-cost and small-scale industrial plants that were weak in terms of industrial competitiveness on aworld scale. Firms found it difficult to lift their horizons from domestic to international markets.

Economic spaces and manufacturing exportsThe shift to neoliberal policies has also boosted manufacturing exports from the larger countries ofLatin America, particularly Mexico and Brazil. In these two countries, the inward-oriented phase ofdevelopment was much more successful in creating manufacturing sectors that came close tointernational levels of competitiveness. In the shift to outward orientation, many firms have beenunable to compete in international markets and have closed down plants. Other firms, however, havebeen able to restructure successfully and achieve international levels of competitiveness. Such firmshave required access to capital, new technology, best-practice in management and a range of labourskills. However, the key factor in the international competitiveness of these firms has been low labourcosts. Wage levels in Mexican industrial plants have been as low as one-tenth of those in equivalentplants north of the border in the United States (Shaiken, 1994). Such labour cost differentials haveattracted much investment from foreign firms, particularly since the signing of NAFTA in 1993 and theprivileged access of Mexico to the US market; labour markets, the gender division of labour and socialrelations have dramatically changed in Mexico’s northern border towns as a result (Kopinak, 1997).

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BOX 3.1: ‘New’ economic spaces on the Mexican border

The north Mexican border is probably the largest export processing zone in the world. On theMexican side, there are at least 11 towns directly adjacent to the border, from Tijuana in the farPacific west to Matamoros in the east (see Figure 3.4). Each has a direct partner town on the USside of the border, which provides many of the high-order services. Mexican border towns havehad a special status ever since 1965 and the establishment of the Border IndustrializationProgramme. Within these border towns assembly production has predominated in assemblyplants known as maquilas.

Since the decisions of the Mexican government to shift to outward orientation in the mid-1970s and join NAFTA in 1993, this border region has been one of the fastest-growing economicspaces in Latin America. Between 1990 and 2000 the population on the Mexican side grew bymore than 50 per cent and GDP growth (for the border states on both sides) averaged between5 and 7 per cent a year (The Economist, 2001b: 27). Ciudad Juarez now has a population of overone million inhabitants. Employment growth in the assembly industry was very high during the1990s (see Figure 3.4), more than trebling in Tijuana and Mexicali and more than doubling inReynosa, Ciudad Acuna, Ciudad Juarez and Nogales.

However, this ‘new’ economic space probably provides a special case, unlikely to be copiedelsewhere in Latin America. Virtually all its exports are sent to the US market. Manufacturinginvestment in the border towns comes largely from TNCs rather than Mexican or local firms. Theindustrial mix is a combination of export processing and component supply (Gereffi, 1996). Inexport-processing firms, plants are labour-intensive and the majority of workers are female andin unskilled jobs (Kopinak, 1997). Component supply firms are more capital-intensive, can usehigh technology and require more skilled labour. Both types of industry are, however, controlledby TNCs, mainly US but with significant numbers from Japan and South Korea. Furthermore,trade unions have much less power than in central Mexico as company-based unions negotiatingflexible contracts prevail (Kopinak, 1997).

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Los Angeles

San DiegoCalexico

Yuma

Douglas El Paso

Del Rio

Eagle Pass

Laredo

McAllenBrownsville

Corpus Christi

San Antonio

Houston

DallasPhoenix

Albuquerque

Austin

TEXAS

NEW MEX ICO

ARIZONA

CALIFORNIA

SONORA

CHIHUAHUA

COAHUILA

TAMAULIPAS

Tijuana

Nogales

AguaPrieta

Hermosillo

Ciudad Juarez

ChihuahuaPiedras Negras

CiudadAcuna

NuevoLaredo

ReynosaMonterrey

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100.313.2

109.2

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175.6 72.5209.9

Mexican border townsGrowth in 1000s of jobs in assembly industryin each Mexican border town, 1990–2000.US border townsOther towns

San Luis R.C.n.a.

~

Mexicali

Figure 3.4 Assembly industry and the Mexican border towns

In broad terms, the outward-oriented nature of economic growth has had an impact on peripheralregions according to the ability of producers in those regions to export successfully to internationalmarkets. In those regions where producers have made the shift from supplying domestic tointernational markets (normally with the assistance of international intermediaries), significantincreases in regional investment and labour productivity have often followed. However, in regionswhere producers remain geared to the domestic market, no such transformation has normallyoccurred. Thus, in countries that have experienced outward-oriented growth, uneven developmenthas been the consequence – although without unduly affecting the inherited core–peripheryrelationship (Scott, 1996; Uribe-Echevarria, 1996).

Neoliberal reform has tended to accentuate the economic importance of the core region or maincity of each country. According to de Mattos (1996), foreign investment in Chile (outside mining) hasbeen heavily concentrated in the metropolitan region of Santiago during the period of neoliberalreform, and particularly during the late 1980s and 1990s. Between 1974 and 1993, nearly two-thirdsof foreign investment in manufacturing and services was concentrated in the Santiago region, causingthat region to receive the largest benefits in terms of regional economic growth, employment,construction and labour productivity. Figure 3.5 shows that in resource-rich countries such as Chile,the economic effects of export-oriented resource growth are not necessarily concentrated in theproducing region. The GDP of the metropolitan region of Santiago completely overshadows the GDPof other regions, including those with large mineral exports.

The primate city and its immediate environs can enjoy the highest rates of regional economicgrowth within export-oriented resource development. There are some logical explanations as to whya wide range of firms are attracted to locate in the primate city. The primate city offers firmseconomies of scale in a range of services – finance, manufacturing supply, business services, retailing,production of knowledge – and constitutes the nexus of communications between resourceproduction in the regions and the demands of firms in the wider world economy. Technologies oftime–space compression favour these large cities, such as access to international airports or hotelsoffering video-conferencing. For example, Santiago is emerging as a second-tier global city foradvanced producer services and other elements of economic globalization (Sassen, 2000).

Away from the core metropolitan areas, a complex patchwork of regions and sub-regions hasevolved, reflecting the comparative advantage and factor endowments of regions in world markets.Prosperity has been linked to an area’s ability to attract investment and produce for export markets.In regions that did well under the inward-oriented model but found it difficult to attract export-ledcapital and restructure production for global markets, economic stagnation and decline relative toother regions have occurred, particularly in terms of labour productivity. The old reliance on supplyingdomestic markets became more difficult as regional producers had to face competition fromimported goods. Thus, it is often at the regional and local scales of analysis that the impacts ofneoliberal reform can best be seen in terms of changing social relations – for example, throughchanging labour and land markets (Gwynne, 2003). However, one then has the methodologicalproblem of generalizing from the particular impacts of policy reform at one locality to that at otherlocalities.

CONCLUSIONThe history of neoliberal reform in Latin America has been both heterogeneous and volatile. Somecountries have undoubtedly benefited, most notably Chile, others have done to a much lesser extentand some not at all. Meanwhile, the history of repeated but different crises and of varying significancein the key countries of Mexico, Brazil and Argentina makes overall generalizations difficult to make.Meanwhile, the policy-makers call for the second-generation of institutional reforms to beimplemented in which the state takes a more professional and regulatory role in economicdevelopment (Willamson and Kuczynski, 2003); these authors argue that the way forward is to

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3.2%

5.4%

2.1%

4.0%

3.2%

4.7%

0.5%

REGION 1

REGION 2

REGION 3

REGION 4

REGION 5

METROPOLITANREGION

REGION 6

REGION 7

REGION 8

REGION 9

REGION 10

REGION 11

REGION 12

Regional GDP as percentageo f natural GDP, 1998

2.8%

9.7%

5.9%

41.5%

10.2%

2.1%

Figure 3.5 The economic power of Chile’s regions.

‘complete, correct, and complement the reforms of a decade ago’ and not to reverse them. However,references to selective capital controls, a greater role for the state, and income distribution point tothe reform agenda moving towards the centre of the political spectrum and away from the applicationof free-market economics (The Economist, 2003b: 52).

In terms of activating economic growth at the local level, new government policies are needed toassist firms, particularly small firms. Small firms need special support to be able to access factormarkets (technology, skilled labour and capital). While the costs of accessing international markets arerelevant for all kinds of firms, they are particularly heavy in relative terms for the smallest companies.Reducing these costs for small firms is most efficient when the firms are clustered in particular regions(Perez-Aleman, 2000). As we saw in the case of North Mexico, much investment is concentratedamong large TNCs that have not shown the capacity to develop backward and forward linkages withsmall local firms. Instead they prefer to link into global supply chains linked to corporate control ratherthan develop local supplier networks.

Thus, changing inter-firm relations and the promotion of more locally-based and cooperativeclusters of firms will be difficult to achieve. However, if some shifts do not occur in this direction,economic spaces in Latin America will be increasingly at the mercy of decisions taken by TNCs. Thesewill have the priority of furthering corporate profitability rather than local development (Gwynne,2003). This applies as much to the ‘new’ economic spaces specializing in the development of renewableresources as to those characterized by product and component manufacturing oriented to coreeconomy markets. Overall, the patterns of uneven spatial development, so characteristic of previouseconomic phases (Morris, 1981), has continued and seems set to continue under neoliberalism.Peripheral regions within Latin America have become ‘new’ economic spaces in the sense ofgenerating new export-oriented activities. However, they have not become ‘new’ in the sense ofdeveloping new forms of locally-based enterprise and related organizations that can competeeffectively with transnational capital.

FURTHER READING

Bulmer-Thomas, V. 1994 The economic history of Latin America since independence. CambridgeUniversity Press, Cambridge. Provides a very detailed survey of the evolution of Latin Americaneconomies from the early nineteenth century and is particularly useful on the role of resources inLatin American development.

Casaburi, G. C. 1999 Dynamic agroindustrial clusters: the political economy of competitive sectors inArgentina and Chile. Macmillan, Basingstoke. Uses a commodity chain approach to study the regionaldevelopment of agroindustry in the Chilean Central Valley and Santa Fe region of Argentina. One ofthe few studies to explore the links between resource growth and local development in LatinAmerica.

Edwards, S. 1995 Crisis and reform in Latin America: from despair to hope. Oxford University Press,Oxford. A World Bank insider from Chile (and former Chief Economist for Latin America) analyseseconomic transformations in Latin America in an optimistic but also critical way. Edwards clearlyexpresses the reasoning behind policy changes and decisions and, unlike many economists, seemsaware of the political backdrop to economic crises and attempts to resolve them. Less ideologicalthan other writers from within the Washington consensus.

Gereffi, G., Spener, D. and Bair, J. 2002 Free trade and uneven development: the North Americanapparel industry after NAFTA. Temple University Press, Philadelphia. Uses the commodity chainapproach (itself derived from dependency theory) to explore the evolving relationships between theUnited States, Mexico, Central America and the Caribbean after the greater economic integrationbetween the USA and Mexico in the past decade. Targets the clothing industry and provides a useful

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spatial approach by focusing on how the changing commodity chain impacts (both positively andnegatively) on different producing regions. Useful source for Chapter 4 as well.

Stiglitz, J. 2002 Globalization and its discontents. Allen Lane, London. A former Chief Economist ofthe World Bank who is now very critical of the role of the IMF and the World Bank in Latin Americaand other developing regions. Points to some of the key contradictions of contemporary capitalismand argues that globalization is not working for many of the world’s poor.

Thorp, R. 1998 Progress, poverty and exclusion: an economic history of Latin America in the 20thCentury. Johns Hopkins Press, Baltimore, MD. An excellent resource for those wishing to explore theeconomic evolution of Latin American capitalism during the past century. Manages to successfullylink themes of political economy, economic theory, country studies and even livelihoods in areadable, data-rich and illuminating form.

WEBSITES

Inter American Development Bank, www.iadb.org, less comprehensive economic coveragethan the ECLAC website but there is more material on issues of poverty, inequality and social policy,such as related to education or pension systems.

International Monetary Fund, www.imf.org, provides data and IMF analysis (through speechesand reports of IMF economists) on Latin American economic conditions. Useful to know thethinking behind the decisions of this very powerful multilateral economic organization.

United Nations’ Economic Commission for Latin America and the Caribbean,www.eclac.org, a good source for contemporary economic data on Latin America, and somecontemporary studies on development issues can be accessed.

World Bank, www.worldbank.org, a source of data on individual countries (and groups ofcountries) as well as providing links to many relevant topics (such as aid and globalization).

World Forum, www.worldforum.org, provides a critical perspective on the arguments providedby the multilateral institutions.

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Central America and the Caribbean (CA/C) is a region of small, economically vulnerable, and trade-dependent countries surrounded by larger and more industrialized and economically diversifiedcountries (Figure 4.1). This chapter surveys the ramifications of neoliberalism’s outward-orientedstrategies that contrast with the approaches common in the decades prior to the 1980s’ debt crisisthat were relatively inward-looking.

Central America and the Caribbean each have their own scholarly literatures, and it is uncommonto unite and compare them as in this chapter (for a historical comparison, see Grugel, 1995).Analysing Central America and the Caribbean as a single region is increasingly appropriate, however,as events unfold around it. NAFTA’s designation of Mexico as part of North America, SouthAmerica’s organization into Mercosur and the Andean Group (see Chapter 3), and Reagan’sCaribbean Basin Initiative (a trade policy for designated ‘friendly’ countries) have all increased theusefulness of analysing Central America and the Caribbean as a region (Figure 4.1). Unfortunately itis a region anxious about, and reacting somewhat defensively to, hemispheric movements towardstrade alliances and increased capital flows to its north and south. Spurred on by the internationalclimate favouring regional trading blocs, the region has recently formed the Association of CaribbeanStates, but beyond several regional summits, has taken no firm steps towards region-wide economicintegration (ACS, 2003).

Much of what was said in Chapter 3 about economic policies and problems during the twentiethcentury in South America and Mexico applies to a considerable extent to these smaller countries. Thedecades prior to 1980 witnessed in this region the emergence of an array of state economicinterventions, including the promotion of domestic manufacturing of consumer goods. In that era ofimport substitution industrialization (ISI), a notion gaining widespread acceptance was that the stateshould control the ‘commanding heights’ of Caribbean economies, and that the private sector shouldslot in under the state’s guidelines for development. For both the Caribbean and Central America, theversion of ISI adopted, to a large extent involved US transnational corporations (TNCs) relocatingproduction facilities within the region to serve customers there, rather than a dramatic expansion ofdomestically owned industries.

In Central America and the Caribbean, as in South America, the 1980s’ debt crisis ushered in a newdevelopment paradigm associated with representatives of the multilateral aid agencies, who havefrequently visited regional capitals to move the neoliberal transition slowly but irreversibly along (Heyand Klak, 1999). Since the 1980s policy-makers have placed great emphasis on attracting foreigninvestors to produce for export. The state’s role has shifted away from direct ownership, productionand the provision of social services, towards subsidizing export-oriented investors. While the state’s new role under neoliberalism is often portrayed as one of downsizing, it is more accuratelyviewed as a qualitatively different relation between the state, investors and workers. For some

4Globalization, neoliberalism andeconomic change in Central America andthe Caribbean

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MEXICO

COLOMBIA

VENEZUELA

FLORIDA

THEBAHAMAS

CUBA

BARBADOS

PANAMA

ELSALVADOR

GUATE-MALA

BELIZE

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ISLANDS

MONTSERRAT

TOBAGO

TRINIDAD

BONAIRE

GUADELOUPE

PUERTORICO

DOMINICANREPUBLIC

HAITI

JAMAICA

CAYMANISLANDS

CURACAOARUBA

GUYANA

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FRENCHGUIANA

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ANTIGUAST. KITTSNEVIS

90 85 80 75 70 65 60 55O O O O O O O O 50O

25O

20O

15O

10O

5O

200 Km

200 Mi.

30O

65OBERMUDA

Figure 4.1 The small countries of Central America and the Caribbean

neoliberal activities, such as promoting exports and competing to attract investment, the state’s rolehas actually considerably expanded (Klak, 1996; 1998).

This chapter relies on Chapter 3 for an extended discussion of the evolution of macro-economicpolicies in Latin America and the Caribbean, and aims primarily to note ways in which the experiencein the smaller countries differs from that of the larger countries. Because it can build on the previouschapter’s economic policy groundwork, this chapter is able to devote considerable attention to thesocial, political and sectoral dimensions of development in Central America and the Caribbean. Itsfocus on the forces behind and impacts of macro-level development policy is complemented by thechapters in Part 3 that are pitched at the ground level of people’s creative struggles to adapt toadversity, make ends meet, organize themselves and defend their interests.

A REGION OF SMALL AND DEPENDENT STATESCentral America and the Caribbean is a region of small states (Table 4.1), but by internationalstandards, what is meant by small? These countries are certainly tiny compared with the regional giantsof Brazil, Colombia, Argentina and Mexico. The population of Central America and of the Caribbeanin 2002 was 38 and 39 million, respectively, when combined only three-quarters that of Mexico. Butour perception of the region’s size and significance is tainted by the emphasis in the media and inscholarship on huge countries. Note that when size is measured by population, the mean for all ofworld’s countries (33.6 million people) is much larger than the median (6.7 million people). This isbecause the mean population is positively skewed by a few huge countries such as the United States,Brazil and Mexico. In fact, one out of every four countries in the world is smaller than Jamaica. By worldpopulation standards, El Salvador (6.4 million people) and Haiti (7.1 million people) are actuallyaverage-sized. Similar conclusions would be reached if size were measured by area rather thanpopulation. Comparisons of this sort suggest the importance of examining unexceptional countriessuch as those of Central America and the Caribbean if we are to grasp the possibilities for andobstacles to development throughout the Third World (Table 4.1).

Central America and the Caribbean is also a region of economically vulnerable countries. The firstcolumn of data in Table 4.2 expresses trade dependence as a ratio of exports and imports divided byGDP. The lower the value, the greater the share of a country’s economic activity that involvesdomestic suppliers, producers and consumers. In other words, lower values mean more economicautonomy. The data indicate that, by and large, Central America and the Caribbean countries areconsiderably more trade-dependent than the larger and more industrialized countries represented inTable 4.2. Values of well over 100 for three of the countries indicate extreme trade dependence.

Note the exceptions to the above generalization. Guatemala is the least trade-dependent of theCentral America and the Caribbean countries with a value similar to that of Chile, the most trade-dependent of the South American countries shown. Indeed, Chile’s pronounced primary product-based export-orientation has been the subject of considerable attention and debate in scholarly andpolicy circles (see Chapter 3). But Chile distinguishes itself from Guatemala regarding the diversity oftrading partners. Chile is not only considerably less dependent on imports from and exports to theUnited States, but its exports there are now surpassed by those going to the EU (and to Japan).

The patterns just described for trade dependency in Central America and the Caribbean areextended by the data for imports to and exports from the USA in Table 4.2. For virtually everycountry shown, the United States is both the largest importer and exporter. At the same time, notethat the USA is the least trade-dependent country in Table 4.2. This is testimony to the profoundeconomic power of the USA in the American hemisphere. The only exception to the rule of US tradedependency in the region is St. Lucia, whose banana shipments to a guaranteed UK (and now EU)market dominate its exports. Dominica and St. Vincent display similar trade patterns. Unfortunately forthese eastern Caribbean islands, their lack of trade dependency on the United States has only createda bigger problem. The USA has successfully argued to the World Trade Organization that theguaranteed market in the EU is illegal and must be terminated (this issue is discussed further below).

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TABLE 4.1 Basic indicators for Central American and Caribbean countries and territories

Country Area Population Infant External debt Per capita Humanand territory (square 2002 mortality (most recent year) GDP, (PPP US$) development

miles) (PPP) rate, 2002 (most recent year) Index, 2000**

Central AmericaCosta Rica 51,100 3,835 11 4,600 (01) 8,500 (01) 43El Salvador 21,040 6,354 28 4,900 (01) 4,600 (01) 104Guatemala 108,890 13,314 45 4,500 (01) 3,700 (01) 120Honduras 112,090 6,651 30 5,600 (01) 2,600 (01) 116Nicaragua 129,494 5,024 33 6,100 (01) 2,500 (01) 118Panama 78,200 2,882 20 7,600 (01) 5,900 (01) 57

The CaribbeanAnguilla , 35 , 12 24 , 9 (98) 8,600 (01) naAntigua and Barbuda ,171 , 66 21 ,231 (99) 10,000 (01) 52Aruba , 75 , 70 6 ,285 (99) 28,000 (01) naBahamas 5,382 , 300 17 ,382 (00) 16,000 (00) 41Barbados ,166 , 276 12 ,425 (00) 14,500 (01) 31Belize 8,867 , 262 24 ,500 (00) 3,250 (01) 58British Virgin Islands , 59 , 21 20 , 36 (97) 16,000 (01) naCayman Islands ,102 , 36 10 , 70 (96) 30,000 (99) naCuba 42,804 11,224 7 11,000 (00) 2,300 (01) 55

*20,000 (01)1Dominica ,290 , 70 16 ,150 (00) 3,700 (98) 61Dominican Republic 18,704 8,721 33 , 5 (01) 5,800 (01) 94French Guiana 33,399 , 182 13 1,200 (88) 6,000 (98) na

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Country Area Population Infant External Debt Per Capita Humanand territory (square 2002 mortality (most recent year) GDP, (PPP US$) Development

miles) rate, 2002 (most recent year) Index, 2000**

Grenada ,133 , 89 15 ,196 (00) 4,750 (01) 83Guadeloupe ,687 , 436 9 na 9,000 (97) naGuyana 83,000 , 698 38 1,100 (00) 3,600 (99) 103Haiti 10,597 7,064 93 1,200 (99) 1,700 (01) 146Jamaica 4,244 2,680 14 5,200 (01) 3,700 (01) 86Martinique ,421 , 422 8 ,180 (94) 11,000 (97) naMonserrat , 40 , 8 8 , 9 (97) 2,400 (99) naNetherlands Antilles ,308 , 214 11 1,350 (96) 11,400 (00) naPuerto Rico 3,515 3,958 9 na 11,200 (01) naSt. Kitts and Nevis ,104 , 39 16 ,140 (00) 8,700 (01) 44St. Lucia ,238 , 160 15 ,214 (00) 4,400 (01) 66St. Vincent and the Grenadines ,150 , 116 16 ,167 (00) 2,900 (01) 91Suriname 63,251 , 436 23 ,512 (00) 3,500 (00) 74Trinidad and Tobago 1,978 1,164 24 2,200 (00) 9,000 (01) 50Turks and Caicos Islands ,193 , 19 17 na 7,300 (99) naUS Virgin Islands ,136 , 123 9 na 15,000 (00) na

Population figures are in thousands; IMR is an estimate of the infant mortality rate; external debt is measured in millions of US dollars; GDP per capita is measured inpurchasing power parity.* Russian Debt** Rank out of 173 Countries, lower being betterSources: The Human Development Report, http://hdr.undp.org/reports/global/2002/en/pdf/backone.pdfThe World Factbook 2002, http://www.cia.gov/cia.gov/cia/publications/factbook/countrylisting.html

http://www.cia.gov/cia.gov/cia/publications/factbook/countrylisting.html

http://hdr.undp.org/reports/global/2002/en/pdf/backone.pdf

Trade dependence is a key economic characteristic of all of Central America and the Caribbean, butcountries differ in terms of level (Table 4.2). The smaller islands of the Eastern Caribbean are moretrade-dependent than the larger islands and mainland countries. Regional diversity is also suggested bythe ranks of CA/C countries on the Human Development Index (HDI), a combined measure of lifeexpectancy, literacy, access to education, and per capita purchasing power. As Table 4.1 shows, CentralAmerica and the Caribbean countries are distributed among the top two-thirds of the world’scountries on the HDI index (i.e. ranking 117 or lower out of 174 countries). Only Haiti, Guatemalaand Nicaragua fall in the bottom third of the distribution along with most of sub-Saharan Africa. Moretroubling, however, is that if we gauge social development progress by the simple measure of whetherthe region has moved up or down on the HDI ranking since 1993, we find more descenders (13) thangainers (7), with two staying the same. All of Central America except El Salvador fell in rank.

Despite the variations noted above, there is much regional commonality. On average, CA/C is moredependent on trade, and is less industrialized, than South America and Mexico. The region’s economicdependence on the United States is also an important element of regional commonality, as distinctfrom the situation in South America. Central America’s and the Caribbean’s relatively high levels of

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TABLE 4.2 Trade dependency: selected Central American and Caribbean countries in comparative perspective

Region Exports + imports/ Exports ImportsGDP to US from US

(%) (%)

Central America and the CaribbeanBahamas 130 51 55Barbados 117 13 36Dominican Republic 48 48 60Guatemala 35 30 44Honduras 59 53 50Jamaica 82 47 54Panama 77 39 40St. Lucia 166 22* 34Trinidad and Tobago 96 48 48

South America and MexicoArgentina 20 9 21Brazil 15 17* 23Chile 38 15* 25Colombia 28 39 36Mexico 22 85 69

Industrialized countriesUnited States 13 NA NAUnited Kingdom 48 13* 12*

* The US is the largest export outlet and import source for all countries listed except those marked with asterisk.For St. Lucia, 56 percent of exports go to the UK; for Brazil, 28 percent of exports go to the EU; for Chile, 25percent of exports go to the EU; for the UK, 13 percent of exports go to Germany and 15 percent of importscome from Germany.Sources: For exports, imports, GDP: Baumol and Wolff (1996: 877); data are for 1950–90 with slight differences forBahamas, Barbados, and Jamaica; Exports to and imports from the US: The World Factbook http://www.cia.gov/cia/publications/factbook/; data are for 1993, 1994, or 1995 depending on the country.

http://www.cia.gov/cia/publications/factbook/

http://www.cia.gov/cia/publications/factbook/

trade dependency distinguish how neoliberalism is applied there compared to most of South America.Neoliberalism puts pressure on an already highly trade-dependent CA/C to export more. The region’srelatively low levels of output and industrialization also contribute to its peripheral status in the worldsystem (Gwynne et al. 2003).

The economic power of the United States in the region also allows it to express its geopoliticalpower. Within the last few decades, direct or covert intervention by the United States throughout theregion (e.g. in Guatemala, Cuba, Guyana, the Dominican Republic, Nicaragua, El Salvador, Panama,Grenada and Haiti) attests to the importance the superpower places on pursuing and maintaining itsinterests in the region (Blum, 1986; Dupuy, 1997; Walker, 1997). The US economic embargo againstCuba is now four decades old and was only strengthened with the passage of the Helms-BurtonAmendment in 1996 (LeoGrande and Thomas, 2002).

Central America’s and the Caribbean’s economic and geopolitical dependency on the United Statesis a constant factor weighing on the region’s development policies, in contrast with the relativedecision-making autonomy enjoyed by South American countries, especially the larger ones. CA/Ccountries must always take account of how the United States will react to their policy proposals. ForCuba’s socialist regime, US animosity has been a constant preoccupation since the 1959 revolution.

DEVELOPMENT POLICIES PRIOR TO NEOLIBERALISMThe Caribbean was, from the outset of European colonialism, wholly outwardly oriented andeconomically dependent on a few primary product exports. In Central America, on the other hand,the haciendas which historically dominated were never as thoroughly focused on serving exportmarkets as the plantations of the Caribbean (West and Augelli, 1989). The legacy of this historicaldifference is somewhat more agricultural diversity in Central America than the Caribbean, laid on topof the greater amount of arable land in the much larger mainland territories (Table 4.1). However, bothregions have inherited highly unequal distributions of agricultural land. Rural peasants and smallfarmers have been unable to significantly expand production and income levels because the colonialor post-independence state has been unable or unwilling to implement serious land reformaccompanied by appropriate infrastructure and extension services (de Janvry, 1981; Barry, 1987;Mandle, 1996).

Since the Second World War, Caribbean states and large landowners have tried to reinvigorate theprofitability of the monocrop plantation systems and associated export sectors by replacing anoutmoded crop with another that appeared to have more promise. For example, various Caribbeancountries substituted bananas for sugar, arrowroot, or cocoa, coffee for cocoa, or citrus for sugar.However, such limited adjustments to the countries’ agrarian production did not bring back theprofitability of the colonial economies (Conway, 1998). Compared with the islands, there has beensomewhat more diversity to Central America’s agrarian exports, of which the five most important arecoffee, bananas, cotton, sugar, and meat. Still, these commodities have suffered since the early 1970sfrom deteriorating terms of trade. Further, they do little to support the basic needs of the vastmajority of Central Americans who are not large landowners. Local protein consumption has actuallyfallen with the increase in land devoted to the production of meat for export (Barry, 1987).

The region’s development policy experiments since the 1950s divide geopolitically into two camps– socialist and dependent capitalist – each with distinctive risks (Klak, 1998). The first set of policiespursued development through socialist routes and emphasized redistribution, equity, social welfareand prioritization of workers’ needs. This route purposefully attempted to turn away fromdependence on the United States, which emerged as the region’s political and economic hegemonaround 1900 with the taking of Cuba and Puerto Rico from Spain and the Panama Canal Zone fromColombia. As the regional hegemon, the United States interpreted the socialist experiments as threatsand confronted them. Thanks in large part to pressure by the USA and its allies, the list of CA/Ccountries that failed in their attempts to construct alternatives to mainstream capitalist development

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reads like an epitaph to Third World socialism: Guatemala 1945–54 under Juan Jose Arevalo andJacobo Arbenz, Guyana 1961–64 under Cheddi Jagan, Jamaica 1972–80 under Michael Manley,Grenada 1979–83 under Maurice Bishop, and Nicaragua 1979–90 under Daniel Ortega. Enemiesfrom within and outside (mainly the USA) worked to capitalize on any of the inevitable errors inleadership, and to sabotage these experiments before their developmental capabilities could beascertained (Blum, 1986; Booth and Walker, 1993). Only Cuba retains elements of socialism, but evenCuba is following the rest of the Caribbean region by relying on international tourism as its economicmainstay (Pattullo, 1996), and by courting foreign capital with special labour codes and incentives, asdiscussed further below.

The essential challenge for the region’s socialist regimes has been to harness an under-industrializedand highly unequal peripheral economy and to rapidly expand the productive forces and redistributeresources more fairly. This is in itself a tall order, made more difficult because it runs against the tide ofglobal capitalism and US hegemony. Such departures raise broad questions such as, How can acountry in Central America or the Caribbean, in the US ‘backyard,’ pursue a noncapitalist path withoutthe trade, capital, and blessing of the United States and the rest of the largely capitalist world? or Howcan internal resources be progressively redistributed when there are few to go around, and whensocieties are poor and unequal and therefore prone to internal divisions, unrealizable pent-up popularexpectations, and patronage systems? The challenges are many and the successes, not surprisingly, arefew.

A second, contrary and far more common development policy has reinforced and extended tieswith the North Atlantic region. It is represented by Puerto Rico’s Operation Bootstrapindustrialization commencing in the 1950s, by Europe’s Banana Protocols dating back to 1957 with thegranting of special market access to 12 former colonies, including eight in the Caribbean, by Reagan’sCaribbean Basin Initiative (CBI) of the 1980s, and by the present neoliberal transformation.

The Caribbean Basin Initiative

As an economic development policy, CBI has two main components (it was initially a disguised USmilitary aid policy against leftists in Central America). CBI primarily involved a further opening of theregion’s markets to US products, and a relocation of US garment factories there to take advantage ofcheap labour and subsidized factory space (Deere et al., 1990). The United States now has a large andgrowing export surplus with the CA/C region which, along with the rest of Latin America, is the onlypart of the world with which the USA has a trade surplus. CBI should therefore be seen as a vanguardpolicy for a reconstituted US regional hegemony under neoliberalism. In general, CA/C’s dependentcapitalist paths to development avoid US hostility and instead aim to exploit opportunities availed bystrong trade and policy ties to advanced capitalist countries. The risk is that the results will replicatehistory whereby the region has gained relatively little in subordinate relationships with core countries.

Operation Bootstrap

This has long been viewed by political leaders in the region as an industrial development model,although upon closer inspection it can be seen as non-replicable and domestically exclusive. PuertoRican industrialization derives from its unique Commonwealth relationship with the United States.Operation Bootstrap began in 1947 when US tax law amendments gave corporations multi-year taxexemptions on any net income deposited in banks on the island. For their part, Puerto Rican officialspromised industrial infrastructure and low-wage, non-union and, by Caribbean standards, skilled labour(Thomas, 1988; Cordero-Guzman, 1993). First to relocate to Puerto Rico were light industries such asclothing, shoes and glassware, then came the heavier and more environmentally damaging industriesof petroleum refining, petrochemicals and pharmaceuticals. They contributed to impressive annualeconomic growth rates of 6 per cent in the 1950s, 5 per cent in the 1960s, and 4 per cent in the1970s. In total, Puerto Rico’s real GDP growth rate between 1950 and 1990 was the eighth highest ofthe 74 countries world-wide for which data are available, and the highest in the hemisphere (Baumol

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and Wolff, 1996). In 1979 Puerto Rico had the world’s highest per capita level of US imports, moderntransportation facilities, and 34 per cent of all US foreign direct investment. The 22 US drug companiesmanufacturing in Puerto Rico during the 1980s saved $8.5 billion in income tax exemptions(Freudenheim, 1992). The subsidies from the various sources described above from the US mainlandto Puerto Rico have amounted to around $9 billion annually, almost as much as all of the US aid tothe rest of the world combined (de Blij and Muller, 1998).

The geopolitical price of Operation Bootstrap is great dependency on US subsidies, capital andtrade. Few local manufacturers have emerged or have networked with those from the mainland. In1996 the US Congress began a ten-year phase-out of Puerto Rico’s corporate tax exemption, leavingthe island entrenched in a bankrupt model of dependent industrialization (Pantojas-García, 1990).Puerto Rican people have made the most of their special political status by migrating to and circulatingback from the US mainland in great numbers, and by relying on the federally mandated social welfarenet (Conway, 1998). The human face of Puerto Rico’s industrial expansion includes the fact that realper capita income has not grown relative to that of the mainland USA during Operation Bootstrap,and that unemployment has often been in excess of 20 per cent since the 1970s (Cordero-Guzman,1993; Grugel, 1995).

Europe’s Banana Protocols

These began in 1957 and were followed in 1975 by a succession of four Lomé Conventions. They haveprovided special market access to more than 70 Third World nation–states that were once Europeancolonies and which are now called the Africa-Caribbean-Pacific (ACP) countries. The special marketaccess applies mainly to primary sector commodities such as coffee, sugar and bananas. Only 12 of theACP countries export bananas to Europe through Lomé, and eight of these are members ofCARICOM (Figure 4.2). Measured by volume traded, bananas are the world’s most important fruit orvegetable, the EU is the banana’s largest market, and the EU’s banana subsidies have been estimatedto be worth $2 billion annually (Wiley, 1998). Like Puerto Rico’s Operation Bootstrap, banana farming

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Figure 4.2 The weekly banana shipment from Dominica to Britain. The World Trade Organization has ruled that the

Eastern Caribbean’s preferential market access is illegal and must be eliminated. Photograph by James Wiley

in the Eastern Caribbean provides an example of the double-edged sword of growth/prosperity anddependency/vulnerability associated with relying on special trade preferences from the core capitalistcountries.

In the 1950s British public authorities and private shipping firms encouraged its Caribbean coloniesto shift from sugar cane to bananas. Britain offered a guaranteed market and good prices for all thebananas that these islands could grow. Farmers in St. Lucia, Dominica, St. Vincent, and to a lesser extentGrenada and elsewhere in the Caribbean, responded wholeheartedly, digging up or abandoning manyother crops to specialize in bananas (Welch, 1994; Wiley, 1998). In St. Lucia, for example, the growingreliance on bananas continued through to the late 1980s as thousands of additional acres wereconverted or deforested to grow them (Barrow, 1992). As a result, Dominica, St. Lucia and St. Vincenthave each earned more than half of all their foreign exchange from bananas, which has placed themamong the countries of the world most dependent on the export of a single cash-crop.

Dependence on a guaranteed overseas market for a single cash-crop has had its positive side. Itfuelled a growth of prosperity on the islands and especially for their many small family farmers, whoseprominence and vitality are unusual in a region dominated by large land holdings (Barrow, 1992). Bananaexports helped Dominica, St. Vincent and St. Lucia climb to the top half of countries ranked by theHuman Development Index (Table 4.1). Additionally, only the smaller Caribbean territories with specialaccess to European markets, primarily for bananas, were able to avoid the fluctuations and decline inthe region’s traditional agricultural exports during the 1980s (Schoepfle and Pérez-López, 1992).

EU rulings in recent years, however, began a gradual phase-out of the ACP countries’ special marketaccess (de Cordoba, 1993). A 1997 World Trade Organization decision completed the phase-out forbananas by ruling that the preferential access to the British market was illegal. The United Statesbrought the case to court after extensive lobbying by Chiquita’s CEO Carl Linder who exportsbananas from Central America and wanted a larger share of the EU market. The EU’s preferentialbanana market is being phased out and many banana farmers will be forced to find new sources ofincome (Herbert, 1996; CBEA, 2003).

Bananas grown on small family farms in the Eastern Caribbean cannot compete with the volume,size, and price of bananas from Ecuador and Central America grown on mechanized plantationswhere wages are 50–75 per cent lower and unions are repressed (Barry, 1987; The Economist, 1998).As The Economist (1998) drew the comparison: ‘If islands like St. Lucia are the corner stores of thebanana business – chaotic, friendly, and unreliable – the Latin American plantations are the Wal-Martat the edge of town.’ The future is clearly with the mainland banana, but the fruit has become toocentral to and entrenched in the rural societies of the Eastern Caribbean for farmers to replace it withanother crop. In St. Lucia, for example, more than two-thirds of agricultural land was still devoted tobananas in 1997. Public policy devoted to the promotion of non-traditional exports has thereforeneeded to concentrate on the industrial and tourism sectors, while continuing to work towardsdiversifying agriculture (Pattullo, 1996; Klak, 1998). The monumental task for the Eastern Caribbean,and for CA/C more broadly, is to replace traditional sources of income with revenue from sourcessuitable to the present era of more open trade relationships, and to avoid the vulnerability associatedwith relying on a single product and the North Atlantic market.

THE DEBT CRISIS AND THE NEOLIBERAL REMEDY

Latin America [had no] desire to flaunt free trade, but . . . was forced to do so. [In this period,]most of Latin America followed the liberal doctrine of free trade. Advocates of protection inLatin America found little favor in government circles which were beholden both literally andintellectually to creditors in the developed world. (Skidmore, 1995: 228)

This profile could well apply to Latin America from the 1980s to the present when in fact it waswritten to characterize the period 1880–1914. The point to stress is that now is not the first time that

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Latin America has been lectured on the benefits of free trade. Within Latin America, CA/C countrieshave over time remained especially vulnerable owing to their distorted, under-developed, andperipheral economies. As the example of bananas illustrated, they have over-emphasized a fewexport-oriented primary products, particularly agricultural. They have also relied on importedindustrial and commercial goods and on foreign capital and expertise to feed people, service industry,and finance internal capital expansion (Grugel, 1995). Even Trinidad, the region’s wealthiest countryowing to its petroleum deposits, has made only modest progress towards indigenous industrialdiversification while at the same time it has accumulated $2.2 billion in foreign debt (Mandle, 1996;Klak, 1998).

The current development policies in Central America and the Caribbean focus on attracting foreigninvestors to generate new exports, and date back to the debt crisis of the 1980s. The foreign debtsituation for CA/C countries parallels that of the hemisphere’s larger countries, as outlined in Chapter3. In the 1970s international banks were awash with deposits and therefore eager to make loans topublic and private interests in Latin America and the Caribbean (Corbridge, 1993). When interestrates rose in 1980–81, the world economy sank into recession and the vulnerable primary productand tourism sectors of CA/C lost many of their customers. Economic decline was precipitousregionwide. By the end of 1983, the economies of Barbados, the Dominican Republic, Guyana, Haiti,Jamaica, and Trinidad and Tobago had shrunk an average of 17 per cent in real terms compared to1980 (Conway, 1998). The interest rate hike also contributed to making the foreign debts of mostCA/C countries unserviceable. In sum, an array of related factors, from poor agricultural yields andprices, to wasted windfall loans and political thinking that seeks industrialization through TNCinvestment, led to governmental insolvency by the 1980s (Mandle, 1996).

The many interrelated problems outlined above have provided strong motivation for governmentsacross the region to approach the international development agencies seeking debt rescheduling,additional loans, and in the words of its leaders, the IMF’s ‘blessing’ (McBain, 1990; Killick and Malik,1992). Central America and the Caribbean governments one after another, conservative and socialistalike, have had to sign up for a series of austerity agreements with the IMF and World Bank inexchange for financial bailout. The international agencies’ demands of fiscal conservatism, privatization,economic opening, and aggressive promotion of TNC investment have the effect of homogenizinggovernment policies across CA/C so that distinctive development strategies are history. They are likelyto continue along the homogeneous neoliberal track in the future, in part because of the on-goingconstraints of foreign debt.

Measured against population size or various economic indicators, the foreign debts of Jamaica,Guyana, Honduras and Nicaragua are the hemisphere’s worst. The World Bank (2003a) classifies all ofthese countries except Jamaica among the world’s 42 most indebted poor countries. The newcomerto this group is Honduras which, along with Nicaragua, suffered 11,000 deaths and $5.3 billion indamage from Hurricane Mitch in October 1998.

THE MEANING AND IMPACTS OF GLOBALIZATIONOver recent years, globalization has become one of the most commonly used terms in corporate,political and academic discussions. Despite its ubiquity, it is unusual to find a clear definition ofglobalization, and even rarer to see it interrogated against evidence. Some writers on the politicalleft disparagingly dismiss globalization as a corporate takeover scheme (Rieff, 1993), but many otherinfluential commentators are more optimistic about its impacts (Reich, 1991; World Bank, 2002b).Of particular concern here are some of the positive spins given to globalization trends that suggestthat there are many new opportunities for peripheral countries such as those of CA/C . Many (butnot all) of these positive interpretations of globalization in the academic literature fall under theumbrella notion of a ‘global village’. Global village ideas suggest that in various ways the world iscoming together and balancing out. Such global village ideas are misleading, however, when

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considered in light of the history and contemporary situation in CA/C; the regional situation isunfortunately less balanced and promising than global village ideas suggest. Further, current politicaland economic transformations, impacts and responses must be specified at the local level, ratherthan subsumed by overgeneralized notions of globalization (a point Bebbington discusses in Chapter9). There are six components of the global village concept that are worth addressing with respect tocontemporary trends in CA/C .

First, it is claimed that the world is ‘shrinking’ as a result of greater international connectivity(Giddens, 1990: 64; World Bank, 1995a; Watts, 1996: 64–5). Central America and the Caribbean,however, have long been heavily integrated into the global economy. The Caribbean is historicallyperhaps the most globalized of world regions. Since the 1500s it has been controlled by outsidepowers, based economically on imported labour, cleared to create monocrop landscapes ofsugarcane or bananas, and reliant on the import of virtually everything else needed to sustain localpopulations (Richardson, 1992; Mandle, 1996). In Central America, export-oriented production ofsugar, bananas, beef, and other agricultural commodities has been dominant since before thetwentieth century. So for Central America and the Caribbean, current ‘globalizing’ trends representanother round of powerful external influences for a region historically shaped by exogenousdecisions and events.

Second, traditional distinctions between core and peripheral regions of the world are said to beblurring (McMichael, 1996). Kearney (1995: 548) claims that ‘globalization implies a decay in [the]distinction’ between core and periphery. This structure of inequality is still highly relevant to anunderstanding of US–CA/C relations, however (Klak, 1998). The fact that production (of certain items)is more geographically dispersed across nation–states does not indicate an accompanying fundamentalredistribution of control over and benefits from production. The constraints imposed on CentralAmerican and Caribbean workers by their own capitalist classes and states, and the constraintsimposed on Caribbean countries by core states, especially the regional hegemon, the United States,produce vast international gaps in income and living standards.

Third, it is said that foreign investment, trade, and opportunities for development are more widelydistributed across world regions and nation–states (Qureshi, 1996). However, global economicintegration is highly selective in favour of developed countries and a few developing countries, none ofwhich are in Central America and the Caribbean. Fully 80 per cent of all world trade is within the coretriad, although it comprises less than 20 per cent of world population (Hirst and Thompson, 1999;Dicken, 1998). Of the world stock of direct foreign investment, 81 per cent was located in theEuropean Union, North America, and Japan as of 1991, up from 69 per cent in 1967 (Koechlin, 1995:98). There has been an increase in the share of direct foreign investment flows to certain developingcountries, but none of the major recipients (headed by China, Mexico, and Brazil) are in CA/C(Gwynne et al., 2003). There is indeed a global integration apace with regard to the basic ideas aboutdevelopment and neoliberal policy, and there are pressures and incentives to increase trade, but thematerial rewards are enormously unequal.

Fourth, it is claimed that there is now a convergence into one world economy, to which all placesand people can, and generally do, find export market niches (McMichael, 1996). But for peripheralregions such as Central America and the Caribbean, market niches are narrow, highly competitive, andfraught with obstacles. They are largely outlets for selling non-traditional goods and services, i.e. fruits,vegetables, flowers, garments, electronic products, processed data and tourism, to wealthy Westernconsumers (Figure 4.3; Thrupp, 1995). However, CA/C as a whole has thus far had only limited successin filling new export market niches (Klak, 1998).

Fifth, media and cultural influences are supposedly more widespread and multilateral (Patterson,1994; Kearney, 1995). It is a stretch, however, to compare the northward influence of such artifacts asreggae music, Mayan handicrafts, or merengue music to the multitude of cultural impacts in theopposite direction. US affluence and opportunity, often romanticized, are especially well known, deeplyingrained and alluring to Central America and Caribbean people. They are prone to set their living

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standard goals in accordance with what the US media ascribe to the United States. And the imbalancein media flows is increasing with CA/C’s economic crisis and neoliberalism, as local media have beenslashed. And the imbalance in the flows of influence between the USA and CA/C is greater foreconomic and geopolitical issues than for cultural ones.

Finally, people themselves are said to be more integrated through immigration and communications.However, the increasing international flows of people and information should not obscure the region-and class-specific motives for and access to emigration and communication. In pursuit of opportunitiesfor economic development and also for social and cultural expression, Caribbean people haveengaged in more twentieth-century emigration than those of any other region. Central Americanshave also emigrated in vast numbers in recent decades, especially to flee civil war, oppression and theassociated lack of opportunities. The societal porousness and citizens’ coping strategies are not a globalphenomena, but are particular to the historical and geographical context of the region and itsinhabitants (Simmons and Guengant, 1992). The massive scale of contemporary emigration andremittances results from the growing marginalization and pessimism about the economic prospectsback home. Most of Central America and the Caribbean is economically stagnant, and currentglobalization trends present its people with few promising options.

The main point of these critical comments on globalization is to suggest that current economic andpolitical trends are not really globalized, but rather highly uneven geographically, in terms of bothimpacts and control (Dicken et al., 1997). Peripheral regions are certainly shaped now, in the era ofglobalization, as they have been under previous phases of capitalism, by the ideas and actions ofoutside investors and political leaders. Currently, CA/C governments are under pressure to createincentives that will attract investors in order to export a greater quantity and range of products (Klak,1998). The following sections look more closely at these exogenously originating political andeconomic transformations in the region.

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Figure 4.3 Electronics assembly in Costa Rica. Owing to its international reputation for educational attainment,

political stability and environmental quality, Costa Rica has been the most successful CA/C country at attracting

foreign investment in an array of export sectors paying reasonable wages. Photograph by Thomas Klak

THE NEOLIBERAL DEVELOPMENT MODEL

At the level of people, the system isn’t working. (World Bank President James Wolfensohn,1999, quoted in Faux 2001)

Because the economies of Central America and the Caribbean are smaller, less diverse, and lessindustrialized than their South American counterparts, the reform period since the 1980s has beenespecially painful for its working people, and the new outward orientation has much less to build on.While Latin America has long held the unfortunate distinction as the world’s most socially unequalregion, things have only worsened since the debt crisis and the neoliberal bailout. For Latin Americaand the Caribbean as a whole, the share of population living in poverty increased from a historical lowof around 22 per cent in 1982 to over 30 per cent in the 1990s. With the exception of Costa Rica,Central America is more unequal than the average Latin American country, helping to explain whyCentral America’s poverty rate is almost 60 per cent (IDB, 1997: 41; Latin America Press, 1997). Theexception to Central America’s relatively high rates of inequality and poverty is Costa Rica, but eventhere, a range of public service reductions have forced people to spend more for services from theprivate sector or do without health care and other basic needs (see Chapter 9).

Caribbean countries, with the exception of Haiti (see Box 4.1), are more socially equal than bothCentral American and Latin American averages. This helps to account for the Caribbean’s lowerpoverty rates and relatively good standing on social welfare indicators (Table 4.1). However, theCaribbean’s relative equity is canceled out by its relative economic weakness (Table 4.2). Small size,limited industry, and a historical lack of international competitiveness leave the Caribbean in aprecarious position during the neoliberal transition.

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BOX 4.1: World Bank recommendations for Haiti

Haiti has for many years been the poorest country in Latin America (Table 4.1). The vast majorityof the Haitian population must endure a high infant mortality rate, low life expectancy, low birthweights, high maternal deaths, inadequate caloric intake, squalid housing conditions, and a lack ofbasic services such as potable water and sewer lines. The country is also economically dependent,importing around 70 per cent of all that it consumes. It is in this context that the World Bank in1985 offered advice to the Haitian government in a report intended to have restricteddistribution, but which became public. The report, entitled ‘Haiti: Policy Proposals for Growth’,suggests the following reorientation of national priorities:

The development strategy must be export-oriented . . . [Domestic] consumption . . . will have to bemarkedly restrained in order to shift the required share of output increases to exports . . . Moreemphasis will have to be put on development projects that support the expansion of privateenterprises in agriculture, industry and services. Private projects with high economic returns shouldbe strongly supported with accordingly less relative emphasis on public expenditures in the socialservices. (quoted in Wilentz, 1989: 272–3)

Given how reliant Haiti is on foreign assistance and investment, World Bank recommendationssuch as these carry a lot of weight in government circles.

The international development agencies (chief among them, the World Bank the IMF and USAID)are encouraging CA/C governments to promote production for export rather than domesticmarkets, and to reduce social welfare spending. In most cases domestic production and social welfarespending were already inadequate prior to the cuts. A comparative study of the public sector reforms

under neoliberalism in three countries (Costa Rica, Nicaragua, and Jamaica) echoed theseobservations (Evans et al., 1995: 44–5). The study identified two important commonalities in the newrole of the state in these countries. Internationally, the relationships of these countries are increasinglyneocolonial in nature. As the authors put it, ‘The countries themselves are able to exercise less controlover their economic policy than was the case in many former colonial regimes.’ Domestically, policieshave turned noticeably more hostile to the interests of the working class. This has occurred directlythrough policies that have dramatically cut public services, employment and wages, and indirectlythrough increased unemployment. In addition, governments have weakened trade unions throughrepression and division. In particular, the abject dependency of emasculated Nicaragua stands in acutecontrast to the widespread hope in the early 1980s among most of its people for a socially just society(see Box 4.2).

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BOX 4.2 Nicaragua’s Sandinistas and their successors (source: Walker,1997)

In the 1970s, mounting society-wide disenchantment with the ‘mafiacracy’ of Anastacio Somozahelped the Sandinista rebel army depose him by the end of the decade. Over the next severalyears the ruling leftist junta was able to demonstrate effective leadership. Accomplishmentsincluded effective social policies such as a literacy campaign and agrarian reform, a mixedeconomy which grew at 7 per cent annually per capita, and a clear electoral victory in 1984. Forthe remainder of the 1980s, however, Ronald Reagan sought to make the Sandinistas ‘cry uncle’(as he put it) by orchestrating a cut-off of its international loans and the Contra war. The latter’smany costs included more than half of Nicaragua’s public resources that were needed fordefence, the devastation of rural schools and clinics that the Contras viewed as targets, and30,000 Nicaraguan lives. In 1990 Nicaragua’s war-weary voters rejected the Sandinistas in favourof the US preferred candidate, Violeta Chamorro. The country reversed policy direction andbegan what William Robinson characterized as ‘a close U.S. tutelage in the process of reinsertioninto the global system’. Nicaragua’s USAID programme leapt to become the world’s largest, andincluded funds to replace Sandinista textbooks with ones beginning with the Ten Commandmentsthat AID’s director believed would help ‘reestablish the civics and morals lacking in the last elevenyears’. By the late 1990s, more than half of all Nicaraguan workers were un- or under-employed.And the half billion dollars worth of international aid keeping the Nicaraguan economy afloatmade President Arnoldo Alemán subordinate to the wishes of core capitalist countries. DespiteNicaragua’s ‘economic straitjacket’, it has managed to retain some meaningful vestiges of theSandinista period. These include vibrant grassroots activism, politically-aware citizens, genderequality laws, and autonomy laws protecting its culturally distinct Atlantic Coast people.

Central American and Caribbean governments are aggressively promoting and subsidizing non-traditional exports (Klak, 1996; 1998). These efforts can be likened to a ‘shatter-shot’ approach tosearching out export market niches. Even in the smallest countries, policy-makers are activelypromoting investment in a host of non-traditional activities. In tiny Dominica, for example, these rangefrom tourism, assembly operations, and data processing, to vegetables, fruits, seafood and cut flowers(Figure 4.4; Wiley, 1998). Such experimentation raises the essential question of whether productniches with considerable promise can be secured or whether they are replacing monocrop and singlemarket dependence with a new form of vulnerability. In other words, are exporters trying to do manythings at once while not doing any of them well?

During the 1990s, the non-traditional export activity that employed most people and was mostwidespread was the assembly factories. Virtually every state created export processing zones (alsoknown as free zones) and took loans to build and service their factory shells. Garments were by farthe most common product because of their low entry requirements, although electronics, plasticgoods, and shoes were also represented. Tens of thousands of mainly young females are employed insuch factories in Jamaica, Haiti, and each Central American country. Most of the Eastern Caribbeancountries had more than a thousand workers each. The Dominican Republic attracted the mostassembly activity and had over 160,000 factory workers. But even there, the assembly plants werelow-wage economic enclaves with minimal positive impact on the local economy (Willmore, 1994;Kaplinsky, 1995). And although it is widely claimed that the assembly plants are net economic gains forthe host country, that assertion would need to be validated through a thorough cost accountingwhich, to my knowledge, has never been undertaken. The gross income from low factory wages andsubsidized rents and utilities would need to be weighed against the public costs of promoting thecountry as an investment site, building, operating, and maintaining the factories and relatedinfrastructure, and training workers (Klak, 1996; 1998). The main beneficiaries of the low cost productsmade in the assembly plants are the corporate brand names they carry, the department stores wherethey are sold, and US consumers who buy the low-priced products (Ross, 1997a).

NAFTA shifted the growth in Free Zone employment and exports to Mexico where employmentreached over 1.5 million in 2000 (see Box 3.1 for a discussion of the Mexican assembly industry).Meanwhile, many garment producers have left the Caribbean, leaving tens of thousands of square feetof vacant publicly owned factory shells. Governments have had to admit that ‘The move to diversifythe economy to include export-oriented services (and increasing tourism), as well as non-traditionalexports such as apparel manufacturing has not yielded the economic development gains expected’(Government of Jamaica, 2002: 18).

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Figure 4.4 Dominica’s non-traditional industrial exports, on display at the Dominica Export Import Agency (DEXIA).

Is the Caribbean successfully filling a neoliberal export niche or undergoing a new round of dependency?

Photograph by James Wiley

Before examining the prospects for non-traditional agriculture, it is worth noting the continuedsignificance of traditional primary product exports. While the region’s traditional exports such assugar, bananas, coffee, cotton and bauxite have lost value in recent years, it is premature to deem themirrelevant to the region’s role in the global economy. In 1990, primary products (mostly traditionalones but including a steadily growing share of non-traditional exports) were still 46.5 percent of theexports sent to the United States by CBI countries. By then, manufactured products had surpassedprimary products as a share of the total, but this reversal is attributable more to primary exportdecline than to manufacturing growth (Deere and Melendez, 1992). As noted above, new exportswere mainly from the assembly plants. As those close down, the region’s trade deficit increases.

The export of fruits, vegetables, and flowers, labeled NTAEs (non-traditional agricultural exports),by definition have high value by volume and area under cultivation. Central America has been moresuccessful than the Caribbean in meeting the demand for NTAEs in the US and other northernmarkets. By 1991 Central America’s NTAE earnings exceeded $175 million, while those of theCaribbean were under $90 million (Thrupp, 1995). The Caribbean’s limited success is especiallynotable given its more desperate need for new sources of foreign exchange. One indicator of thisneed is that Caribbean earnings from traditional agricultural exports have fallen faster than those ofCentral America.

A more general problem with NTAEs is that the neoliberal image of a small-scalefarmer/entrepreneur rising up to meet new export market niches – perhaps substituting snow peasor strawberries for bananas – does not match the reality. Although the experience varies acrosscontexts and products (and therefore leaves hope for greater small-scale sustainable production), thefollowing general characteristics of NTAEs in Central America and the Caribbean restrict benefits tosmaller-scale farmers:

• markets are highly competitive, require connections to complex international commodity chains(Gereffi and Korzeniewicz, 1994), continually draw new entries from countries world-wide, andrisk saturation;

• products are highly perishable, require expensive transportation, are subject to wide-ranging pricefluctuations, and entail risk for producers;

• the vast majority of NTAEs are native to temperate rather than tropical climates; thisdisadvantages Caribbean farmers whose knowledge is of local crops;

• crops are usually planted continuously and intensively in monocultures, and buyers demandperfect-looking produce;

• the above features often lead to the problem of a ‘pesticide treadmill’, and related problems ofhuman and ecological health and unsustainability, and residues on crops entering the UnitedStates (Conroy et al., 1996);

• the above features, combined with the need for large capital investments, contribute todominance by large foreign firms, for which local people mainly serve as low-wage labour.

These factors have meant that small-scale farmers have generally not been competitive (Thrupp,1995). The NTAE sector is characterized by the dominance of firms from the USA and elsewhere inthe core triad, inadequate state support to develop the sector, shaky performance and low to nogrowth for small-scale local producers, and poor working conditions for the employees. In essence,core–periphery relations are maintained despite shifts in economic sectors.

Neoliberalism’s market niche strategy may have its conceptual appeal, but the region’s experiencewith it shows that it is fraught with difficulties, as the data processing sector further illustrates. Thedevelopment prospect of this sector entails incorporating local labour and nurturing local firms totake advantage of expanding opportunities in the global data processing industry that earns $1 trillionyearly, of which information processing services is a component. Mullings (1995; 1998) draws on adetailed analysis of the rise and fall of information services in Jamaica to explain why this industry,which has real potential for growth in employment, wages, managerial expertise, and backward

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linkages into the local economy, has stagnated on all these criteria. She identifies the problem in termsof inadequate state support for local firms; continued policy steering and dampening by a traditionaland complacent private elite; investment fear on the part of foreigners; and an extremely narrow roleallotted to Jamaican firms and workers by US outsourcing firms. Rather than propelling Jamaica to aheightened position in the international division of labour as the neoliberal model predicts, theinformation services sector has slumped and entrenched the gender, class and internationalinequalities that have long characterized this peripheral capitalist country.

Another relatively new and globally oriented economic activity that Caribbean political leaders haveeagerly pursued by offering investment incentives is offshore finance. The islands that are winners andlosers in the casino capitalism associated with the quest for highly mobile international finance capitalhave their own set of pre-existing attributes and consequent problems. Islands that have been mostsuccessful at attracting offshore banking and related activities are relatively small territories, even byCaribbean standards, that continue to fly the Union Jack: the Cayman Islands, the British Virgin Islands,the Turks and Caicos Islands and, until volcanoes made two-thirds of the island uninhabitable in 1997,Montserrat. The British dependencies confer the highest level of political stability and investorconfidence. Besides the British dependencies, the Netherlands Antilles and the Bahamas (which isclosely tied to the US economy; see Table 4.2) are also notable for their ability to attract financialholdings from thousands of foreign firms. In some places such as the Caymans and the British VirginIslands, offshore finance has become such a major economic component that real estate prices haveskyrocketed while other economic sectors have atrophied (Hampton and Christensen, 2002). But mostislands have seen relatively little of the sought-after mobile capital or, in fact, capital of any kind. In fact,an island’s ability to attract furtive capital into an offshore finance sector is negatively correlated with itsneed for new sources of foreign exchange earnings. Most islands are now independent countries withmany features viewed as unattractive to finance capital, including weak and unstable economies,poverty, high unemployment, and social tensions. Since 9/11, the US government, in concert with theOECD, has sought and achieved greater regulatory oversight of offshore financial centres. It is probablethat a longer-term result will be a reduction of capital flows through, and therefore revenues going to,the offshore centres, particularly the smaller, poorer and less regulated ones (Klak, 2002).

CUBA: ISLAND SOCIALISM AMID GLOBAL CAPITALISMThe above examples of non-traditional sources of foreign exchange earnings indicate thatneoliberalism is wholly based on the hegemony of global capitalism and the associated internationalsystem of states. But even socialist Cuba has needed to turn to a development policy that offersincentives to foreign investors. Cuba’s crisis is not unrelated to that of the capitalist countries of theregion. Since the nineteenth century Cuba has essentially had a one-crop (sugar cane) exportingeconomy with the concomitant vulnerabilities of output and price fluctuations and deterioratingterms of trade. In part, Cuba’s crisis is unique to its experience in CMEA (Council for MutualEconomic Assistance), the now defunct trade alliance among state socialist countries led by the USSR.Rather than embarking on a major post-revolutionary economic diversification effort from the 1960sthrough the 1980s, Moscow encouraged Cuba to specialize primarily in sugar exports and to importmost other requirements from other CMEA members. A one-for-one trading deal with Russia, sugarin exchange for petroleum, encouraged Cuba’s specialization and yielded a $5 billion annual subsidycompared to open market prices (note, however, that little sugar actually trades on the open market).The USSR also offered Cuba a generous line of credit that has grown to an outstanding debt of $20billion in addition to the island’s $11 billion of debt to western and Japanese creditors (Table 4.1).

Cuba’s CMEA trade relationship delivered a reasonable assortment of industrial inputs andconsumer goods until the unexpected events of the late 1980s. The collapse of the Soviet bloc in1989–91 meant that Cuba lost 75 per cent of its trade flows and imports, and aid worth 22 per centof national income (Marshall, 1998). Cuban imports fell from $8.1 billion dollars in 1989 to only $2

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billion in 1993. Cuba’s economy went into a free fall (Figure 4.5). Independent of a country’s political-economic organization, it is hard to imagine any nation enduring such vast economic losses andweathering through the necessary transitions without a major internal upheaval.

Castro coined the euphemism ‘The Special Period in the Time of Peace’ to describe the post-Sovietera of massive shortages, daily hardships, and new policies that encourage private initiative and courtforeign investors. Domestic policies now include farmers’ markets selling directly to consumers, parallel(black) market activity for many consumer goods, legalized use of the US dollar, and a process ofconverting the entire currency to a dollar equivalent. Production policies include encouraging foreigninvestment by allowing (at least partial) foreign ownership of enterprises in Cuba, promoting tourism,reorienting state investment to enhance product development for global markets, and reconfiguringlarge state farms into autonomous and productive cooperatives (LeoGrande and Thomas, 2002).

Obtaining food and other daily necessities now preoccupies many citizens, especially Habaneroswho are most isolated from rural food production. Urbanites who considered kerbside gardening orbicycling beneath their sophisticated lifestyles grudgingly adapted to necessity. Faced with a crisis ofshortages of basic needs, theft of state resources, and black marketeering, Cuban officials have beenforced to legalize a range of capitalistic practices. In a rare public opinion poll, most Cubans pointed tothe farmers’ markets legalized in 1994 as the most important post-Soviet reform, well ahead of self-employment and legalization of the dollar (Marshall, 1998: 287). To compensate for the agricultural biasagainst the capital city, farmers’ market vendors in Havana are taxed at a rate of 5 per cent of the valueof their goods, while everywhere else the rate is 15 per cent (Marshall, 1998). The farmers’ marketshave expanded to offer prepared food, and many Habaneros have made their homes into informalrestaurants, called paladares. Further, the foreign tourism sector has acted like a vacuum drawingCubans of all stripes away from skilled professions and toward the dollar-earning possibilities. A highlytrained professional earns much more driving a taxi cab for tourists (Segre et al., 2002). Besides turningto tourists as a source of income, Cubans have needed to become very imaginative in order to obtainenough income or in-kind transfers to make ends meet (Box 4.3).

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Figure 4.5 Cuban economic growth rates, 1985–2002

The Cuban economy bottomed out in 1993 and has since haltingly recovered, although in theclassic Caribbean fashion of booms and busts (Figure 4.2). Food and other basic necessities are nowmore available than in the early 1990s when the average Cuba is said to have lost 30 pounds. About60 per cent of the population regularly have access to dollars from income or remittances fromrelatives in the USA which are estimated to have reached $1 billion, second only to tourism in foreignexchange value (LeoGrande and Thomas, 2002). Sugar, without the benefit of Soviet fertilizer andother inputs, has fallen to third place. Recent harvests were below 1960 levels. Cuba has joined theCaribbean Tourism Association and tourist receipts reached $1.97 billion in 2000, eight times higherthan in 1990. While the United States continues to try to isolate Cuba, other countries such asCanada, Mexico, and Spain and China are taking advantage of the profitable opportunities in tourism,as well as in mining, utilities, and consumer goods availed by the lack of competition from US firms. Thefalling growth rates since 2000 stem from falling sugar and nickel prices, the global recession whichbegan before 9/11, and stagnation in tourism after 9/11. As of late 2003, tourism seems to berebounding, boosting hope for an upturn in economic growth.

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BOX 4.3 How people survive during economic crises: a comparison ofCuba and Jamaica

Cuba’s economic difficulties have forced its citizens to resort to survival tactics, adding newmeaning to the verbs ‘to invent’ and ‘to resolve’. Cubans regularly use the phrase ‘hay queinventar’, or ‘one has to invent’, to explain their alternative ways to sustain themselves. In mostcases ‘inventar’ involves stealing or committing a crime against the state, as in the followingexample. One young man in the colonial city of Trinidad in south-central Cuba describes his owncreative adaptation this way:

To resolve my economic difficulties, I’ve begun to collect used packages of Popular, a state brand-name for cigarettes. My friend [‘socio’], who works at the tobacco farm, sells me tobacco andpaper. With a handmade rolling machine, I roll cigarettes and repackage them for sale on theblack market. That is what ‘hay que inventar’ means to me.

Using the tobacco and paper that his friend steals from the farm, this man is able to sell his hand-rolled version of a pack of Populares, which sell for 10–11 pesos in state stores, for 5 pesos. Thosepurchasing the black market cigarettes are well aware of their illegal origins and accept them aspart of the current survival strategies. Cuban authorities admit that nearly 30 per cent of alltobacco is stolen for illegal sale. (Source: Brandon J. Cabezas, Latin American Studies Programme,Ohio University, based on field work in August, 1997; and Chauvin (1998: 5).)

In Jamaica, the great majority of adult residents of poor communities in Kingston and othercities are unemployed. They need to come up with many different strategies to earn money inorder to meet their basic needs. These strategies range from legal ones, such as temporaryemployment, to illegal ones, such as robbery or selling drugs, and include many others in the greyarea in-between, as in this example:

In the gray area, residents developed innovative income-raising strategies, often centered on‘hustling’ (ad hoc buying and selling, using begged or borrowed money). A sophisticated hustlingsystem had grown up around the nearby prison, with women buying food for the prisoners,arranging for visitors’ food parcels to get to the prisoners, buying goods from prison warders to selloutside, and begging/’negotiating’ for money from prison guards on the paydays in exchange forsex. (Source: Moser and Holland, 1997: 24)

MIGRATION AND TRANSNATIONALISMProlonged crises and hardship have required that Central American and Caribbean people be verycreative both at home and abroad. In reaction to neoliberalism, a growing number of people have triedto emigrate to the USA, where over 2.5 million Caribbean islanders (more than 8 per cent of thepopulation) have gone since 1965 (Potter et al., 2003). Emigration to Europe and Canada considerablyexpands those numbers. Central Americans migrants have been fewer but have also increased inrecent decades. In recent years, the enticing messages from relatives, friends, and the ubiquitous massmedia from the north have conveyed that there is a better life abroad. The resulting diaspora is indeedlarge. To cite an extreme example, for every five people born in St. Kitts and Nevis and alive today, twoof them now reside in the USA. For Jamaica, a more typical Caribbean case, the ratio is 6 to 1. In total,Jamaica sent 480,600 legal immigrants to the USA between 1970 and 1996, while Cuba and theDominican Republic sent 547,300 and 668,700 each (de Souza, 1998). A poll conducted in theDominican Republic found that half the population now has relatives in the United States, and morethan two-thirds would emigrate if given the chance (Klak, 1998).

Not all people leave for good, however. Many see opportunities for employment and education inNorth Atlantic countries as part of a multidimensional international strategy to make ends meet andadvance economically. Many send remittances home to immediate family members. How much is senthome varies greatly per household and over time. Macro-economic statistics for remittancesunderstate their significance because they principally record bank transfers, leaving unrecorded moneyand goods sent through the mail or with travelling relatives and acquaintances. Nonetheless, officialdata on remittances reveal they contribute between 5 and 7 per cent to the GDPs of Jamaica, theDominican Republic, Haiti, and Belize (Latin America Press, 1997).

Earnings from the north are used back home to meet basic needs, acquire a plot of land, build ahome, finance the children’s education, or start a small business (Chevannes and Ricketts, 1996; Portesand Guarnizo, 1991). For Mexico and Central America, the positive impacts of ‘migradollars’ on livingstandards, investments, and overall economic conditions are clear (Durand et al., 1996). Male garmentfactory workers from the Dominican Republic have been notably successful in transferring skillsacquired on the job in the New York metropolitan area back to ownership and management positionson the island (Portes and Guarnizo, 1991). Jamaicans now refer commonly to a local phenomenoncalled ‘barrel children’, the parents of whom work in North America and who largely survive on thecontents of the overstuffed containers that regularly turn up at customs. The combined effect of thesegrowing trends towards emigration, remittances, and circulation is a ‘deterritorialization’ of the region’ssocieties (Olwig, 1993: 206).

REGIONAL TRADING BLOCSIt is said that Central America and the Caribbean ‘belong to two different cultural universes’ (Grugel,1995: 155). It follows that they have had negligible economic ties historically and have developed theirown regional trading blocs recently. The Central American Common Market (CACM) consists of fivecountries with a long history of linkages: Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica.For centuries Spain administered them as one colony, and for 15 years after independence in 1823they were a united republic. The obvious Central American outlier from this group is Panama, whichwas a province of Colombia until its independence in 1903 (Barton, 1997a). Panama now participatesin Central American presidential summits without commitment to implementing CACM’s commonexternal tariff, an important component of any trading bloc.

The Caribbean region is less economically united than Central America, a reflection of the islands’greater physical fragmentation (Figure 4.1), and greater historical fragmentation by European colonialpowers (Richardson, 1992). Because most Caribbean countries are now English-speaking, theydominate the region’s trading bloc created in 1973 and called CARICOM (the Caribbean CommonMarket). The 15 full members of CARICOM as of 2003 are 12 English-speaking countries of the

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Caribbean region, one British colony (Montserrat), Surinam, and most recently Haiti. CARICOMaccepted Haiti’s membership in 1997 contingent on it moving more aggressively in the neoliberaldirection, i.e. privatization, public spending reduction, and promotion of foreign investment; it passedthese stipulations in 2002. Haiti had already undergone many neoliberal reforms. For example, itreduced tariffs on imported rice from 50 to 3 per cent in 10 years, causing the local market to beflooded with US rice and local production to fall by almost 50 per cent (CPT, 1998). The Caribbeantrading bloc reinforces the IMF/World Bank/USAID dictates; CARICOM views these neoliberalreforms as necessary prerequisites for all of its members if the bloc is be globally competitive andeventually enter the FTAA (Free Trade Agreement of the Americas).

The Bahamas is the only other English-speaking Caribbean country choosing not to belong toCARICOM, although it does participate in the Caribbean Community. In this regard, the Bahamas’position is similar to Panama’s relative to the CACM; it participates in regional summits of Heads ofState but not in Trade or Finance Ministers’ meetings, and is not committed to CARICOM’s plan for acommon external tariff and economic integration. In the 1990s the Netherlands Antilles and severalof the region’s Spanish-speaking countries have attained observer status in CARICOM. CACM andCARICOM countries, together with Mexico, Colombia, Venezuela, Panama, the Dominican Republicand France, have recently united under the Association of Caribbean States (ACS). The first ACSsummit was held in 1995. Thus far ACS has not functioned as a trading bloc, but rather as a forum fordiscussion of common economic concerns and possible future linkages for trade, transport andtourism (Demas, 1997).

The five-member CACM took effect in 1960 two years after the establishment of the original six-member European Economic Community. The parallel and precocious origins of CACM and the EECin a world economy led observers to wonder if they would develop and strengthen in tandem. CACMgot off to a brisk start during its first decade when intraregional exports grew from 7 to 26 per centof the total (Table 4.3). Central America’s policies that emphasized economic opening, fiscalconservatism and regional trade integration generated economic growth rates of around 5 per centbetween 1965 and 1975. Since then the CACM has faltered. Intra-CACM trade has levelled out atabout 22 per cent of total exports (Table 4.3). Why did CACM show such early promise and thenstagnate?

The core of CACM’s impressive growth in the 1960s was the states’ successful cultivation of ISIfirms, which to a large extent involved TNCs from the United States establishing factories in the regionand exporting within the CACM (Grugel, 1995). The internal market for these industrial goods was

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TABLE 4.3 Central American and Caribbean trading blocs: intra-

regional exports as a percentage of total exports, selected years

Year CACM CARICOM

1960 7.0 na*1970 26.0 na*1980 24.2 8.91985 15.5 13.01990 15.2 12.31992 23.2 11.81994 22.7 15.61996 21.5 na2001 21.8 15.9

*CARICOM was created in 1973.Source: Demas (1997); Bulmer-Thomas (1998); ACS (2003).

quickly saturated, however, given that a large share of the region’s 11 million people at that time livedin poverty. While economic growth and regional trade statistics looked impressive, the disruption ofpeasant economies and the inequities of state policies were fomenting guerilla wars in three of thefive countries – Nicaragua, Guatemala, and El Salvador (Walker, 1997). Trade also proved to be highlyimbalanced across CACM countries. On the one hand, the mutual geographical accessibility of themain urban-economic regions of El Salvador and Guatemala helps to explain why their trade hasdominated the CACM. On the other hand, Honduras, the least developed member country,accumulated a large trade deficit in the 1960s. This, along with its infamous ‘soccer war’ with El Salvadorin 1969, led to Honduras’ withdrawal from the CACM in 1970. Regional relations worsened in the1970s from the region’s civil wars, and then in the 1980s from Reagan’s efforts to isolate the Sandinistagovernment of Nicaragua. World recession and the debt crisis in the 1980s further dampenedCACM’s trading prospects. The neoliberal bailout offered by the World Bank and the IMF since thenhas discouraged ISI and intraregional trade, while it has emphasized extraregional exports of non-traditional agricultural and manufactured goods (Bulmer-Thomas, 1998). As a result, the five CACMcountries sustained annual export growth rates of between 11 and 31 per cent from 1992 to 1995(Colburn, 1998).

The CACM rebounded in the 1990s, although not to its peak trade level of around 1970 (Table4.3). Many of the early shortcomings have again surfaced. Honduras rejoined the group in 1990 buthas once again accumulated large trade deficits. Trade between CACM countries continues to bepredominantly stand-alone industrial products, rather than components of an integrated commoditychain or agricultural products. The lack of the former suggests the shallow development of regionaltrade and economic integration. The latter were legally restricted until the 1990s. Even since theirinclusion, however, agricultural exports have not diversified, and comprised only about 4 per cent ofintra-CACM trade in the late 1990s (Rueda-Junquera, 1998). Throughout CACM’s existence, traderestrictions have diverted more imports from third countries away from the region than they haveincreased production within the region. In economists’ parlance, CACM has caused more tradediversion than trade creation (Nicholls, 1998) – when more expensive products from within the tradebloc replace cheaper ones from outside. Finally, while capital and products now move more freelyacross Central American borders, political leaders have been unwilling to consider facilitating labourmobility in the same way (Bulmer-Thomas, 1998).

In comparison, CARICOM has never approached CACM’s regional trade levels, suggesting theformer’s lower levels of commitment to trade integration and its limited economic complementarity.Intra-CARICOM trade as a share of total exports has fluctuated between 8 and 16 per cent since1980 (Table 4.3). Further, whereas intra-CARICOM exports were worth $5.9 billion in 1980, they fellto $4 billion in 1994 and only $1.3 billion in 2001 (Demas, 1997; ACS, 2003). CARICOM’s market isalso more limited. Whereas CACM’s population is 35 million, CARICOM’s is just 6.3 million plus Haiti’s7.1 million people (mostly impoverished rural peasants). By the end of 2002, CARICOM had not yetimplemented a common external tariff, while internal economic integration had been ‘placed on theback burner’ (Gibbings, 2002). Skilled labour has been able to move within CARICOM but notunskilled labour (Demas, 1997; CARICOM, 2003). CARICOM recently eliminated the visa (but notthe passport) requirement for travel among member countries, although North Americans orEuropeans have long been able to enter member countries with only a driver’s licence.

As has typically been the case historically, exogenous factors have overwhelmed the region’sprogress toward regional economic development. Both CACM and Caricom have suffered as regionalintegration involving outside countries has become a higher priority. For example, in 1994 Costa Ricaentered a bi-lateral trade agreement with Mexico, a move that impedes further progress toward acommon external tariff for CACM because it blurs the distinction between countries that are internaland external to the trading bloc. CARICOM has similarly signed free trade agreements with Colombiaand Venezuela (Demas, 1997). NAFTA and potentially a future FTAA create even larger obstacles, asBulmer-Thomas has suggested. His critical observation on how CACM countries’ attention has been

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diverted toward NAFTA applies equally well to CARICOM countries: ‘Unrestricted access to the USmarket, however implausible, has been seen as more desirable then the less exciting, but more realistic,goal of regional integration’ (Bulmer-Thomas, 1998: 320).

More broadly, NAFTA has decreased Central America and the Caribbean’s economic importancein the global economy and has relocated manufacturing investment to Mexico. Mexico’s foreigninvestment and exports have grown relative to the region’s small countries since 1994. Policy-makershave seen Mexico as a major threat to their efforts to develop by attracting foreign investment intoassembly operations. CACM and CARICOM have been pressing the United States for tradeconcessions. The most urgent aim is parity with Mexico within NAFTA, so that the region will nolonger be comparatively disadvantaged as an export platform. Caribbean and Central Americancountries seek NAFTA membership despite their competitiveness vis-à-vis the USA for little beyondlow wage labour.

Unfortunately, the economic marginality of CA/C described above breeds political marginality. AsDemas (1997: 20) laments for CARICOM, ‘We have already conceded far too much, far too quickly,by way of trade liberalisation.’ But the US government has offered CA/C little more than rhetoric onthe subject of deeper economic ties and regional cooperation toward mutual and complementarydevelopment. The region’s developmental concerns have been an especially low priority for the BushAdministration since 2001 (Griffith, 2003). It is difficult not to conclude that Washington’s policytoward the region – if such scattered actions and mostly inactions deserves to be called ‘policy’ – isself-serving, narrow and short-sighted.

THE GROWING DRUG ECONOMYWith so few opportunities for growth through neoliberalism materializing, the production, andespecially the transhipment of drugs through Central America and the Caribbean, have becomewidespread. Individuals have taken to growing and exporting marijuana and to trafficking cocaine andincreasingly heroin from the Andean region on the way to the world’s largest market in the UnitedStates. They seek even a small share of the vast transnational income: Colombian cocaine, heroin andmarijuana alone have an estimated retail value of $46 billion (NACLA, 2002). The growing number oftourists moving in and out of the region facilitates the movement of drugs to US by air and by boat.

A Guatemalan researcher Edgar Celada characterizes Central America’s increased drug traffickingas ‘geographic fatalism’ – the region is sandwiched between South American producers and NorthAmerican consumers. The same study found Central America expanding its drug activities beyondtrafficking to production and consumption (Jeffrey, 1998). Problems are similar in the Caribbean.Puerto Rico had the highest per capita murder rate in the USA in 1995, with two-thirds of the deathsassociated with drugs. A growing number of Caribbean people are being deported from the USA, andthe most common cause is drug activity. At the same time Caribbean jails are already overcrowdedand have been judged to be unsafe and unhealthy (Griffith, 1997).

Expansion of drug activity in Central America and the Caribbean is also occurring with respect tosocial classes. The ‘democratization’ of drug activity now includes growing numbers of politicians,judges, businesspeople, and ordinary citizens. Military personnel are involved in both drug running andenforcement. Following the conclusion of Central America’s civil wars and peace accords, there is nowa remilitarization of the region through US funding for antidrug efforts. Neoliberalism’s openeconomies and non-traditional exports are also entangled with the drug trade. Another Guatemalanresearcher, Mario Maldonado, laments the growing number of local ‘businessmen who earn theirwealth hiding cocaine in shipments of broccoli and cut flowers’ (Jeffrey, 1998). Guatemala joins othercountries in the region where residents now assume, often quite accurately, that sudden increases ofexpenditure among locals on gold jewellery or a new car, home or restaurant are attributable to drugtrafficking. The exception is Cuba which, according to US authorities, plays little role in thehemisphere’s drug trade (NACLA, 2002).

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CONCLUSIONCentral America and the Caribbean have traditionally been studied separately. Today, thehomogenizing impacts of US regional hegemony, economic globalization and neoliberalism suggest thefruitfulness of analysing them together. Over recent decades the region has learned that USdominance and intervention make developing local interpretations of ‘democracy’ and ‘development’extremely difficult. The region’s hurried experiments with various democratic socialist paths todevelopment are history. Instead, Central America and the Caribbean have converged on a set ofpolicies that pursues dependent capitalist development under the tutelage of the United States.

The current global political economy presents these small, under-industrialized, and trade-dependent countries with many risks of further vulnerability and marginality, but also some narrowoptions and opportunities. The greater economic openness associated with neoliberalism is exposingdomestic firms to competition from larger and more competitive ones from abroad. Suchcompetition has been fierce for both old and new producers. The few survivors from the region havebeen able to fill the market niches that neoliberalism trumpets, although too often suchcompetitiveness is attained primarily at the expense of labour and the environment.

However, international economic integration can potentially have other positive impacts if it helps toexpose and dislodge internal obstacles to development and human rights. Economic exposure bringspressure to confront internal problems such as economic stagnation under the weight of localmercantilist capital, and inefficient local production methods from which only a few have benefitted.Global integration and openness can also help to expose government mismanagement, graft andnepotism that have long plagued much of the region. Non-traditional export production means thatthere are now more external interests connected to the region that can expose (but also potentiallybenefit from) illegal or inhumane practices. Issues of human rights can be brought to internationalattention through greater global connections. For example, the international campaigns in recent yearsagainst Nike, Reebok, Kathie Lee Gifford apparel, and Disney (and their subcontractors) for their ThirdWorld employment practices demonstrate these trends (Ross, 1997a). The campaigns are makinginternationally known employment and living conditions that have long been sequestered by distance,undemocratic states, foreign cultures and closed societies. In some cases such campaigns helped tocreate openings for workers to mobilize and struggle for better wages, benefits, and conditions.

Economic globalization is primarily a top-down, elite-driven, and externally-based process shapingthe lives of Central America and the Caribbean people. However, globalization has many dimensions,and it can also open opportunities for progressive transnational networking and for confrontingconditions of domination, exclusion, and exploitation, as later chapters explore.

FURTHER READING

Hirst, P. and Thompson, G. 1999 Globalization in question: the international economy and thepossibilities of governance. Polity, Cambridge, second edition. This is the most thorough and carefulinterrogation of the ideas and evidence behind economic globalization to date. It refutes manytruisms about globalization and offers empirical evidence to document the extent and the preciseways in which global economic integration is actually occurring.

Klak, T. (ed.) 1998 Globalization and neoliberalism: the Caribbean context. Rowman and Littlefield,Lanham, MD. Through the analytical lens of political economy, the book examines the impacts,adjustments, and coping strategies found in the Caribbean as it undergoes a rapid and profoundtransformation. Issues addressed include development policies, non-traditional exports, externalrelations, the environment, tourism, class and gender relations, and human migration.

Potter, R., Barker, D., Conway, D. and Klak, T. 2003 The contemporary Caribbean. Addison-Wesley Longman and Prentice Hall, Harlow. Broad, geographical overview of the Caribbean region,including its environmental, economic, political, and social issues.

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Thomas, C. Y. 1988 The poor and the powerless: economic policy and change in the Caribbean.Monthly Review Press, New York. The most thorough and insightful account of the various modelsof state-promoted noncapitalist paths toward development of Caribbean countries since WorldWar II.

WEBSITES

Association of Caribbean States (ACS), http://www.acs-aec.org, the only Pan-CaribbeanBasin political organization that includes island, Central American and South American countries,devoted to fostering regional unity, coordinating development policies and negotiating from aposition of unified strength.

Campaign for Labor Rights, http://campaignforlaborrights.org, mobilizes and informssweatshop workers, consumers and advocates to promote worker rights in assembly plants andexport processing zones anywhere in the world.

CARICOM, http://www.caricom.org, the website for the Caribbean’s free trade organization; notethat the Central American Common Market had no website as of January 2003.

CIA, http://www.cia.gov/cia/publications/factbook, the CIA’s excellent and up-to-date collection offacts and figures for all of the world’s countries.

World Development Movement, http://www.wdm.org.uk, a website for a British organizationfocused on confronting global poverty and reporting on resistance in all corners of the world totop-down globalization.

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http://www.acs-aec.org

http://campaignforlaborrights.org

http://www.caricom.org

http://www.cia.gov/cia/publications/factbook

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Urbanization affected Latin America profoundly during the twentieth century. Less than one person inten lived in towns and cities in 1900, compared with three-quarters at the turn of the millennium. Anurban population of perhaps 10 million in 1900 had grown to around 375 million by 2000.

Urbanization constituted much more than a numerical shift; it transformed people’s lives. It changedthe locus of work from the fields to offices, shops, factories and urban streets. It changed the form oftheir housing from unserviced, rustic shacks to semi-serviced tenements and self-help properties. Ithelped modify the way they thought about religion and about society. Politics was graduallytransformed from a matter dictated by rural landlords to one where urban people not infrequentlyvoted and sometimes even influenced major decisions. In the cities, the power calculus graduallychanged, shifting from populism, through military rule to something vaguely approximating todemocracy. In this sense, urbanization was arguably the most revolutionary change to have occurredin Latin American life during the twentieth century. It was surely far more important than politicalrevolution, real cases of which were very rare, or land reform, which was neither frequent nor oftenvery effective, or globalization, the effects of which are usually greatly exaggerated.

Given such a fundamental change in economic and social organization, it might be assumed thatacademia would respond by placing urbanization at the centre of their research agendas. In practice,rather few did so. A glance at most of the great historical tomes of twentieth-century Latin Americareveals an almost eerie silence about towns and cities; Hardoy (1975), Morse (1958; 1971), Davis(1994) and Scobie (1964; 1974) are among the relatively few exceptions. Economics as a disciplinewas even more silent on the issue, although Currie (1971) must be exempted from this criticism. Ofcourse, much has been written but outside the disciplines of anthropology, geography, planning andsociology, the city was sadly neglected.

When urbanization did emerge as a theme, it was frequently discussed in an over-generalized way.Of course, there were many similarities between Latin American cities but, apart from the growth ofshanty towns, informal employment, social segregation and motorized transport, do Barranquilla,Belém, Brasília and Buenos Aires really have that much in common? Research also tended to focus onthe largest cities, even though most Latin Americans still live in other urban places. At least capital city-cum-large city bias is understandable in the sense that twentieth-century Latin America was incubatingsome of the largest cities in the world and those cities tended to dominate national life. Neglectingcities with less than 100,000 or so people was not all that surprising, but what about those with morethan a million people? Very few books have ever been written about Belo Horizonte, Barranquilla,Guayaquil or Manaus.

If the process of urbanization has too often been neglected, or studied selectively, some of itselements have been given too much importance. The fear that the cities would suffer from some kindof social breakdown has been a recurrent theme for decades. The economic failure of Latin America’scities to provide enough work or adequate housing has been another.

5The urban revolution

Alan Gilbert

This chapter argues that during the twentieth century the growth of the city constitutes one of theessential elements in understanding the nature of life of most people in Latin America. And, despitethe very real problems associated with the process, urbanization should be regarded as a majorsuccess story. Despite the widespread poverty, people live longer and fuller lives than they did whenthere were so many fewer of them. This could not have been achieved without urbanization.

The chapter also discusses the relationship between urbanization and globalization. However, itdoes not confine the term to discussing events since 1980 because, whatever that ill-defined conceptactually means, life in Latin America has always been affected by the outside world and LatinAmericans have always sought to play a part in the world economy. In Latin America, the process ofglobalization goes back at least to the arrival of Christopher Columbus in the fifteenth century. Arenot Catholicism, the ubiquity of the Spanish and Portuguese languages, slavery, the urban settlementpattern, and bull-fighting adequate testimony that globalization in Latin America is less than recent?Even that cultural obsession, soccer, had arrived from England and was well established in the SouthernCone by the beginning of the twentieth century. When the World Bank, one of the leading supportersof world economic integration, recognizes that significant globalization occurred in Latin Americabetween 1870 and 1914, when foreign investment and immigration in the Southern Cone wasrelatively far more important than it has ever been since, it is welcome recognition that Latin Americadid not start to ‘globalize’ in 1980.

In discussing globalization, both in the past and in the present, it is vital to understand howdifferent parts of Latin America have always inter-reacted with the outside world in highly variableways (Palma, 1978; Cardoso and Faletto, 1979). Certain cities and regions have always been closelylinked to the world’s ‘metropoles’ (Frank, 1966), whereas the ebb and flow of international tradepassed around and beyond the vast majority. Even in the past 20 years, when ‘globalization hastriumphed’ (ILO, 1995: 68), many cities have been touched only lightly by whatever it is thatconstitutes globalization. The obvious exceptions, most notably the cities of northern Mexico andthe larger national capitals, are to be regarded as just that, exceptions. The impact of globalization onmost people in urban Latin America has been highly variable. Social class, location of the city and thelevel of development are the keys to understanding how globalization has impacted on ordinarylives. Perhaps that geographical rallying call, ‘place matters’, forms another of the essential argumentsof this chapter.

URBAN GROWTH DURING THE TWENTIETH CENTURYUrbanization in the Americas did not begin with Christopher Columbus’ accidental landing onHispaniola. The Aztec, Inca and Mayan civilizations had already established great cities before theIberian Conquest (Hardoy, 1975). In that sense urban life is a very old phenomenon, at least in certainparts of Latin America.

Of course, the Spanish quickly dismantled the pre-Columbian civilization and established a newurban tradition in its place. The Spanish and Portuguese used urbanization as a major weapon in theconquest of the Americas (Morse, 1971; Cardoso, 1975). They founded most of the cities in existencetoday. With the exception of Brasília, Ciudad Guayana, Belo Horizonte, Goías and a few others, mostcities had been founded before 1700 and well before independence. The phase of globalization thatbegan in 1492 brought a new form of urban civilisation. Iberian squares, churches and rectilinear streetpatterns were established through administrative diktat in areas where they had never been before.Latin American urbanization therefore is centuries old. It is also, in a very important sense, very recent.Indeed, it might almost be argued that in most of the region urban growth is really a phenomenon ofthe past 70 years (Table 5.1). In the Latin America of 1930, five out of every six people lived in thecountryside; in 2000 three-quarters were urbanites. In 1900, only one city, Buenos Aires, had anywherenear one million inhabitants. In 1950, the number of million cities had reached seven. By 1990, therewere 40 (UNECLAC/UNCHS, 2000: table 12).

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The extent and speed of urban growth in Latin America during the twentieth century have beenimpressive and, for many governments, profoundly worrying. During the 1950s, most major cities weregrowing annually at over 4 per cent per annum and many were expanding much faster : Lima, MexicoCity and São Paulo at over 5 per cent, Caracas at over 6 per cent and Bogotá at more than 7 per cent.Such rates of growth quickly turned relatively small cities into what were often described as urbanmonsters. Today, Mexico City and São Paulo both contain around 18 million inhabitants, Buenos Airesalmost 13 million, Rio 11 million and Lima more than 8 million (CEPAL, 2001b).

Urbanization deeply influenced the lives of Latin Americans. However, it did not change LatinAmerica uniformly, affecting particular areas in very distinctive ways and at different times. Forexample, Argentina, Uruguay and Southern Brazil experienced rapid urbanization in the latenineteenth century. Successful export production generated economic growth and attracted migrantsto the region from southern Europe. In the process, Argentina became a nation of immigrants and itscapital the region’s first ‘million city’. But in most of the region, urbanization came much later. By 1940,when two-thirds of the Argentine population was living in urban areas, less than one in three Brazilians,Colombians or Venezuelans lived in towns or cities (Wilkie et al., 1994: 141). In Central America, thesupposed tranquillity of rural life remained largely undisturbed.

Over the century, urbanization transformed the nature of life. Despite the frequent chaos, urbanliving generally enhanced the quality of most rural migrants’ lives, especially as the quality of publicservices and sometimes the housing gradually improved. Certainly, urbanization never brought thedisaster that was so often predicted and sparked few social revolutions, unfortunately nor has itmanaged to remove poverty. Indeed, experience in the past two decades suggests that poverty inLatin America became both entrenched and increasingly urbanized. The continued arrival of ruralpeople, the debt crisis and the nature of the neoliberal economic development model haveestablished poverty as a permanent feature of urban life.

EXPLANATIONS FOR URBAN GROWTHUrbanization in the Southern Cone was initiated by economic expansion. The growth of the coffeeeconomy in Rio de Janeiro and São Paulo and the boom in meat, wool and cereal exports in Argentinaand Uruguay created a measure of affluence and generated a huge demand for labour (Morse, 1958;Scobie, 1974). People crossed the Atlantic from Spain, Portugal and Italy, and many stayed in the portswhere they landed. Over three million people migrated to Brazil between 1872 and 1940 and 3.4 million

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TABLE 5.1 Latin America: urban share of population in selected countries, 1930–2000

Country 1930 1950 1970 1990 2000

Argentina 38 63 79 87 90Bolivia 14 34 42 58 62Brazil 14 37 56 78 81Chile 32 61 75 84 86Colombia 10 43 59 71 74Ecuador 14 29 41 55 65Guatemala na 25 36 35 40Mexico 14 43 59 71 74Peru 11 35 60 70 73Venezuela 14 54 77 84 87

Source: UNECLAC/UNCHS (2000: Table 4); Cunha (2002: Table 1).

moved to Argentina in the half century after 1881. Cuba also benefited from a wave of immigrants inthe years following independence. Between 1902 and 1930, 1.2 million foreigners arrived, mostly fromSpain. In most of the region, however, foreign migrants either came much later or never came at all.

Economic growth was insignificant in most of Latin America until industrialization began in the1940s. In 1950, the degree of urbanization was closely linked to the level of economic development:relatively affluent Argentina, Chile and Uruguay had a majority of their populations living in urbanareas; relatively poor Ecuador, Guatemala and Honduras less than one-third.

Economic growth, however, was not the only ingredient in urban development. By the 1940sanother fundamental factor had emerged – national population growth. During the 1930s and 1940s,most Latin American countries had begun to enter the second phase of the demographic transition,death rates fell while fertility rates remained high. Table 5.2 shows how population growth began toaccelerate in some of the largest countries of the region during the 1930s. With the exception ofArgentina, which had already passed onto a later stage of the demographic transition, every countrywas setting new records for natural increase.

Falling death rates combined with high birth rates had a double impact on urban areas. First, theirown populations began to grow more quickly and, second, there were potentially many more urbanmigrants. Given the inequality in land holding and the poverty of most rural people, life in thecountryside was increasingly problematic. Migration offered an escape valve that was welcome,especially when economic development created new opportunities for a better life in the cities. Theperiod 1950–80 is the climax of urban growth in most Latin American countries. Young peopleflooded to the cities, set up home and produced urban offspring. Later, the pace of urban growthslowed. Migration continued to be an important source of growth in many places but increasingly theseeds of urban growth lay in the cities. After 1960, urban growth was fuelled mainly by natural increase(Merrick, 1986).

By 1980, national populations were growing much more slowly. From 1950 until 1980, LatinAmerica’s population increased annually by 2.8 per cent; from 1980 until 1995, the annual growth ratehad fallen to 1.8 per cent. Fertility decline was a significant factor in that change. After 1970, mostwomen in the region bore fewer children. In 1970, the average Nicaraguan woman gave birth to 7.2children during her lifetime, in 2000 the figure had fallen to 3.7 (UNDP, 1997; table 22; World Bank,2000: 286–7). Over the same period, the gross fertility of Mexican women fell from 6.5 to 2.8. Thedecline in fertility helped greatly to slow the pace of urban growth.

In places, emigration also reduced national population growth. The combination of local poverty and proximity to the Great Society encouraged millions to move to the United States. By 2000, the Hispanic population in the USA numbered 35.3 million (Logan, 2002: 1). That year, approximately

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TABLE 5.2 Latin America: annual population growth, 1900–95

Country 1900–30 1930–50 1950–70 1970–95

Argentina 3.1 1.8 1.7 1.5Brazil 2.1 2.4 3.0 2.1Chile 1.3 1.7 2.3 1.6Colombia 2.2 2.0 3.1 2.5Guatemala 2.3 2.4 3.2 2.7Mexico 0.8 2.4 3.1 3.1Peru 1.0 1.6 2.5 2.6Venezuela 0.9 2.2 3.8 2.9

Source: Thorp (1998: 23).

19 per cent of all Mexicans, 16 per cent of all Salvadoreans, and 11 per cent of all Cubans andDominicans were living in the United States. Of course, this underestimates the impact in the sendingcountries because so many migrants are undocumented and because increasing numbers are nowmigrating to Europe and other international destinations (Jokisch and Pribilisky, 2002; Gilbert, 2002).The exodus had a major impact on urbanization in Latin America. Had the emigrants not movedabroad, most cities in their home countries would have grown much faster.

If the 1980s heralded a decline in the pace of urbanization, the decade was seared into Latin American memories for another reason – the debt crisis. Between 1981 and 1989, per capitaincomes in Latin America declined by approximately 8 per cent. With the exception of Cuba, and tosome extent Chile and Colombia, every country was affected badly by economic recession. But ifmost countries suffered during the ‘lost decade’, the brunt of the crisis was borne by those living in thecities. For the first time in generations, poverty in the cities increased faster than that in thecountryside.

While the absolute number of rural poor increased by 8 per cent between 1980 and 1990, thenumber of urban poor virtually doubled (see Tables 5.5 and 5.6). Of course, the urban sector had gainedmost of the benefits from the old model so it was not unreasonable that it reaped the withered cropsfrom the ill-invested seeds. The only problem with that interpretation is that those who gained mostduring the prosperous years did not suffer greatly during the urban debt crisis. Most of the burden wasthrust upon the poor and even the middle class; the rich had already converted their funds into dollarsand often invested abroad (Portes, 1989; Gilbert, 1992; Tardanico and Menjívar-Larín, 1997).

The debt crisis hit the urban areas hard for several reasons. First, the debt crisis unleashed an unholycombination of economic recession, rapid inflation and balance of payments deficits. To help re-establish some degree of economic normality, stabilization programmes were introduced in virtuallyevery country. Some claim that IMF loans were made conditional on governments accepting theWashington consensus view of economic management, although many Latin American economicsministers, very often themselves graduates of US economics faculties, argue that they devised thepolicies for themselves – there was no alternative. Whatever the cause, the medicine of opening upthe economy, controlling government expenditure, increasing taxation and privatizing as manygovernment-owned companies as possible was taken in many countries. The early 1980s, and in someplaces the later 1980s as well, saw a necessary slowing in the inflation rate but far too little in the wayof faster economic growth.

Second, stabilization programmes made unemployment and under-employment worse. Economicrecession and cheap imports from the United States and the Far East forced many Latin Americamanufacturers out of business. New labour reforms encouraged those that remained to shedworkers. Many of those who lost their jobs sought refuge in the informal sector ; some in the betterpaid parts, like taxi driving, many in the worst paid, like peddling goods on the street. In addition, thepoorest families were forced to put more people into the labour force (Escobar and González de laRocha, 1995). Older children left school both to save expenditure on books and uniforms and to earnsomething from casual employment. The Latin American labour force in the 1980s increased in size atthe same time as unemployment and informal sector rose. Needless to say, the average real wage fellin most countries.

Third, the New Economic Model (NEM), based on encouraging exports, displaced the old importsubstituting industrialization (ISI) template (Edwards, 1995). In theory, the old industries could redirecttheir production toward export markets, something that would be helped by another key element ofstructural adjustment, devaluation. In practice, few manufacturing companies were sufficientlycompetitive to do so. With some exceptions, notably Mexico, Argentina and Brazil, most of the newexports actually came from the countryside. In certain areas, devaluation encouraged agriculturalproduction because for the first time in years farmers could make a profit on their export sales (butsee Chapter 4). In terms of urban growth, devaluation effectively shifted the terms of trade against thecity. In areas of export expansion, agricultural incomes sometimes rose.

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Fourth, cuts in government budgets impacted heavily on social expenditure and particularly onheavily subsidized urban sectors like transport, water and electricity. Newly privatized utilities startedto charge the commercial rate for the service and the higher tariffs cut into the wage packets of eventhose who had retained their jobs. As most subsidies had previously only reached the cities, the debtcrisis hit the urban poor particularly hard. The impoverished in the countryside were protected in thesense that they had never received much in the first place.

Structural adjustment in the 1980s was meant to have improved the macro-economic structures ofLatin American countries and the benefits would be felt in the 1990s. Table 5.3 shows there is somejustification for that view but also demonstrates that the results were not all that impressive. Things didnot improve greatly during the early years of the new millennium when the region’s economy declinedand countries like Argentina, Uruguay and Venezuela faced real crises. Whatever the promise held upby the combination of globalization, free trade and structural reform, Table 5.3 suggests that LatinAmerica has so far reaped few of the benefits. The growth record of the 1990s was far worse than inthe much-derided days of ISI (see Chapter 3). The slow pace of economic growth continues to havean effect on urban development and, particularly on the urbanization of poverty (see below).

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TABLE 5.3 Economic growth in selected Latin American countries since 1950 (annual growth in GDP)

Country 1950–59 1960–69 1970–79 1980–89 1990–99 2000–2

Argentina 2.4 4.4 3.0 –0.6 4.9 –5.5Brazil 6.5 6.2 8.6 2.9 2.9 2.4Chile 3.8 4.5 2.0 3.2 7.2 3.1Colombia 4.7 5.0 5.7 3.7 3.3 1.8Guatemala 4.0 5.2 5.9 0.9 4.2 2.6Mexico 5.9 7.1 6.5 2.1 2.7 2.5Peru 4.9 5.6 4.0 –0.2 5.4 2.6Venezuela 8.3 5.4 3.2 –0.8 1.7 –0.2Latin America 4.9 5.7 5.6 1.7 3.4 1.2

Source: ECLAC (1998), World Bank (2000), CEPAL (2003).

RURAL–URBAN MIGRATIONFor centuries Latin Americans have migrated to find work. The Spanish forced many to move tomining areas to produce silver and gold. Slave ships brought millions of Africans across the Atlantic. Forgenerations, rural labour moved seasonally in search of work on the plantations of Brazil and Peru, toharvest the coffee in Brazil and the northern Andes and to pick bananas in Central America (Arizpe,1982; Skeldon, 1990; Chant, 1992; Radcliffe, 1992; Bailey and Hane, 1995). In this sense the rural tourban movement that increased so markedly after the 1930s was merely a variation on a long-established theme of labour mobility.

In another sense, however, it was a revolutionary change. It was different from earlier patterns ofseasonal migration because most migrants began to stay permanently in the cities. In this respect LatinAmericans were unlike the majority of Africans who tended to retain their homes and rights to landin the countryside and to move only for short periods (Gilbert and Gugler, 1992). In Latin America,whole families gradually gave up rural life to seek their fortunes, or at least a better chance of survival,in the cities. Urban migration was also different from most kinds of rural migration insofar as it directlyinvolved women. Indeed, more women tended to move to the cities than men (de Oliveira, 1991;Chant, 1992; Radcliffe, 1992; Gilbert, 1998). Permanent migration meant that cities increasingly becamethe central focus of Latin American life.

People moved to the cities because urban conditions, for all of their horrors, were better than thosein the rural areas. Access to public services like electricity and drinking water was problematic in thecities but infinitely superior to that in the countryside. In Colombia, 97 per cent of urban householdshad access to electricity in 1993 compared to 35 per cent of rural families. Surprisingly, evenmalnutrition was less severe in the cities; in the late 1970s, for example, 62 per cent of rural families inLatin America were malnourished compared to 26 per cent of urban families (Pfeffermann and Griffin,1989).

If conditions were better in most cities than in most rural areas, most migrants were presumablymaking a sensible choice in moving. However, many contemporary observers thought that themigrants were choosing an erroneous path and had been tempted to move by a hopelessly optimisticview of the city. The migrants believed that the streets of the city were ‘paved with gold’, when urbanlife actually offered them little in the way of work or housing. Many city folk even regarded the newmigrants as figures of fun, particularly when they wore ponchos and spoke Indian languages. How couldthese uneducated and unsophisticated natives possibly cope in the city?

Occasionally, the negative stereotype of the migrant was correct. Rural conflict and violencesometimes forced people to move to the cities in search of safety. Although they might wish to return,they could not because their fields had been damaged or stolen. Natural disasters might also makerural flight inevitable. Hurricanes, drought, earthquakes and floods regularly hit many areas of theregion and forced many families to leave their homes. At certain times, such ‘refugees’ could wellconstitute a majority of migrants although in most countries they were normally a minority.

When serious studies of the migration process began to be conducted in the 1960s, reality wasshown to be very different from the stereotype (Mangin, 1970; Portes, 1972; Peattie, 1974; Cornelius,1975; Perlman, 1976). Most migrants were not ill adapted to urban life. And, when country folk hadtime to make up their own minds and to calculate their life chances, they seemed to make rathersensible choices.

The decision to migrate was often taken not by an individual but by the whole family. Migration wasconsidered to form part of the household’s survival strategy. How could the movement of one orseveral individuals help the household survive in difficult circumstances? Was it sensible for the wholehousehold to move to the city or for one person to move, set up home and act as the base for othersto move later? Remittances from those in the city might even be the way in which the rest of the familycould survive in the countryside.

Migration to the city was generally rational, people moved from poorer to more prosperous placesand tended to move short distances to the nearest city. Critically, the migration process was selective.Those who moved were not the poorest of the poor but those with a decent chance of making theirway in the city. It was those aged between 15 and 35 years of age who were most likely to move, thosewho could read and write, and those with suitable skills. Women were more likely to move than menbecause their labour was less in demand in the fields but they stood a better chance of gettingemployment in the city, as maids, cleaners, shop assistants or even as sex workers.

Moving to the city was a real challenge but one to which most Latin Americans responded very well.The ‘natives’ of the Andes, Central America and Mexico, had a much harder task but adaptednonetheless. Many studies reported that the migrants were so anxious to adapt to their new lives inthe city that they changed their life styles, their dress, and even their language (Andrews and Phillips,1970; Doughty, 1970; Roberts, 1973; Lomnitz, 1977).

Of course, because most migrants have been rational, the nature of migration has changed over theyears in response to changes in the socio-economic environment. After all, large-scale urbanwardmigration has now been occurring for at least 60 years and so migration now takes place incircumstances very different from those of the early years. For example, most rural people today havefriends and relations in the city. It no longer constitutes much of a risk to move because they havesomeone with whom to stay and who can help them survive. Improvements in transportation meanthat they have already been to the city on visits. One consequence is that more people without the

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ability to cope in the city on their own have been able to move. The old and the infirm can come tothe city knowing that they will be cared for. Parents will bring their young to benefit from the superioreducation facilities of the city. In short, the migration process has probably become less selective overthe years.

The process of migration has also changed in the sense that the stark differences in living standardsbetween urban and rural areas have become much less obvious since 1980. When the debt crisis hitthe cities, Latin Americans soon realized that the normal route out of poverty was no longer available.The slow pace of urban growth in the 1980s suggests that potential migrants picked up the messagevery quickly; continued residence in the countryside was now a more sensible option. With structuraladjustment and agricultural modernization, the rural–urban calculus changed. For those living in areasof export agriculture, new opportunities were being created. Pay rates might be desperately low, butrising unemployment and falling living standards in the cities offered nothing better.

Improving transport and communications systems were also changing the rural–urban balance.Better roads, faster buses and lorries, and the spread of telephones allowed rural people to sell goodsin the city and return home. Better transport encouraged some urban people to work in thecountryside; the boías frias (cold lunches) of São Paulo and the agricultural workers of Santiago arewell-known examples (see Chapter 12). Similarly, many of the women who work in the cut-flowerbusiness on the fringes of Bogotá, live in the city. As Roberts (1995: 112) puts it:

the legacy of past movements and the commercialisation of most rural areas mean that thedistinction between rural and urban is often not a great one. Economic enterprise spans rural andurban locations. The patterns of consumption of the village may be different in scale to those of thetown, but they are not different in kind.

In many places the city has absorbed the countryside (Gilbert, 1998).As Latin America has become increasingly and predominantly urban, the nature of migration and of

the migrant has changed. Questions like ‘Who moves and why?’ and, ‘Where do they move from andto?’ have always been determined by local circumstances but now urban and rural conditions in theregion have become more diverse. As such, it is much harder to generalize usefully about the processof migration.

One other change is also critical, the way that migration has increasingly become an internationalphenomenon. Rural workers from Mexico and Central America have long moved to rural jobs inCalifornia but they now move in huge numbers to US cities as well. Half a million Mexicans now livein Chicago and many more in other cities of the Mid-West (The Economist, 2003a). Who moves, to orfrom where, is often difficult to predict; for example, why do Colombian migrants to London comepredominantly from three departments of the country rather than from the other 29 (Gilbert andKoser, 2002)? What is certain is that international migration increases during periods of nationaleconomic decline (Cornelius, 1991; Roberts, 1995; Gledhill, 1995). Current crises in Argentina,Colombia and Ecuador are producing increasing flows of migrants not only to the United States butto Spain and Italy as well (Jokisch and Pribilsky, 2002). Increasingly, the money sent back by those livingabroad are sufficient to keep the family alive at home and even to build a decent house (Durand andMassey, 1992; Jokisch, 2002). In 2001, Salvadorans sent US$2 billion dollars back home, a contributionequivalent to 16 per cent of the country’s GDP (BID, 2002).

All that we can say about migration today is that it is still motivated principally by economic realitiesand that most migrants continue to make sensible decisions about where to live and work (seeChapter 9). The only real exceptions come when people have little or no choice. Current experiencein Colombia where more than two million people have been displaced by rural violence, suggests thatsome people do not have the luxury of choosing who in the household should move (Rojas, 2001).Perhaps only in such circumstances does that highly simplistic explanation of migration, ‘push and pull’,really prove helpful. When people in the countryside are being threatened with death, they are mostcertainly being pushed to the cities.

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THE GEOGRAPHY OF URBAN GROWTH UNDER THE NEWECONOMIC MODELDuring the days of import substituting industrialization some broad generalizations could be madeabout its impact on the geography of urban growth (Gilbert, 1974; Gwynne, 1990). Since ISI aimed toreplace imports, and most of the market was concentrated in major cities, manufacturing companiesfavoured the larger cities. When those cities also happened to be national capitals or ports, theadvantages of locating there multiplied. The choice facing industrialists in Argentina in 1960, when 56per cent of the urban population lived in Buenos Aires, or in Peru when 57 per cent lived in Lima wasseemingly obvious (Fox, 1975: 20–6). Between 1940 and 1961, Lima’s share of industrial employmentin Peru increased from 14 per cent to 38 per cent (Gilbert, 1974: 61). Of course, some provincial citiesalso prospered, for example, Medellín, Cali and Guadalajara, but even these cities tended to lose outrelative to the national capitals.

Important though manufacturing industry was under ISI, most of the gross domestic product wasgenerated by commerce, finance and services. Here the largest cities, and particularly the capital cities,had the greatest advantage. With the economy oriented towards the domestic market, the cities withthe greatest concentrations of higher-income people tended to do best. Table 5.4 shows that duringthe 1950s and 1960s, the populations of the largest cities in each of the major countries, bar Argentina,grew more quickly than the total urban population.

During the 1970s, population growth slowed in some of the largest cities as a result of further fallsin the birth rate and because of ‘economic de-concentration’. With land prices and, sometimes, labourcosts in the major cities rising rapidly, with transport systems becoming increasingly congested andwith environmental controls beginning to bite, industrial managers began to rethink their locationstrategy. Many decided to postpone expansion in the major cities and locate new facilities somewhereelse. Not infrequently, this meant establishing a new plant in a small city relatively close to the existingfacilities. Any town or city with good communications to the major market and within 200 kilometresof the existing plant was a likely candidate for selection. Around Mexico City, Puebla and Toluca weremajor beneficiaries (Gilbert, 1993; Aguilar, 1999). In the state of São Paulo, the main metropolitan area

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TABLE 5.4 Urban growth in major cities and countries of Latin America, 1950–2000 (annual rates)

Country/city 1950–60 1960–70 1970–80 1980–90 1990–2000

Argentina 3.0 2.2 2.3 1.9 1.7Buenos Aires 2.9 2.0 1.6 1.1 1.2Brazil 5.0 5.1 4.3 2.7 2.2São Paulo 5.3 6.7 4.4 2.0 1.7Chile 3.9 3.0 2.8 1.8 1.8Santiago 4.3 3.2 2.8 1.9 1.6Colombia 4.4 4.3 2.7 2.8 2.5Bogotá 7.2 5.9 3.0 3.3 2.5Mexico 4.8 4.7 4.5 2.7 2.0Mexico City 5.0 5.6 4.2 0.9 1.6Peru 3.6 4.9 3.5 2.8 2.3Lima 5.0 5.3 3.7 2.8 2.6Venezuela 6.1 4.6 3.9 2.5 2.5Caracas 6.6 4.5 2.0 1.4 na

Source: 1950–90, UNECLAC/UNCHS (2000); 1990–2000 are mainly estimates from UN Population Division (2001).

lost industrial plants to nearby cities like Campinas, Guarulhos, Santo André and Osasco during the1970s and 1980s (Townroe and Keen, 1984; Diniz, 1994; Bähr and Wehrhahn, 1997).

But it was the debt crisis that really slowed the pace of growth in the major cities. As mentionedabove, manufacturing industry suffered badly under the dual impact of domestic recession and risingcompetition from imports. The largest cities lost their favoured status and economic restructuringcreated new opportunities for other places to attract manufacturing investment. The New EconomicModel aimed to stimulate manufacturing exports. Insofar as these exports were linked to naturalresources, for example, the production of cellulose or wine, this gave an opportunity to regions wherethe raw material was produced. Export orientation also favoured cities that were close to ports ormajor communication routes. Whereas ISI favoured the major cities, in places the New EconomicModel changed the balance of regional advantage. In Mexico, industrial production in the northernstates boomed (see below) and, in Chile, some of the cities in natural resource areas did well. Ofcourse, some of the major cities suffered little from the change in strategy because they were also inan excellent position to produce manufactured exports. But, in general, the New Economic Modelgave much more opportunity for certain provincial cities to industrialize than previously.

Table 5.4 shows that most of the large cities lost out badly after 1982. As unemployment rose andliving conditions deteriorated, the word went back to potential migrants in the countryside and smalltowns that now was not a good time to move. Indeed, the fact that Mexico City was growing moreslowly than the Mexican population generally strongly suggests that more people were actually leavingthan were arriving. For the first time in decades, the growth rates of most of the largest cities werelower than the respective national urban growth rates.

By the 1990s, the worst of the economic pain had seemingly passed and Latin America’s largestcities seemed poised to expand once again. But conditions in the 1990s were different from those inthe 1960s or 1970s. Structural adjustment had opened up the region to the brave new world of globalcompetition. Dependent on how they performed, cities could flourish or suffer (Friedmann and Wolff,1982; Dornbusch and Edwards, 1991; Sassen, 1991; Iglesias, 1992; Green, 1995; World Bank, 1995b;Gilbert, 1998). Furthermore, location in a successful country did not mean that every city wouldbenefit. In the new world order, every city was in competition with every other. Some cities did welland others badly as the case studies below demonstrate.

THE URBANIZATION OF POVERTYAccording to modernization theory, economic growth was supposed to rid Latin America, and indeedthe world, of poverty (Rostow, 1960; Kuznets, 1966). At the very least, economic growth wassupposed to reduce levels of inequality and to reduce the relative numbers of people living in poverty.Arguably, it managed to do this in Latin America under ISI. Of course, the process was interrupted bythe debt crisis, but once the lost decade was over, economic growth would continue to reducepoverty and make the region more equal.

There is limited evidence to suggest that this is what happened during the 1990s. While there aresigns that the incidence of poverty declined in countries, like Chile and Mexico, where economicgrowth was more rapid, the population in countries like Argentina and Venezuela experienced growingeconomic hardship. Indeed, for every country where there has been a fall in the incidence of poverty,there is another where it has increased (Table 5.5). In many, the absolute numbers of people living inpoverty have actually increased.

Table 5.5 provides even less evidence to support the idea that economic growth has broughtgreater equality. Indeed, many argue that the New Economic Model is highly flawed in this regard.Although the World Bank (2002b: 1) recognizes that globalization ‘produces winners and losers’ andthat growing integration does not usually heighten inequality within countries (ibid.: 5), Latin Americais a major exception. ‘In Latin America, due to prior extreme inequalities in educational attainment,global integration has further widened wage inequalities.’

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How has this general worsening of inequality and the increase of poverty in certain Latin Americancountries affected poverty in urban and rural areas? Table 5.5 suggests that in many the urban areashave seen a major rise in poverty. Insofar as several Latin American countries are predominantly urban,this is hardly surprising. In Argentina or Uruguay, where 90 per cent live in urban areas, it is inevitablethat rising levels of poverty nationally will badly affect conditions in the cities. But, even in the lessurbanized countries, it seems as though urban poverty may well have increased, at least on themeasure used in Table 5.5.

Table 5.6 presents data computed on a different basis; poverty measured in terms of the proportionof the population living below a poverty line. According to Table 5.6, the last decade of ISI saw someincrease in the numbers of people living in poverty although the incidence of poverty hardly changed.With rural people continuing to move to the urban areas, urban poverty rose while that in the ruralareas declined. Migration was equalizing per capita income, as classical economic theory would suggestit should, but making urban poverty worse in the process.

However, the debt crisis created millions more poor people in both the cities and the countryside.And because the debt crisis impacted far more severely on the cities than on the countryside, theincidence of poverty rose by 11 percentage points in urban areas compared with five in the ruralareas. Indeed, the number of urban poor more or less doubled during the lost decade.

Since 1990, the incidence of poverty in Latin America has fallen but the absolute number of peopleliving in poverty has continued to increase, albeit at a much slower pace. What is interesting is that all

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TABLE 5.5 Poverty and inequality in Latin America during the 1990s

Country Year Gini % persons below 50% of coefficient mean per capita income

Total Urban Rural

Brazil 1990 .501 39 52 461999 .542 44 54 47

Chile 1990 .554 54 45 482000 .559 55 46 39

Colombia 1994 .601 49 48 461999 .572 46 46 40

Costa Rica 1990 .438 32 30 281999 .473 36 35 33

Guatemala 1989 .582 48 46 381998 .582 50 43 44

Mexico 1989 .536 44 43 342000 .542 44 39 46

Venezuela 1990 .471 36 34 311999 .498 39

Argentina, Bolivia and Ecuador have been excluded because data are onlyavailable for urban areas, Peru because data are only available for 1997 and 1999.Source: CEPAL (2003: Table 24).

of the increase has been concentrated in the cities and the number of rural poor has diminishedslightly.

The new model of development, therefore, is not only failing to cut poverty in the region in anysignificant way but is tending to ‘urbanize’ poverty. In part, this is because people continue to move tothe cities from the more impoverished rural areas. But it is also because rising rates of unemploymentand burgeoning casual employment are creating new forms of poverty in the urban areas.

DIFFERENTIAL PATTERNS OF URBAN CHANGEThe 1990s have thrust Latin America into a highly competitive market situation and some places havefared much better than others. For this reason the following section considers the experiences ofurban growth in three different countries. Mexico represents the classic case of a country that grewrapidly under ISI, suffered very badly during the debt crisis, and then introduced IMF-approved formsof stabilization and adjustment. All seemed to be going well until 1994 when a major economic andpolitical crisis hit the country just as it entered the North American Free Trade Area (NAFTA). Mexicoexemplifies both the strengths and the weaknesses of the new approach to development.

Chile, by contrast, is the darling of neoliberal thinking. After the traumas of three years of democraticsocialist government and its overthrow by a military junta in 1973, the government of AugustoPinochet anticipated IMF policies by some years and reformed the Chilean economy along neoliberallines. Despite many criticisms of the social record, many argue that Chile represents the best face ofthe new form of capitalism and note that it has now graduated into the category of high-incomecountries in the World Bank league table (World Bank, 2002a).

Colombia presents a much more complicated picture. The country has opened up its formaleconomy successfully, but there is a more covert side to economic opening. Arguably, the latter is theprincipal cause of the country’s current political and social crisis. Without drugs, Colombia would notnow be suffering from civil war. Arguably, Colombia represents the worst-case scenario – ofneoliberalism gone wrong.

All three countries managed to attract foreign investment during the 1990s and did better thanLatin America as a whole (Table 5.7). However, the data for 2001 are a necessary antidote to excessiveoptimism, and the figures for 2002 seem still worse. One of the problems with economic integrationis that investment flows fluctuate considerably (Fernández-Arias and Hausmann, 1999).

Improved export production is one of the new criteria for judging economic performance (Table5.8). On this criterion, Chile and Mexico have done much better than Colombia, although only Chilehas increased its share of exports since 1990.

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TABLE 5.6 The incidence of poverty in Latin America, 1970–99

Total Urban Rural

Millions (%) Millions (%) Millions (%)

1970 116 40 41 25 75 621980 136 41 63 30 73 601990 200 48 122 41 79 651994 202 46 126 39 76 651997 204 44 126 37 78 631999 211 44 134 37 77 64

Source: UNDIESA (1989: 39), Altimir (1994: 11) and CEPAL (2001b).

Mexico has outperformed the other two markedly in terms of growth in manufactured exports(Table 5.9). On this particular indicator, the Chilean economy has done rather poorly and continuedto rely mainly on agricultural and mineral exports. Colombia is not dissimilar, with coffee, oil, and otherprimary products constituting the majority of its export revenues.

One of the less desirable, and less publicized, aspects of restructuring in Latin America has been itseffect on the manufacturing sector. Whereas manufacturing’s share of GDP generally increased underISI (Table 5.10), the debt crisis and neoliberal reform have cut it. During the 1980s and 1990s, bothChile and Colombia experienced a major relative decline in manufacturing production and Mexicoonly avoided this problem because of the growth of export plants along the northern border.

Since 1980, the overall economic performance of each country differs considerably (Table 5.11).While all struggled during the 1980s, the 1990s saw Chile surge ahead. Both Colombia and Mexico

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TABLE 5.7 Foreign direct investment: Chile, Colombia and Mexico, 1990–2001

Country % of gross domestic product

1990 1997 2001

Chile 0.8 7.0 4.5Colombia 0.5 6.2 2.9Mexico 1.0 3.1 4.6Latin America and Caribbean 0.8 1.4 na

Source: World Bank (1999: Table 5.1); CEPAL (2003).

TABLE 5.8 Chile, Colombia and Mexico: export performance, 1965–2001

Country/region Exports as % of GDP

1965 1980 1983 1990 2001

Chile 14 23 24 26 28Colombia 11 16 10 15 15Mexico 8 11 20 31 26Latin America 9 13 na 15 18

Source: World Bank, World Development Report, various years.

TABLE 5.9 Chile, Colombia and Mexico: development of manufacturing exports, 1965–2001

Manufactures as % of total merchandise exports

1965 1980 1990 2001

Chile 4 10 11 16Colombia 7 20 25 34Mexico 16 12 43 83Latin America 8 20 34 48

Source: World Bank, World Development Report, various years.

have struggled. The first three years of the new millennium show that, along with most of the region,all three countries face a complicated future.

The urban consequences

MexicoMexico is almost a classic case of how ISI and subsequent restructuring should affect the urban system.During the years of ISI, the populations of the three largest cities, Mexico City, Guadalajara andMonterrey, grew rapidly and only cities on the northern border, like Tijuana, Mexicali, and Matamoros,and major tourist centres, like Acapulco, grew faster (Table 5.12). The big three received the bulk ofthe increase in industrial and commercial investment. The pace of urban expansion slowed in the1970s, but the real change in their fortunes came with the debt crisis. All three grew more slowly thanthe country’s urban population as a whole and Mexico City was affected particularly badly. It ispossible that the slowdown was exaggerated by the 1990 census, which was much criticized in MexicoCity at the time. Nevertheless, there is no doubt that the growth rate of Mexico City was very muchslower than in earlier years. Mexico City lost some 6,000 companies and one-quarter of a millionmanufacturing jobs between 1981 and 1988 (Rowland and Gordon, 1996; Garza, 1999).

Economic restructuring favoured the cities along the US-Mexico border as regular devaluations ofthe peso made them increasingly attractive to foreign investors. Their growth was also stimulated bymigration across the international border and the series of agreements made with the United States,beginning with the bracero programme in 1942, continuing with the establishment of the BorderIndustrialization Programme in 1965, and culminating in Mexico’s entry into NAFTA in 1994 (Perló-Cohen, 1987; South, 1990; Sklair, 1992; Kopinak, 1996). Starting from humble beginnings, the bordercities boomed in the 1940s and 1950s before growing at more reasonable rates during the periodafter 1970. However, unlike Mexico City, Guadalajara and Monterrey, the border cities continued togrow rapidly during the debt crisis. Devaluation of the peso made Mexican labour very cheap andproved very attractive to US and Japanese companies (see Table 5.13). By 1999, maquiladorasaccounted for 27 per cent of all manufacturing employment in Mexico. After 2000, NAFTA rules

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TABLE 5.10 Chile, Colombia and Mexico: manufacturing value added, 1950–99 (% GDP)

Country 1950 1960 1970 1980 1990 1999

Chile 23 26 28 20 21 16Colombia 13 16 18 21 20 12Mexico 19 20 23 20 21 21

Source: Adapted from Thorp (1998: 162) and World Bank (2001c: 296–7).

TABLE 5.11 Chile, Colombia and Mexico: economic growth by decade since

1980 (annual growth in GDP)

Country 1980–89 1990–1999 2000–2

Chile 3.2 7.2 3.1Colombia 3.7 3.3 1.8Mexico 2.1 2.7 2.5Latin America 1.7 3.4 1.2

Source: Inter-American Development Bank (2003).

removed customs duties so the advantages of the maquilas have been less marked and employmentfell between 2000 and 2002 (see Box 3.1).

Other cities also benefited under the New Economic Model. Tourist centres prospered during the1980s and 1990s as the cost of travel for North Americans became progressively cheaper. Acapulcogrew rapidly along with newer tourist cities like Cancún and Puerto Vallarta. The downside ofrestructuring is that many areas did not find much of a niche in the world economy. Areas in the southof the country and in parts of northern central Mexico were hit particularly badly, for example, thestates of Chiapas, Oaxaca and Zacatecas. Far from the US border, and unlike Yucatán, not even closeto Florida, these areas attracted little in the way of foreign investment. As they also producedagricultural or mining products with little economic potential, cities in these states declined relative tomost other parts of the country.

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TABLE 5.12 Mexico: population growth rates in the major cities, 1950–2000

1950–60 1960–70 1970–80 1980–90 1990–2000

Mexico City 5.0 5.2 4.2 0.4 1.6Guadalajara 6.4 5.5 4.0 2.6 2.5Monterrey 6.3 5.7 4.6 2.5 2.2Puebla 2.3 5.5 4.3 2.5 2.6León 5.0 5.0 4.3 2.9 2.7San Luís Potosí 2.2 3.8 4.5 3.4 2.6Ciudad Juárez 7.2 5.0 2.8 3.8 4.4Tijuana 9.3 7.7 2.6 5.0 5.7Torreón 3.1 1.4 4.5 2.8 3.1Mérida 1.8 2.2 6.1 2.7 3.0Chihuahua 5.5 5.6 3.9 3.0 2.7Acapulco 5.7 13.1 5.3 5.3 3.4Urban population 4.8 4.9 4.3 2.8 2.0Total population 3.0 3.3 3.2 2.0 1.8

Source: CEPAL (2002), INEGI (2002) and Demographia (2001).

TABLE 5.13 Mexico: growth of the maquiladoras, 1966–2002

Year Companies Employees (000s) Foreign exchange earnings (US$m)

1966 1,157 1,114 na1975 1,454 1,167 11,4541980 1,620 1,120 11,7731985 1,760 1,212 1,4501987 1,125 1,305 1,5981991 1,914 1,467 4,1341994 2,085 1,583 5,8031997 2,661 1,888 7,5932000 3,590 1,285 13,5232002* na 1,066 na

*January–AprilSource: Gilbert (2002: 221).

The unequal outcome of restructuring is reflected in the available figures on per income by state.For while the gap in terms of per capita income between the richest state, the Federal District, andpoorest, Oaxaca, increased from 19.4 to 29.5 between 1980 and 1999, some states in north andcentral Mexico improved their relative position (Hernández-Laos, 2000; Arroyo, 2001; Tamayo-Flores,2001). What is more worrying is that the partial reduction in regional disparities has led to very littlereduction in poverty (Table 5.14). In 1999, two out of five Mexicans were still living in poverty. Thedebt crisis increased poverty, which was partially redressed by the restructuring between 1988 and1994. However, the Tequila crisis of 1994 hit the poor very hard and subsequent improvements haveonly put the incidence of poverty back to the level it was before the debt crisis hit. The improvementssince 1995 are welcome, but whether they are wholly the outcome of restructuring is doubtful. Moreimportant, perhaps, is that millions of Mexicans have left the country for the United States. Poverty inMexico has been reduced both by their physical departure and by their remittances. In 1995, Mexicanmigrants sent back US$4 billion of their earnings to their families in Mexico (Castro and Tuirán, 2000)and in 2001, a staggering US$9.2 billion (The Economist, 2003a).

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TABLE 5.14 Mexico: poverty and inequality, 1963–2001

Year Gini % population % urban population % rural populationcoefficient below poverty line below poverty line below poverty line

1963 45.1 (77.5)1977 45.1 (58.0)1984 45.1 (58.5)1989 .536 47.8 (59.0*) 42.1 57.01994 .539 45.1 (73.7) 36.8 56.51996 52.1 (79.5) 45.1 62.51998 46.9 (79.5) 38.9 58.52000 .542 41.1 (79.5) 32.3 54.72001 42.3 (79.5)

* 1988Source: CEPAL (2002: Tables 14 and 26); bracketed figures are from Hernández-Laos (2000: 871).

Insofar as there has been any reduction in poverty levels since 1989, it seems to have favouredurban Mexico. The incidence of poverty in the rural areas is not much better today than it was in 1989.Despite the continued departure of people to the cities and even across the northern border, fewrural areas have benefited from restructuring or from growing integration with the United States andCanada. The rural states of the far south have certainly gained little and it was the fears of farmers inthe southern state of Chiapas about the effects of NAFTA that was one of the factors behind theZapatista rebellion (see Chapter 12).

The more urbanized states have done relatively better and all the northern states increased theirper capita GDP between 1980 and 1999 (Arroyo, 2001). However, this has done little to improveliving conditions along the border ‘where between 60 and 75 percent of the population lives inpoverty’ (Kelly, 2002: 6). It could be argued that life in the border cities is the best illustration possibleof the urbanization of poverty under the New Economic Model.

But, what of Mexico City? For years, the capital dominated the Mexican economy but since 1982that dominance has been under threat. The city’s share of national manufacturing employmentplummeted from 49.5 per cent in 1980 to a mere 23.5 per cent in 1998; despite the latter figureincluding every industrial centre in the State of Mexico (INEGI, 2001). It has lost public sector jobs, thenumber of public servants declining by 28,000 between 1987 and 1995. Surprisingly, too, it has even

been losing a few headquarters of major companies to Greater Monterrey; in 1980 Mexico Cityhosted 19 of the country’s 25 largest companies; in 2000 only 17. The city’s relative decline isunderlined by the fact between 1980 and 1999 the Federal District’s contribution to the country’sGDP fell by 2.7 percentage points and that the State of Mexico by 0.3 (Arroyo, 2001).

Despite this decline, the per capita income of the Federal District, which now contains only 47 percent of Mexico City’s population, actually rose between 1980 and 1999 and the capital maintained itsposition at the top of the league table of per capita income in 1999. Although it lost manymanufacturing jobs, service employment has grown rapidly. While many of these service jobs havebeen in low-income activities, like street trading, there has also been a major expansion in productionservices. Like most Latin American capitals a series of major hotel chains, accountancy firms andadvertising agencies have established branches in the city. After all, Mexico City is still by far and awaythe major centre of decision-making in the country.

But, if the central core of the city has become more affluent, the rest of the greater metropolitanarea has not. Most of the city’s poor live outside the Federal District in the State of Mexico, an areawhere per capita income declined between 1980 and 1999. Arguably, Mexico City is experiencing thefull social impact of global city status, growing polarization (Sassen, 1991). People with skills and capitalhave prospered; those without have done badly. Mexico City reflects the new reality under LatinAmerican neoliberalism of a polarization of incomes (Dussel, 2000). The urbanization of poverty isaccompanied by the urbanization of affluence.

ChileDuring the 1950s ISI helped both Santiago and Concepción, although its impact was less markedduring the 1960s. The city that benefited most from industrialization during the 1960s was Arica,mainly because it was given special import tax status in 1958. And, when a bizarre political decisionbanned car production in Santiago and virtually forced vehicle manufacturers to locate in the country’snorthernmost port, the city’s population exploded (Gilbert, 1974; Gwynne, 1978).

None of the major cities grew very quickly after 1970 because Chile’s population was increasingrather slowly and most Chileans already lived in urban areas. But the liberalization strategy of the newmilitary government meant that during the 1970s, the most dynamic cities were those that werelinked to export production. Antofagasta, Arica, Talca, La Serena-Coquimbo and Temuco all grew fasterthan the largest three cities (Table 5.15). By the 1980s, it was the cities in the south that wereprospering most, a consequence of the major boom in agricultural and timber exports.

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TABLE 5.15 Chile: annual population growth of the largest cities, 1952–92

1952–60 1960–70 1970–82 1982–92

Santiago 4.2 3.3 2.7 1.9Valparaiso-Viña del Mar 2.7 2.0 2.0 1.2Concepción-Talcahuano 3.5 3.0 2.4 1.9Antofagasta 4.0 3.7 3.3 2.0La Serena-Coquimbo 2.7 3.4 3.1 3.0Temuco 3.2 4.3 3.0 2.9Rancagua 3.0 5.1 4.0 2.6Arica 0.8 15.2 3.9 1.5Talca 2.8 3.1 3.1 1.416 largest cities 3.7 3.3 2.7 1.9Total national population 2.5 2.0 2.0 1.6

Cities with more than 150,000 people in 1992.Source: CEPAL (2001b).

Santiago grew slowly after 1970 when the combination of fertility decline, structural adjustment andeconomic de-concentration began to sap its vitality. Indeed, the population of Santiago relative to thatof the largest 16 cities remained constant from 1960 to 1992 – 58 per cent. The national capital initiallyfared badly under Pinochet’s neoliberal reforms because they allowed imports to flood into thecountry putting many local manufacturing companies out of business. As the largest manufacturingcentre, industrial production in Santiago was badly affected and its share of the country’s industrialvalue added fell from 52.1 per cent in 1970 to 43.5 per cent 15 years later (de Mattos, 1996; 1999:37). Since the mid-1980s, much of Santiago’s dynamism has returned and it has re-established itsformer dominance over the Chilean economy; in 1991 51 per cent of Chile’s industrial value addedand some 47 per cent of its gross domestic product were produced in the city.

Chilean experience is similar to that of Mexico insofar as the neoliberal model has increasinglyfavoured cities that are linked to the production of exports. However, unlike Mexico, and indeed mostof the rest of the region, poverty has been in decline since 1975. Since 1990 the combination ofhealthy economic growth, the return of democracy, a tendency for unemployment to fall and theestablishment of a fairly effective social safety net has cut poverty in both urban and rural areas. WhereChile differs from Mexico is that the incidence of urban and rural poverty is very similar (Table 5.16).The rural poor have gained, to a degree, from the boom in export agriculture.

The worrying feature of the Chilean experience is that after so many years of relatively rapideconomic growth, one in five Chileans is still living in poverty. Many observers blame this situation onthe nature of the development model. First, given the labour reforms and the ability to hire and firerelatively easily, many urban and rural jobs pay very low wages. Second, there has been no change inthe distribution of income (Table 5.16) and in Chile, as in the rest of Latin America, inequality isincreasingly being blamed for slowing the pace of economic growth (Morley, 1995; Berry, 1998; IDB,1998; World Bank, 2002b).

Many commentators have criticized the Chilean economic miracle because it has failed to reduceinequality nationwide and has created increasingly polarized cities. This is most obvious in Santiagowhere ‘globalization’ has allowed highly educated Chileans to capitalize on their skills and the inflow ofcheap imports has improved their life style while sustaining unemployment and low wages among theless skilled. The nature of urban management has also divided the city (CED, 1990; Dockerndorff et al.,2000; Sabatini, 2000). The military regime demolished squatter settlements located in high-incomeareas and moved the population to the poorest municipalities (Rodríguez and Icaza, 1993; Scarpaci etal., 1988). What made the situation worse was that the authorities in these impoverished areas weregiven little in the way of additional resources to cope with the influx. Spatial segregation was

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TABLE 5.16 Chile: poverty and inequality, 1970–2001

Year Gini % population % urban population % rural populationcoefficient below poverty line below poverty line below poverty line

1970 17.1 38.61987 38.1 38.61990 0.554 34.6 38.6 38.4 39.51992 27.7 38.61994 34.6 27.5 26.9 30.91996 0.553 34.6 23.2 21.8 30.61998 34.6 21.7 20.7 27.62000 0.559 34.6 20.6 20.1 23.82001 34.6 20.0

Source: CEPAL (2002: Table 14); Feres (2001); Scott (1996).

aggravated in the 1990s by the privatization of space. The creation of guarded residential complexeshas protected the better off and even the poor have begun to fence off public space in an effort tocut crime and improve their living conditions (Ducci, 1997).

ColombiaIf liberalization and globalization have produced some benefits for the poor of Chile and even Mexico,the balance of advantage in Colombia is currently much more debatable. Colombia went through aperiod of moderately successful import substituting industrialization in the 1950s and 1960s which,assisted by the discovery of oil, coal, emeralds and nickel, produced steady if unspectacular rates ofeconomic growth. The country suffered some economic and financial problems during the debt crisis,but many fewer than most countries in the region (Edwards, 1995; Green, 1995).

Unfortunately, this history of seemingly admirable economic management failed to produce apeaceful society. Not only was Colombia as unequal as most of its neighbours but it had far more thanits share of political and social violence. During the 1980s, the number of violent deaths grew rapidlyas the drug gangs, police, guerrillas and paramilitary forces came increasingly into conflict.

Increasing levels of violence and slower economic growth convinced the economic and political elitethat it was essential to change its economic model. A new government in 1986 promised to makeColombia more like an Asian Tiger and the country took a major step along this path in 1990. Theneoliberal agenda of the government of César Gaviria (1990–94) was to make the economy moreefficient, cut the responsibilities of the state, open up the economy and keep inflation under control(Ramírez-Ocampo, 1998). Colombia also sought to follow Chile’s example by reforming its pension,social security, health and housing systems, reducing the power of organized labour and privatizingmany state enterprises (Hommes et al., 1994: 49).

The country also introduced political reforms in an effort to reduce the level of political conflict andcivil violence. A new constitution in 1991 attempted to liberalize the country’s political institutions andto devolve power to the cities and departments. The political equivalent of opening up the country toforeign investment and imports was to make government more efficient, more democratic and moreresponsive to ordinary Colombians.

If we are to believe the World Bank, which included Colombia in its list of 24 ‘more-globalized’developing countries in 2001, the new model was highly successful (World Bank, 2001c: 51). Certainly,the pace of economic growth was quite impressive during the mid-1990s and in cities like Bogotálevels of unemployment and poverty fell dramatically (Gilbert, 1997a). Unfortunately, the positivepicture changed in 1997 when an economic recession hit the country and when the country beganto reap the bitter fruits of the hidden side of globalization (Sarmiento, 1999).

Colombia, of course, has become famous for supplying drugs to the developed world. Marijuana,cocaine and, most recently, opium exports have contributed to the economy even if the foreignexchange generated has never been registered in official statistics. Estimates of the value of drugproduction vary, although the most commonly cited figure is around 2 per cent of GDP (Thoumi,1995; Fernández, 1996; Steiner, 1998; The Economist, 2001a).

The real problem with the drug trade for Colombia is that its illegality has stimulated increasinglevels of violence and corruption (Tirado, 1998). In 1989, no less than three presidential candidateswere assassinated during the electoral campaign and President Samper was accused in 1994 ofreceiving campaign contributions from the Cali cartel – a charge that severely weakened hispresidency and increasingly damaged the national economy. Gradually, too, the FARC and ELNguerrillas were taking control of the rural areas and imposing ‘taxes’ on drug producers; a ‘business’ thatthe World Bank (2002b: 127) estimates is worth US$500 million per year.

Although violence has been a feature of life in some cities for years, and particularly in Medellínduring the reign of Pablo Escobar, the worst problems lie in the countryside. In many areas violencehas reached such extreme levels that it has forced people to flee to the cities and it is estimated thatmore than two million people have been displaced by the conflict (Table 5.17).

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The drug trade, and the internal violence that it has released, have also brought the threat ofinternational intervention. Under Plan Colombia the US government is helping Colombia to controlthe production of drugs by providing military assistance and European governments are providing aidto improve social conditions in rural areas. However, the plan is very controversial and to date isshowing relatively little sign of success. It is difficult to believe that greater US involvement will notaccentuate the deadly cocktail of official, paramilitary, guerrilla and drug-related conflict. The plight ofNicaragua in the 1980s is one possible future scenario for Colombia.

It is less than certain how Colombia’s unique combination of formal and informal globalization hasaffected the recent geography of urban growth. Until 1973, the pattern was relatively clear, rapid urbangrowth was occurring but was producing a pattern of urban development that was relatively balancedby Latin American standards. Colombia was a country of medium-sized cities and each region had itsown urban hub. ISI had increased the level of industrial and urban concentration, and Bogotá certainlybenefited considerably, but Table 5.18 shows that many other cities grew just as rapidly.

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TABLE 5.17 Colombia: the economy, murders and internal displacement, 1990–2001

Internally Annual Per capita income Urbandisplaced people murders (annual growth) unemployment (%)

1990 77,000 24,267 2.2 10.61991 110,000 28,140 0.0 9.41992 64,000 28,224 2.1 9.81993 45,000 28,026 2.4 7.81994 78,000 26,807 3.8 8.01995 89,000 22,062 2.9 9.51996 181,000 24,155 0.0 11.31997 257,000 24,306 1.4 12.01998 308,000 26,062 –1.1 15.61999 288,000 na –5.6 18.02000 317,375 na 0.4 19.52001 341,925 na –0.4 16.82002 90,179 (Jan.–Mar.) na 0.0 (Jan.–Sept.) 15.7

Sources: Rojas (2001: 33); Sarmiento-Anzola (1999: 113); CODHES (2002); Banco de la República (2002).

TABLE 5.18 Colombia: annual population growth of the largest cities, 1951–93

City 1951–64 1964–73 1973–85 1985–93

Bogotá 7.0 5.8 3.0 2.0Medellín 8.0 1.8 2.4 1.2Cali 7.2 4.9 2.6 1.8Barranquilla 4.4 4.0 3.0 1.3Cartagena 5.1 3.8 3.8 1.9Bucaramanga 5.5 5.3 3.0 2.3Cúcuta 5.6 5.0 4.5 1.6Pereira 5.0 4.6 3.0 3.2Total urban 4.4 4.3 2.7 1.9Total population 2.9 2.9 1.6 1.4

Source: CEPAL (2001b).

After 1973, fertility rates continued to decline rapidly. In the late 1960s the average Colombianwoman gave birth to 6.2 children, by the late 1970s this had fallen to 4.3 and by the late 1990s shebore only 2.8 children (CELADE, 2001: 65). This helped to slow the pace of urbanization even if city-ward migration continued to boost the populations of most of the larger cities, which continued togrow much faster than the national population and slightly faster than the total urban population. Thecountry was much less affected by the debt crisis than most of its neighbours so that the pace ofurban growth did not fall dramatically.

Traditionally, Colombia has had a more even pattern of urbanization than most other LatinAmerican countries. In 1951 Bogotá had approximately the same population as that of the next twocities, Medellín and Cali, combined. However, import substitution tended to favour Bogotá’s expansionbecause of its larger market and because it was the administrative centre of the country (Gilbert,1975; Dávila, 1996) and its population grew more rapidly than those of its two main rivals after 1964.

Since 1985, the liberalization of imports has brought major problems for the textile and clothingindustry of Medellín, a situation made worse by the tendency for drug traffickers to bring in verycheap imported goods as a means of laundering drug monies. Colombia has recently postponed thedate of its census so we will not know what happened to urban growth in the 1990s for some time.Export production has no doubt had some effect and insofar as most of Colombia’s exports comefrom agriculture and mining, export production has stimulated growth in a number of provincial cities.The growth of petroleum production in the llanos, nickel in northern Antioquia and coal from theGuajira have all had some local impact on urban growth although the recent decline in the worldcoffee price had badly affected the central area of the country. The other clear urban outcome is thatthe flood of displaced people has impacted heavily on cities located in the areas of conflict andincreasingly even on major cities like Bogotá. Many rural areas have suffered badly since 1990 andcurrently as much as 40 per cent of Colombia’s total area is effectively beyond the control of the state.

Bogotá has continued to grow despite these problems and indeed has flourished as itsadministration has become more streamlined and major projects like the Transmilenio bus systemhave been completed. Indeed, Bogotá is now regarded as the new Curitiba, a Latin American exampleof how cities ought to be run (Gilbert and Dávila, 2002). Criminal activity is declining, the streets arerelatively clean and the parks are well kept. The globalization of Bogotá has produced a World TradeCentre, a glut of BMWs and a series of new exclusive hotels. The main problems come from the highlevel of unemployment and the city’s inability to generate much in the way of exports beyond cutflowers and leather. The recent decision of the guerrillas to take the ‘war’ to the cities is also a majorconcern and the wave of bomb and rocket attacks do not encourage too much optimism. Thisconfused situation means that any effort to predict the urban future is difficult. The situation is as likelyto get worse as it is to get better.

Has Colombia suffered from the urbanization of poverty? Table 5.19 suggests that Colombia fits thetraditional theory that economic growth is effective in reducing poverty. Poverty diminished between1978 and 1995, before rising rapidly during the economic crisis of the late 1990s. The extent to whichpoverty has increased since 1997, however, is in dispute; CEPAL (2002) reports that 55 per cent ofColombians were living in poverty in 2001, whereas the Colombian government has recently admittedto a figure of 68 per cent (El Tiempo, 2002; Sarmiento-Palacio, 2002). Similar disputes revolve aroundthe reliability of figures on the distribution of income (Londoño, 1995; Sarmiento-Anzola, 1999).

The incidence of poverty continues to be much higher in rural areas than in the cities and Núñezand Ramírez (2003: 19) estimate that in 2000, 84 per cent of rural Colombians were living in povertycompared with 50 per cent of their urban compatriots. However, since 1995 poverty seems to haveincreased more rapidly in the cities than in the countryside (ibid.). There are two fundamental causes.First, unemployment has affected the major cities badly and, second, the arrival of so many displacedpeople from the countryside has contributed further to urban poverty. In the late 1990s that was theurbanization of poverty, Colombian style.

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AN UNPREDICTABLE FUTUREUrbanization has brought revolutionary change to Latin America insofar as it has changed the natureof most people’s lives. The cities have provided the safety valve for people to escape from rural penuryand over the years the quality of life has improved in certain very important ways. Today, people liveto a much greater age than ever before, women bear many fewer children, lives are more complexand arguably more interesting and most homes now have a television set. What urbanization has failedto bring is greater equality, justice or even peace of mind.

The process of urbanization was fairly similar in most parts of the region during much of thetwentieth century. Of course, the pace of change varied, as did the timing of urban growth, but thesimilarities were undeniable. Rural–urban migration, metropolitan expansion, industrialization, and theproliferation of informal settlement and employment transformed the cities from 1950 until 1980.Urban poverty increased as the cities absorbed large numbers of impoverished rural people, but onlymoderately. The migration process was surprisingly orderly as the rural people best equipped tosurvive in the cities moved, leaving the less able and adaptable behind. The new urbanites were broadlyconservative; they sought integration into an unequal society rather than striving to change it (Portes,1972).

Urbanization during the latest phase of globalization has continued to be profoundly unequal.Indeed, the cities have arguably become increasingly polarized both socially and spatially. Underneoliberalism, those with skills have generally prospered while the unskilled have encountered a moredifficult economic environment. During periods of economic expansion the living conditions of thepoor have sometimes improved but during downturns, they have generally suffered. However, if thecities have become more segregated and polarized, the gulf between incomes in urban and rural areashas frequently got smaller. Indeed, today, although the incidence of poverty is still higher in rural areas,the gap between urban and rural living conditions in parts of Latin America has been reduced.

The equalization of urban and rural living conditions has sometimes been encouraged byagricultural modernization and the growth of exports. In this respect, liberalization has been a positive

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TABLE 5.19 Colombia: poverty and inequality, 1978–99

1978 1988 1995 1999

NationalPoverty rate 80 65 60 64Extreme poverty rate 46 29 21 23US$2 per day poverty 33 19 13 16Mean income per capita ($000) 112 183 216 210

UrbanPoverty rate 70 55 48 55Extreme poverty rate 27 17 10 14US$2 per day poverty 34 5 3 5

RuralPoverty rate 94 80 79 79Extreme poverty rate 68 48 37 37US$2 per day poverty 59 38 29 30

Gini coefficient 0.54* 0.55** 0.56 0.59

*1980 ** 1991Source: World Bank (1994) and Sarmiento-Anzola (1999: 79).

force. The downside of the shift from ISI to the neoliberal model is that the debt crisis urbanizedpoverty. Economic stabilization programmes slowed urban growth particularly in the largest cities andeconomic recession cut both jobs and wages. The gap in incomes between urban and rural areas wasreduced in large part because the urban areas got poorer while the rural areas stayed the same.

Of course, the New Economic Model created new opportunities and challenges. Some cities havebeen able to respond while others have not. In the past, it was obvious that the largest cities wouldprosper ; today, they may or may not – it all depends. The past 20 years have ushered in a phase ofglobal competition that ensures that some cities will succeed but usually only at the expense of others.The case studies of Chile, Colombia and Mexico show that cities able to generate exports are likelyto do much better than the average. Most national capitals will also fare reasonably well, but as theexperience of Mexico City suggests, that is not always the case.

Whatever the urban impact of globalization, local conditions are always likely to change, andsometimes extremely rapidly. One of the least desirable features of globalization is that local economicconditions are so unstable. The economy of a city that was doing well last year may plunge intodifficulty this. Since 1990, most countries in Latin America have experienced periods of growthinterrupted by sudden downturns. The causes of recession have generally originated outside thecountry, for example, the Tequila, Russian and Asian crises, although inappropriate domestic policieshave often made the local impact much worse. In an increasingly integrated world, events thousandsof miles away can hit a country or a city suddenly and profoundly. Bogotá’s economy was booming inthe mid-1990s and then, suddenly, it was not. In the early 1990s Mexico’s economy was recoveringwell from the debt crisis, was about to join NAFTA, when suddenly everything went awry. More recentexamples are the severe recessions experienced in Argentina and Uruguay.

If one of the features of poverty is that people lack a feeling of economic security, then the instabilityof global processes may well have increased poverty in Latin America. If people feel poorer becausetheir neighbours have become markedly richer than themselves, then the polarization unleashed byglobalization has worsened poverty in the cities. And, if the absolute numbers of people living inpoverty in cities is greater than ever before, then perhaps we can speak of the urbanization of povertyin Latin America.

During the twentieth century, the process of urbanization in Latin America was revolutionary; ittransformed people’s lives in unimaginable ways. The danger is that in the twenty-first century, it maybecome revolutionary in a more political way. Of course, given the unpredictable nature of this‘globalizing’ world, this is less a prediction than the expression of a feeling of foreboding. In any case,what happens in one Latin American city or country most certainly will not happen in another. Theurbanization process in that sense has become both more unpredictable and uneven – and alsobecome inherently more geographical.

FURTHER READING

Blouet, B. and Blouet, O. (eds) (2004) Latin America and the Caribbean, John Wiley, New York,4th edition. An introductory survey of Latin America which includes both systematic chapters anddescriptions of individual regions. There is a chapter on the Latin American city.

De Soto, H. (2000) The mystery of capital, Basic Books, New York. A highly influential bookproviding a rather persuasive if terribly simplistic explanation of why poor people remain poor. Thebook addresses urban problems in most poor countries but as it is written by a Peruvian has astrong Latin American flavour.

Gilbert, A.G. (1998) The Latin American city, Latin America Bureau, London, second edition.Considers the causes of urban growth, the diverse nature of Latin American cities and the problemsthat they face.

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World Bank (2002) Globalization, growth, and poverty: building an inclusive world economy, OxfordUniversity Press, Oxford. Concerned only in part with Latin America but is useful insofar as itprovides a concise and fairly convincing case in favour of globalization. While it errs on the side ofoptimism, it does point out the special problems that seem to be holding back so many LatinAmerican countries.

WEBSITES

Inter-American Development Bank, www.iadb.org, with up-to-date statistics on economicand social matters. Latin American newspapers (some in English) can be accessed through this webpage.

World Bank, www.worldbank.org, a very extensive set of web pages, many of which deal withurban matters.

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Sustainable development became an increasingly popular paradigm, both in academic and policycircles, in the last two decades of the twentieth century, as it was realized that ‘environment anddevelopment are not separate challenges: they are inexorably linked’ (Brundtland, 1987: 37). In thischapter, ‘sustainable development’ is defined in a broad sense. To be sustainable, development must beviable in the long run in a number of closely interlinked ways. Thus, sustainability refers to more thanpurely ecological/environmental sustainability. In particular, political, economic and social sustainabilityare considered equally important. Sustainable development is the product of combiningenvironmental and developmental concerns and although it is subject to disciplinary biases it usuallyrefers to decisions affecting the sustainability of consumption, production, the resource base andlivelihoods obtained from the resource base (Redclift, 1987). It has been defined as ‘development thatmeets the needs of the present without compromising the ability of future generations to meet theirown needs’ (Brundtland, 1987: 43). Meanwhile contemporary development studies envisages apolitical economy framework as one which studies the relationships between market-basedeconomics and democratically-based politics. The study of political economy attempts to push enquirypast the purely economic to uncover the root causes of the political and social characteristics ofcapitalist production.

Part of the limitations of the sustainable development thinking and the reformist technical guidelines… is their failure to address political economy. Without a theory of how the world economy works,and without theories about the relations between people, capital and state power, sustainabledevelopment thinking is locked within a limited compass. (Goldin and Winters, 1995: 200)

This chapter seeks to span this divide, presenting discussion on the political-economic andenvironmental dimensions of the sustainability of natural resource use in Latin America and the linksbetween these two areas of analysis.

It is certainly true that the globalization and population growth of Latin American countries isradically affecting natural resource use. The globalization of Latin American economies has beenclosely linked to the political and economic objectives of higher economic growth and the policies ofeconomic reform that have been introduced since the mid-1980s in order to achieve it (see Chapters3 and 4). As a result, trade and investment have expanded, particularly in terms of non-traditionalexports. In Latin America (as opposed to East Asia), non-traditional exports have tended to beconcentrated more in natural resource areas than in manufacturing.

Thus, recent export growth has been particularly evident in the agricultural, fishing, forestry and, toa lesser extent, mining sectors. The emphasis on trade has meant clearing more forest for timberexports and to make more land available for export agriculture and ranching. Such was the case withsoya production in Bolivia in the 1990s, and cattle ranching in Costa Rica in the 1980s. The emphasison trade also produces pressure for more prospecting for and development of mining (oil in Ecuador ;gold and gems in Venezuela; iron in Brazil), as well as heightened industrial use of water, and more

6The political economy of sustainabledevelopment

Warwick E. Murray and Eduardo Silva

intensive fishing (World Resources Institute, 1994). International capital markets reinforce the pattern.Latin American nations are saddled with the heavy burden of a debt overhang – the legacy of the debtcrisis of the 1980s. Servicing those debts is a key condition of continued creditworthiness ininternational capital markets. Doing so requires generating even more exports, or else too muchprecious foreign exchange will go to pay the creditors and not enough will remain for developmentneeds (Miller, 1991).

This increased resource extraction has brought into focus the question of the long-term political-economic and environmental sustainability of such economic policies. Environmental factors inparticular cannot be omitted from the question of contemporary development in Latin America. IfLatin American countries achieve further economic growth in future years, their use of non-renewableresources and their contribution to greenhouse gas emissions will increase, particularly if the level ofheavy industry increases. Thus, provisions must be made to promote the efficient use of resources andthe minimization of wastes. In urban areas, policies must be formulated to ensure that thedevelopment needs of the poor are met without imposing unsustainable levels of resource use andwaste creation (WHO, 1992).

The interdependence between the environment and society ensures that ecological possibilities areinextricably linked to social and economic policies. Thus, the aim of Latin American societies, within thescope of sustainable development, should be to achieve social, economic, political and ecologicaltargets, while simultaneously minimizing the level of local, regional and global environmental damage(see Figure 6.1). Sustainable development must be concerned with the rational use of resources –minimizing the use of non-renewable resources and ensuring that renewable resources can be usedfor the long rather than short term. However, the essential point about sustainable development (andone that can be ignored by environmentalists) is that it must aim to meet basic human needs – accessto an adequate livelihood, access to adequate shelter and a healthy environment and some form ofparticipation in decision-making that affects those basic human needs (see Figure 6.1).

The question of environmental sustainability, then, must be firmly set within the framework of socialand political relations. Virtually all national governments in Latin America have declared aims ofachieving high economic growth, greater equity and environmental sustainability. However, at present,there are significant trade-offs between these declared aims. With this in mind, this chapter is dividedinto a number of sections. First, the political economy of resource use will examine the conflicts inresource use between the aims of economic growth and environmental sustainability in general at thecontinental scale, with reference to particular national and regional scale case studies. It will review theextent of the reliance on natural resource exports that currently characterizes the continent. Then, itdeals with questions concerning sustainability given the contemporary focus on primary productexploitation and export. There are essentially two controversies: the political-economic threats tosustainability yielded by current economic policy and the environmental impacts of primary productorientation. In the next section, two policy models for sustainable development are outlined – the‘large-scale project’ and the ‘grassroots’ approaches. Finally, we attempt to complete the historicalframework underlying these concerns and suggest where debate and policy might go from here.

NATURAL RESOURCE USE – ECONOMY OR ENVIRONMENT?Economies use natural resources in ever-increasing quantities to produce the goods and services weconsume. Until the past two decades, it was widely assumed that natural resources were ‘free’, in thesense that their extraction need not consider environmental side effects. This view has changed. It isnow generally recognized that the unrestrained extraction of natural resources all too often results intheir rapid depletion and environmental degradation. The consequences include the health hazardsinherent in water and air pollution and the poisoning of land with agrochemicals and pesticides. Localand global climate change threaten. Species extinction contributes to the loss of biodiversity, sappingthe vitality of the gene pool life relies on for its creation; it also robs us of economically useful species,

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MEETINGHUMANNEEDS

Access to adequate l ivel ihood(o f ten impl ies access tonatural resources )

Choice

Participation in nat ionaland local pol i t ics andrespect o f human r igh ts

Access to adequateshelter and healthyenvironment( inc luding basic services )

SUSTAINABLEDEVELOPMENT

SUSTAINABLE USE OFRENEWABLE RESOURCES

(e .g . aqui fers and f resh waterruno f f, soi ls , b iomass )

MINIMIZING USE OF NON-RENEWABLE RESOURCES

(Fossi l fuels , minerals ,loss o f b iodiversi ty )

KEEPING WITH ABSORPTIVECAPACITY OF LOCAL AND

GLOBAL S INKS FOR WASTE(e .g . for greenhouse gases ,

stratospher ic ozone deplet ingchemicals , persistent chemicals ,

for l iquid wastes and sur faceruno f f, keeping w i th in absorpt ivecapaci t ies o f water bodies , etc . )

Figure 6.1 Components of sustainable development. Source: adapted from Mitlin (1992: 3)

thus jeopardizing food sources and depriving us of potential medicinal and other uses. Unrestrainedmining of minerals raises the spectre of scarcity of the basic inputs our economies depend on (Pearceand Turner, 1990; Daly and Townsend, 1993).

There are two categories of natural resources: renewable and non-renewable. Renewable naturalresources, as the name suggests, are those replaced by nature at rates in proportion to human lifecycles, such as forests, water, and animals (including fisheries). Non-renewable natural resources largelyrefer to minerals. Once extracted, natural regeneration occurs in geological time, which is far too slowa process to be useful to humans; some resources can be re-used through the use of scrap (such ascopper and aluminium). Land suitable for agriculture and ranching falls somewhere in between.

Growing recognition exists that these resources are interconnected (Commoner, 1990; Pearce andTurner, 1990). This is especially true for renewable natural resources. For example, forests are crucialfor watersheds. They maintain rainfall patterns that feed them. Furthermore, they fix soil at the banksand on slopes, thus reducing erosion, siltation and maintaining oxygenation of the water for river life.The watersheds feed rivers and lakes that agriculture, energy creation, and other economic activitiesrely upon. Clear-cutting the forests that watersheds depend upon affects the entire chain (Myers,1992).

The extraction of non-renewable resources, however, also has effects on surrounding ecosystemsand the interconnections inherent in them. Mining operations frequently have devastating impacts onlocal ecosystems. Oil exploration in tropical forests can pollute land and water to the detriment oflocal human and animal populations; in Ecuador’s Amazon, an environmental crisis has occurred fromthe poisoning caused by oil mining by-products not being reinjected back into the wells, but insteadleft in open pits. Placer gold mining in Amazonia has poisoned water supplies and fisheries withmercury, posing potentially daunting health risks, particularly for children (Schmink and Wood, 1992).In northern Chile, the open cast mining of porphyry copper ores has released large amounts ofarsenic into the atmosphere; the mining towns of Chuquicamata and Calama both have high rates ofarsenic poisoning and cancer among their inhabitants (Comisión Nacional del Medio Ambiente, 1992;World Resources Institute, 1994).

Latin America’s resource export dependency – a paradox of plenty?

As our awareness and knowledge grow, all nations face the problem of how to balance naturalresource use with sensitivity to related environmental issues. The question, however, is particularlypressing for developing nations. On average, they rely on unprocessed natural resources for theireconomic growth to a much greater extent than advanced economies. Exports of mineral andagricultural commodities supply a greater proportion of the savings and investment necessary for theireconomic development. Latin American countries depend on the hard currency generated bycommodity exports to trade for food, technology, and research and development key to theireconomic growth (Furtado, 1976; Cardoso and Faletto, 1979). Thus, a push for economic expansion,or a drive for a development leap, usually requires an increase in the rate of natural resourceextraction to sell more on international markets.

Latin America has served as a resource periphery for the global economy since colonial times. It isa region extremely rich in natural resources. Given the abundance of ‘gifts of nature’ one mightintuitively expect Latin American countries to be among the most ‘developed’ in the world. This isclearly not the case and we are faced with a ‘paradox of plenty’. Since the theorizations of thestructuralist school, an increasing array of commentators have touted the idea that resourceabundance may actually operate as a ‘curse’ which, under certain conditions, can prejudice long-runsustainable development (Auty, 1993). Various policy initiatives based on such ideas, which have aimedat breaking the continent’s dependence on resource-based development, have not been fullysuccessful. Thus, at a general level, the countries of the region remain on the periphery of the globaleconomy – largely dependent upon the global ‘core’ for consumer goods and for markets for theirprimary products.

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Aggregate economic figures suggest that exports of both renewable and non-renewable primaryproducts have become of less importance over time. In 1970, such exports accounted for 89.2 percent of the value of total regional exports. By 2000, this had fallen to 42 per cent. In nominal terms,primary product export values and volumes continue to rise. Industrial exports have risensubstantially in a number of Latin American countries – most notably Mexico and Brazil (see Chapter3) which together account for close to 64 per cent of the value of all Latin American exports. Giventhis, aggregate data underestimate the continued importance of primary product exports in theremaining majority of countries. In 2000, in 16 countries, primary products accounted for over 50 percent of the value of total exports. In Nicaragua and Venezuela, the proportional role of primaryproduct exports stood at over 90 per cent. Although reliance on primary products for valuable exportearnings has declined in the past 30 years in most Latin American countries, it has not fallen greatly inthe smaller countries.

If the major export goods for each country are considered, compelling evidence for over-specialization is revealed. In 2000, in 17 of the 20 countries selected in Table 6.1 the major export itemin terms of value was a primary product, with only Mexico, Brazil and Costa Rica bucking that trend(CEPAL, 2001a). In many cases, the next two most important exports were also primary products,illustrating the general point that a dangerous reliance on a non-diversified range of such exportsexists. In some countries this reliance is troubling; in Venezuela, for example, the top three exportsaccount for around 88 per cent of the total, being comprised mainly of crude and refined petroleum.In general, in 2000, there were ten countries in which the top three, mainly primary product, exports

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TABLE 6.1 Export specialization in Latin America, proportional values, 2000

Major export per Next two per percent major exports cent cent

Top 3

Venezuela crude petroleum 58.9 petroleum products, aluminium 28.6 87.5Belize raw sugar 25.7 fruit juice, shell fish 43.8 69.5Ecuador crude petroleum 43.5 bananas, shell fish 22.5 66.0T. and Tobago petroleum products 38.9 crude petroleum, natural gas 26.4 65.3Nicaragua coffee 27.1 shell fish, meat 27.1 54.2Paraguay soya beans 32.8 raw cotton, vegetable oil 17.8 50.6Panama bananas 19.3 fresh fish, shell fish 28.2 47.5Chile refined copper 25.6 copper ores, fresh fish 19.6 45.2Colombia crude petroleum 30.6 coal, coffee 14.6 45.2Costa Rica office machinery 29.7 bananas, coffee 15.4 45.1Peru gold 16.7 fish meal fodder, refined copper 23.5 40.2Guatemala coffee 21.3 raw sugar, bananas 15.7 37.0Honduras coffee 23.8 soaps, lumber 11.1 34.9Bolivia zinc ore 11.7 vegetable oil, aircraft 20.0 31.7El Salvador coffee 22.2 petroleum products, medicines 8.4 30.6Uruguay meat 15.5 leather, rice 14.3 29.8Barbados raw sugar 14.0 petroleum products, food preps. 15.4 29.4Argentina crude petroleum 10.8 vegetable oils, petroleum products 13.5 24.3Mexico motor vehicles 9.9 crude petroleum, statistical mach. 13.8 23.7Brazil aircraft 6.3 iron ore, soya beans 9.5 15.8

Latin crude petroleum 12.5 motor vehicles, petroleum 9.2 21.7America prods.

Source: Calculated from CEPAL (2001a).

accounted for over 40 per cent of total values. Formal trade data actually under-estimate theimportance of primary product exports as, in some countries, illegal items – such as coca in Bolivia,Colombia and Peru – make important contributions to the informal economy and livelihoods (Weeks,1995). It is possible that the role of the non-formal economy and some of its illegal components hasrisen during and after the recent economic crises of Argentina and Venezuela in particular – althoughdata for this is not yet available.

Recently, the importance of agricultural exports has been compounded by neoliberal policy in anumber of countries seeking to promote the export of counter-seasonal non-traditional agriculturalitems including, for example, fresh fruits from Chile (see later case study), winter vegetables fromGuatemala, and cut flowers from Colombia. Foreign investment has played an important role in therise of non-traditional exports (NTAX) as transnational companies have set up packing and, in somecases, production facilities in order to supply ‘exotic’ products for the global market (Barham et al.,1992; Murray, 1998; Murray 2002a). The process of the globalization of agriculture has facilitated thisgrowing trend (Le Heron, 1993; Friedland, 1994). In some countries the general global and continentaltrend towards the declining importance of agriculture has been reversed through such processes; inChile, Bolivia and Peru the proportional role of agricultural exports has risen markedly in the past 20years, for example.

POLITICAL-ECONOMIC ISSUES AND IMPLICATIONSThe preceding empirical review has made it clear that, in general, Latin American countries are heavilyreliant on primary product exports. In the future, if neoliberal policies persist, it is probable that thisspecialization, based on comparative advantage, will continue. How can resource abundance operateas a curse? What are the prospects for political and economic development based on resource exportspecialization? What are the major problems associated with reliance on primary product exports? Inthis section, we look at some of the economic, social and political threats to sustainability and illustratesome of our arguments utilizing evidence from a case study of a renewable primary product exportsector in Chile.

The ‘terms of trade’ constraint

Considerable evidence exists which maintains that the original structuralists’ concern with the ‘seculardecline’ of primary product prices is of contemporary relevance (Grilli and Yang, 1988; Barham et al.,1992; Ocampo, 1993). This general trend had a negative impact on the evolution of the terms of tradefor most Latin American countries during the past century and especially in the 1980s (Weeks, 1995).Naturally, the trend is affected by the exact mix of exports/imports. For example, in the case ofcountries exporting coffee and cocoa, the effect has not been so pronounced. However, in countriesshowing a relative specialization in metal production, cereals or the production of agricultural inputs(e.g. nitrates), the decline has been especially marked (e.g. in Chile, Argentina, Uruguay among others)(Ocampo, 1993). Oil-exporting countries, which initially experienced a rise in their terms of trade inthe 1970s, suffered as prices ‘bottomed out’ towards the late 1980s (Weeks, 1995). Given thecontinued relevance of this problem, the original structuralist calls for the organization of commodityprice support systems, regional cooperation and ‘fair trade’ deals in Latin America are as relevant todayas they have ever been (Ocampo, 1993; Sunkel, 1993).

Price volatility

Within the broad decline of primary product prices, it is often the case that world market pricesfluctuate considerably. This is particularly the case in energy, metals and minerals markets, which havebeen subject to rapid changes in economic fortunes (Gwynne, 1990). It is widely argued that windfallprofits – such as those conferred on the oil-exporting economies after the first oil-hike – have notbeen utilized in ways which engender sustainable development. In particular, funds have also been used

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for large-scale projects and ‘showpieces’ – as was the case in Venezuela (Gilbert, 1997b). During globalrecessions mineral economies have often been hit very hard. There have been some efforts to offsetthis ‘boom–bust’ process. For example, the Chilean copper-stabilization fund, founded in 1987, saved‘windfall’ receipts during times of rising copper prices and used them to augment governmentexpenditure in periods of low world prices (Gwynne, 1996a). In general, however, short-term politicaland institutional interests are such that it is often difficult to escape the negative implications of‘windfall’ rents and price fluctuations.

Dutch disease

For commentators such as Auty (1993), the phenomenon of ‘Dutch disease’ explains why energy,metal and mineral exporting economies have performed so badly despite their significant resourceendowments. Dutch disease results from the appreciation of the exchange rate brought about by arapid rise in inflows of rents (defined as surplus above normal profits) in selected sectors. Whenmineral commodity price booms occur, appreciation of the exchange rate can make manufacturingand agricultural sectors uncompetitive internationally. The major problem arises during periods ofrecession, when it may prove difficult to diversify exports into manufacturing and agriculture becausethe sectors have stagnated. This situation was observed in the Latin American oil and mineralexporting economies during the global recession of the mid-1980s.

Protectionism and regionalism in the global core

The high level of protectionism existent in many developed countries and trading-blocs hasaggravated secular decline, most notoriously, in the case of the agricultural sector (McMichael, 1993;Apey, 1995). Guoymer et al. (1993: 231) claim that ‘nearly all of the industrial countries hold resourcesin agriculture behind a panoply of protectionist barriers that insulate the primary sector fromcompetition’ (ibid.: 231). This has had the effect of distorting patterns of world trade enormouslyleading to a situation where; ‘production, specialisation and trade in agriculture are determined by thecomparative strength of policies not by comparative advantage’ (Hitiris, 1989: 67). Thus, ‘most of theworld’s food exports are grown in industrial countries where the costs of food production are high,and consumed in developing ones where costs are lower’ (World Bank, 1986: 154). In the Uruguayround of GATT negotiations agriculture was afforded a high profile. Although certain concessionswere achieved, no great breakthroughs with regard to the prospects for developing countries weremade (Grant, 1993). Latin American countries are attempting to overcome the potential ill-effects ofregionalism in the economic core by vying for membership of free-trade agreements andorganizations. For example, Mexico is a member of the North American Free Trade Agreement(NAFTA), and Chile has been particularly aggressive and successful in winning ‘free-trade’ agreementswith major trading partners including the EU and the USA and plays a proactive role in APEC .Regional integration within Latin America, most notably MERCOSUR, was of growing importance untilthe economic crisis of 2001 (Gwynne, 1995).

‘Enclave’ economies

The problem of ‘enclave’ economies, which tend to characterize primary product export sectors, hasreceived attention in the Latin American development literature since structuralist writings, and tookon extra importance in dependency analysis. This problem is most associated with energy, mineralsand metals mining, but is also relevant to certain types of agricultural, forestry and fishing operations(especially large-scale ones). Mining and energy operations may operate as enclaves in two main ways.First, activities are generally capital-intensive and large-scale. This means that they may generate largerevenues, but little in terms of employment and other linkages into local, regional and nationaleconomies. In the past, given high levels of foreign ownership in the Latin American mining sector, agood deal of surplus was expropriated back to service high levels of foreign investment. More recently,

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higher levels of domestic ownership have partly reduced this problem, although the trend towardsprivatization is reviving some concerns (Gilbert, 1997b). Second, mining and energy operations areoften geographically isolated, located at some distance from major cities. As such, these areas oftenform distinctive geographical economic zones which can lead to the exacerbation of social andeconomic inequalities at the regional scale.

Foreign ownership and control

Foreign ownership in Latin American resource sectors has traditionally been high. This is especially thecase in energy and other mineral sectors, given the high levels of capital and technology required toset up production. The controversy of foreign ownership has inspired a number of expropriations andnationalization of sectors where foreign control was high, including Mexican oil (1938), Peruvian oil(1968), and Venezuelan oil (1976), Bolivian tin (1952), and Chilean copper (1973). In the neoliberal1990s, the benefits of foreign investment were given greater weight, which has led to number ofprivatizations including Bolivian tin and silver mines, and Mexican copper (Gilbert, 1997b).

Currently, high levels of foreign ownership are evident in NTAX sectors that are most explicitlygeared towards export for luxury markets in the developed world (Barham et al., 1992; Gwynne,1993a; Sunkel, 1993; Barton, 1997b). Such ownership can precipitate a number of problems. First, it canlead to technological and financial dependence as transnational companies (TNCs) act as the major,and sometimes only, importers and diffusers of the relevant capital and technology. Second, it can leadto an outflow of profits which could be captured if national potential were developed. Finally, ingeneral there is little incentive for the companies to behave in a way which is explicitly beneficial forthe long-run development of a particular country or producing space. For example, firms involved inNTAX production/distribution will actively search for a variety of locations with low labour costs andnatural resource abundance. This may compound the ‘locking-in’ of countries into low-skill, low-productivity activities.

Food security

In the agricultural sector, recent re-structuring towards agro-exports has reduced food security astraditional staples have been replaced by export cash crops. Furthermore, the protectionist policies ofindustrialized countries, ‘dumping’ of surpluses, internal controls on food prices in Latin America andover-valued domestic currencies have all contributed to the rising import of food into the continent(Kay, 1995).

Inequality and social conflict

Often, growth in primary product sectors has had the effect of exacerbating social, economic andgeographical inequalities. In the case of the agricultural sector, there is considerable evidence tosuggest that re-structuring towards NTAX and the associated ‘modernization’ of agriculture aredistributionally regressive (Cornia, 1987; Barham et al., 1992; Figueroa, 1993; Kay, 1995). Capitalconstraints faced by peasant and small farmers mean that, in general, they have not been able toparticipate fully in the system. The negative impact for most small farmers during the structuraladjustment period was aggravated by the withdrawal of social expenditure which accompaniedaustere fiscal/monetary stabilization (Sunkel, 1993; Vergara, 1994; Kay, 1995). Tensions created bygrowing social and economic differentiation are creating political conflict, as witnessed in the recentChiapas uprising and continuing unrest in Peru and elsewhere. For some of these it raises the potentialfor revolution (Vergara, 1994).

WHOSE SUSTAINABILITY? THE CHILEAN FRUIT EXPORT BOOMThe example of Chilean non-traditional fruit exports (NTFX) is considered the most notable and, forsome, most ‘successful’ example of neoliberal re-structuring. However, the Chilean case study also

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highlights a number of problems associated with attaining sustainable social, political and economicdevelopment based on NTAX.

The neoliberal model was implemented in Chile some years before its neighbours, subsequent tothe military coup of 1973. The General Pinochet regime, under the advice of the Milton Friedman-inspired ‘Chicago Boys’, implemented a range of free market reforms which intended to reverse thestructuralist-informed inward-oriented model of development prescribed by previous governments(see Barton and Murray, 2002). One of the central objectives of such reform was to stimulate exports.This was achieved with considerable success and had the effect of stimulating an enormous increasein non-traditional fruit exports, as the various comparative advantages that Chile possessed in thisactivity were allowed to operate in global space.

Between 1974 and 2001, the nominal value of Chilean fruit exports rose from US$30 million toUS$1,481 million (Banco Central de Chile, 2002b). Growth was especially high in the 1980s as anumber of peso devaluations and export incentives took effect (Murray, 1997b). Grapes and appleshave been the most important species and have represented over 60 per cent of NTFX earningssince 1974. The fruit boom initiated deep social and economic change in certain localities, such asthe Norte Chico and the Northern Central Valley, where the economic base has been transformedrapidly from relatively diversified production for national markets to specialized (in some localitiesmonocultural) export-oriented production (Figure 6.2). In the country as a whole, land plantedunder fruit rose from approximately 65,000 hectares in 1977 to around 210,000 hectares in 2000(ODEPA, 1996; 2001).

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Figure 6.2 The slogan on the board translates as ‘This valley is under control’. While in actual fact the advertising

refers to the pisco (grape-based spirit) producing company Control and is a play on words, it is symbolic of the power

of the companies involved in the export grape economy in the areas surrounding El Palqui in Chile’s Norte Chico

region (Region IV). Photograph: Warwick E Murray

The heady rise in Chilean NTFX can be explained partly in terms of the large ‘comparativeadvantage’ such products enjoy on global markets. These advantages are both ‘natural’ and‘institutionally induced’. ‘Natural’ advantages include the ‘counter-seasonality’ of production withrespect to the major markets in the northern hemisphere, especially the timing of harvests forChristmas markets in the USA and Europe; the existence of ample supplies of fertile land and watersupply in certain areas; and a most favourable range of climates (from sub-tropical to temperate) idealfor the production of a wide range of fruits. Institutionally induced comparative advantages includestate-led investment in the fruit sector during the 1960s; various episodes of land reform in the 1960sand early 1970s which divided up the inefficient latifundio (large estates); and the significant loweringof labour costs through regressive post-coup reforms (Murray, 1997a). Further to these advantages,external conditions were conducive to NTFX growth. In particular, the 1970s and 1980s witnessed theacceleration of the ‘globalization of agriculture’ – especially in the fruit sector. This involved sharpincreases in the consumption of ‘exotic’ fruits in industrialized markets, sourced largely by investmentsin a range of Latin American and other ‘Third World’ countries by transnational fruit companies(Whatmore, 1995; Murray, 1998).

Transnational investment in the Chilean fruit sector

The role of transnational investment in the Chilean NTFX sector has been central. Although theearliest exporters were domestic companies (such as David Del Curto and Copefrut), during the1980s foreign (especially US) capital rose to dominate the sector. Important examples includeUnifrutti, Dole, United Trading Company and Chiquita-Frupac. By 1994, three of the top fourcompanies (accounting for over 40 per cent of exports) were foreign-owned and only four in the topten were Chilean-owned. Foreign firms were critical in the introduction of the organizational systemwhich dominates the industry and links domestic producers to the global market. This system hasthree basic components. First, companies are responsible for marketing, providing facilities for thepacking and storage of fruit and gathering produce in sufficient quantities to justify large-scaleinvestments and obtain bargaining power. Second, companies undertake research and development inthe adoption and adaptation of fruit varieties and technologies and are largely responsible fortransferring these to the growers. Third, and crucially, firms provide finance for growers, acting,effectively, as banks. The vast majority of growers are linked into the system through contracts withsuch companies. These contracts are extremely exacting, and have become increasingly tight in the1990s – leading to high levels of economic and technological dependence upon export companiesamong growers. For some commentators, however, one of the main advantages of this organizationalsystem is that it has permitted the participation of many small-scale growers who would otherwisehave been unable to gain access to the system. Others argue that the system has evolved into onewhich exploits such growers and has led to increasing levels of indebtedness, landlessness andmarginalization (Murray, 1997b).

The costs of macro-economic success

At the macro-economic scale of analysis, the restructuring towards NTFX has proved a resoundingsuccess. It has helped lay a firm foundation for the high average levels of economic growth andtrade surpluses generally recorded since the debt crisis of the early 1980s. Perhaps mostimportantly, it has helped diversify the Chilean economy away from reliance on copper exportswhich by 2000 had fallen to a proportional value of 40 per cent of total exports – from 85 percent in 1971. However, despite this success, when one reduces the geographical scale of analysis, itbecomes apparent that the distributional impacts of NTFX growth have been highly regressive(Murray, 1998). The fruit boom has exacerbated both spatial and social inequalities. In terms of theformer, many rural localities and a number of regions have been unable to participate in thesystem. In particular, in rural regions where environmental and economic conditions are notconducive to fruit cultivation (in parts of the arid North and south of the Central Valley), farmers

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continue to rely upon traditional, low-margin products for the national market. Such farmers havefaced a range of deep problems in recent years (Kay, 1997). These spatial inequalities are causingpolitical tension, recently exemplified by protest marches by ‘traditional’ farmers in the Centralregion. Free market ideology, which has continued under the three democratic governments since1990, has been characterized by the absence of an explicit regional policy to reduce the growingspatial imbalances (Murray 2002c).

Differentiation between socio-economic groups has also been exacerbated through the workingsof the boom. In particular, non-land owners, temporary workers (especially women) and small farmershave seen a decline in their relative socio-economic position in rural society. One of the major impactsof the boom has been to raise the demand for labour to pick and pack fruit. A significant proportionof the increased demand is temporary in nature, leading to economic insecurity in the workforce andto a range of problems associated with the flow of migrants to fruit-producing areas during theharvest season (Gwynne and Ortiz, 1997). Female labour has formed a central part of the labourforce employed in the packing houses. Some argue that this process is positive in that it has providedmany women with their first opportunity to engage in paid employment outside of the home (Beeand Vogel, 1997). However, women generally receive less than the men ‘in the fields’ for a day’s work,often having to return home to work a ‘double day’ (Barrientos, 1997).

NTFX growth has also had a differential impact on farmers of different scales of operation.Medium (20–50 hectares) and large-scale (50 hectares plus) farmers and an increasing amount ofurban suitcase-farmers, have prospered enormously from the boom. In contrast, very small-scalefarmers (minifundistas) have been precluded from participation due to the high costs of setting upan orchard (up to US$35,000 per hectare). Small-scale farmers (5–20 hectares) initially entered thesystem in large quantities. However, they have found it very difficult to survive in the market –particularly since the 1990s. Sales of land are rising as larger-scale farmers and export firms movein to take over the parcelas of heavily indebted small-scale farmers. Part of the problem in thiscontext are financially demanding contracts with export firms which allow a significant passing onof costs to politically disorganized growers. Failed growers often fall back on low-paid temporarylabour or informal activities. Thus, marginalization, landlessness and proletarianization are becomingincreasing realities in export-oriented regions. Again, given the neoliberal model favoured bygovernment, little more than marginal efforts have been made to address the above problems(Murray, 2002b).

The sustainability of Chilean fruit exports

Doubts are increasingly being raised concerning the sustainability of the Chilean fruit export sector.Given the importance of the sector within the national economy and almost complete reliance on thesector in certain regions and localities, this should be an issue of great concern. First, sustainability isbeing threatened in an environmental sense. The rapid expansion of fruit cultivation, especially inmarginal environments is placing stress on ecosystems. In particular, water shortages, watercontamination due to pesticide and fertilizer leakage, and soil salinity due to excessive irrigation arerising. Problems of decline in soil fertility are accentuated on small-scale fruit farms wheremonocultural practice has become dominant.

Second, economic sustainability is threatened. Since the early 1990s, the volume and value (inreal terms) of Chilean NTFX have levelled out. This has been due to a range of interactinginternal and external factors. Externally, rising global competition from southern hemisphereproducers; protectionism; technological change allowing other fruit producers to increasinglyimpinge upon the Chilean counter-seasonal market; and shifting consumption patterns towardshigher quality and new types of ‘exotic’ fruit in the industrialized countries have caused a decline inthe real price of Chilean fruit on world markets (Murray, 1998). Internally, problems in the sectorhave been accentuated by the Chilean state’s reluctance to intervene in order to offset mountingeconomic threats. Thus, there have been only limited efforts from the state to invest in quality,

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diversify the export range, diversify markets, develop value-added production, and invest ininfrastructure. These have been left to individual firms who have met with variable levels ofsuccess. Ultimately, the ‘easy’ phase of Chilean fruit exports is over and in order to grow, thesector must face the challenges of an increasingly sophisticated global market. Attempts to furtherincrease the sector, however, are likely to have deleterious environmental impacts unless regulatedeffectively. The neoliberal model is not capable of reconciling the often competing imperatives ofeconomy and environment and is likely to continue to fail as a means of promoting sustainabledevelopment in Chile’s fruit complex.

ENVIRONMENTAL ISSUES AND IMPLICATIONSThe environmental impact of primary product exploitation in Latin America has received increasingattention in recent years (Figueroa, 1993; Furley, 1996). Studies have tended to emphasize threats toecological sustainability created by environmentally insensitive activities. Among other things, relevantconcerns have included the pollution of river systems and air due to large-scale mining activities; theimpact of pollution created by petroleum and petrochemical sectors; the ecological impacts of largehydroelectric power schemes in a number of countries (Furley, 1996); the over-exploitation anddepletion of natural resource stocks, for example, the depletion of the fishery stock in Chile (Barton,1997b) and the deforestation of Brazil within the imperative of ‘expansion of the agricultural frontier’(Gligo, 1993); the intensive use of inputs and the effects on both ecosystems and human health(Murray and Hoppin, 1990); issues of water supply and the effects of irrigation-intensive production(Gwynne and Meneses, 1994); and issues of increased run-off and flooding due to clear-cutting andsoil erosion (Leonard, 1987).

The leaders of Latin American nations frequently protest that growing environmental sensitivity indeveloped nations forces unacceptable trade-offs upon them. For example, they bridle at demandsfrom developed nations for the preservation of large tracts of land (usually forests) in the interest ofbiodiversity. Latin American leaders argue such demands are unjust. Developed nations became greatby exploiting their natural resources not by preserving them; now they seek to prevent developingnations from enjoying the same benefits (White, 1993).

Policy-makers in developed countries, and their allies in developing countries, respond that this isa false characterization of the problem. Preservation (non-use of nature) does not stand at thecore of policy demands; conservation – commercial use with (as much as possible) themaintenance of the natural setting – is the goal. The issue, then, is not whether to use naturalresources. It is how to use them while minimizing environmental damage (Pearce and Turner, 1990;Rosenberg, 1994).

According to economists, the problem is one of formulating discrete choices over how to useresources and minimize the environmental impact (Pearce and Turner, 1990; Carley and Christie,1993; Goldin and Winters, 1995). For renewable resources the choice is over competing sustainableuses, by which economists usually mean sustained-yield harvest: the point at which the rate ofrenewal is at least equal to the rate of extraction. Thus, the resource is never exhausted. For non-renewable resources the choice is over acceptable rates of depletion, allowing time for technologicaladvances and substitution to reduce the need for the mineral. Choices may also include the meansby which non-renewable resources are extracted to minimize their impact on surrounding ecosystems.

Of course, the formulation is deceptively simple. First, there are many difficulties in calculating thosepoints. Second, and more significantly, decisions over minimizing the environmental consequences ofnatural resource use involve more than discrete calculations of public choice; they also encompasspolitical and social processes (Goldsworthy, 1988; Hurrell, 1991; Hurrell and Kingsbury, 1992). Theseare most acute in the distributional issues inherent in natural resource extraction: who will benefitfrom its use? In short, how natural resource extraction and sensitivity to the environment are

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combined also entails struggle between social groups for control of the resource and the benefits ofits exploitation.

In the drive for economic growth, dominant domestic and foreign socio-economic groups linked toagricultural, industrial, and service corporations benefit the most from the extraction and sale ofresources. When it comes to settling frontiers, as occurred in Brazilian Amazonia, they may demand orprofit from road building and other large-scale projects (such as mining and urbanization). Moreover,colonization programmes may accompany such ventures to provide (in the absence of land reform)land to landless peasants or new settlements and jobs for the unemployed in more established urbanareas (Bunker, 1985; Cockburn and Hecht, 1988).

In the planning stages, these schema may include environmental protection in resource extraction,as well as extension services to colonists for successful farming. But these good intentions may beabandoned during policy implementation. Such was the case in Brazil. The government institutionscharged with administration and oversight of the plans lacked the capacity to carry out their mandates(Bunker, 1985). Centralized bureaucracies and fiscal crises prevented effective follow-through.Moreover, in the Amazonian states of Brazil, those institutions were ‘captured’ by large-scale ranchersand mine owners. They siphoned off meagre credit appropriations from the colonists. As a result,colonists cleared land, and lacking access to credit and know-how to successfully farm their fragiletropical parcels, then sold to ranch owners. Ranch owners bought land as a hedge against inflation andto capture state subsidies for beef produced in Amazonia. Colonists cleared more land for subsistenceand the cycle was repeated (Hecht, 1985; Schmink and Wood, 1992).

In addition to global and national-level development strategies, the plight of the colonists on theBrazilian frontier highlights a second, oft cited source of environmental degradation in natural resourceuse: poverty. Extreme necessity forces people to abuse natural resources, especially renewable ones.Dense populations of poor people are forced to continually clear forests for fuel and land in slash andburn cycles. They also overgraze pasture, are unaware of the fragile character of most tropical soils, anduse primitive, polluting technologies in small-scale mining. Poor economic performance in any givencountry exacerbates the problem. It increases the number of desperate, impoverished people (Ascherand Healy, 1990; IDB, 1991; Annis, 1992).

Awareness of the above problems led analysts to formulate the concept of sustainabledevelopment. The Brundtland Commission’s Our Common Future (1987) first popularized the idea,recognizing the interrelation of economic development, overcoming poverty, and safeguarding theenvironment. However, formulating policies for natural resource use that effectively link these threeoverlapping systems is no easy matter. In addition to technical difficulties, funding for programmes arescarce. As a result, policy-makers are faced with significant trade-offs between different policyalternatives (Redclift, 1987; 1992).

Large-scale sustainable development

One policy response favours the utilization of large-scale private enterprise to foster economicgrowth, a posture well anchored in the free-market tenets underlying globalization, although publicenterprise may also participate in such ventures (see Box 6.1 for example). These companies have thefinancial wherewithal to invest in both development and environment, thus relieving responsibilityfrom fiscally strapped governments. With respect to natural resource extraction and the environment,the task is to persuade such firms to engage in sustained-yield practices, to adopt pollution abatementtechnology, to avoid disfiguring and degrading surrounding ecosystems, to respect autochthonouscultures when present. It is assumed that project requirements (when funding is largely by multilateraldevelopment banks) and environmental regulations will accomplish those goals. Moreover, privatesector projects and their wider economic effects provide employment for the local population. Thisaddresses the link between poverty and environmental degradation. A focus on creating national parksand protected area systems to ensure biodiversity preservation (supported with internationalfunding) complements the approach (World Bank, 1992).

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BOX 6.1 Industrial-scale sustainable developmentThe Greater Carajás Programme: The Greater Carajás Programme spearheaded the Braziliangovernment’s Amazonian policy in the 1980s. It focused on export-oriented mineral projects,which allowed this regional development programme to address major national economicproblems. The programme covers a wide area in three north-eastern Amazonian states: Pará,Maranhao and Amapá. This vast development project involves state-owned mining companies,local capital, and European and Japanese transnational corporations. After the completion ofenvironmental impact reports, it has also received funding from the World Bank. Extraction andsmelting of iron ore have been developed in Carajás; two aluminum complexes have beenestablished, one near Belém and another on the Atlantic coast near São Luis; a hydroelectric plantat Tocurui was also part of the plan. Port facilities near these industrial projects have also beenexpanded (Neto 1990).

Tree plantations in Chile: Chile boasts a timber industry that is the envy of Latin America (Silva,1997a). In response to the military government’s free-market economic policies (1973–90), andwith the aid of substantial government subsidies, a number of powerful Chilean conglomeratesinvested heavily in mainly-for-export timber plantations (Gwynne, 1993a) (Figure 6.3). Jointventures with international corporations or wholly-owned subsidiaries of foreign companies alsoentered the market (Gwynne, 1996a). The bulk of the wood was from radiata pine (Clapp, 1998).In 1994, forest sector exports topped US$1.5 billion, making it one of the leading exportindustries. It also employed about 95,000 people, roughly 2 per cent of the economically activepopulation.

Figure 6.3 The output of plantation forestry in Southern Chile. Logs are being transported to the local cellulose

plant. Both plantations and cellulose plant were owned in the early 1990s by a multinational consortium of Royal

Dutch Shell (60 per cent), Scott Paper (20 per cent) and Citibank (20 per cent)

Latin American nations’ drive for economic advancement requires some large-scale development ofnatural resource extraction. The fiscal weakness of Latin American states and the decline indevelopment funding from multilateral development banks certainly open space for more privatesector involvement in the process. However, excessive reliance on large-scale development, privatecorporations, and national parks (viewed as set-asides) presents serious obstacles for achievingsustainable development. There are at least three difficulties with the approach.

First, no matter what the rhetoric, the environment is not high on the hierarchy of issues confrontingLatin American states, but economic growth is. The fiscal debility of the state itself compounds theproblem. As a result, the ministries and agencies charged with regulating, overseeing, co-ordinating, andenforcing environmental policy are weak and lack the capacity to carry out their mandates. Indeed,sometimes the mandates themselves are deliberately narrowly circumscribed, as was the case in Chile(Silva, 1996–97). Supporters argue that market incentives help circumvent these shortcomings.Markets for pollution vouchers and opportunities for companies to pay for forest preservation andplantations to offset greenhouse gas emissions – joint implementation ventures – are often cited. Thisamounts to the ‘browning’ of the environment (Nielson and Stern, 1997). Such approaches rest on theuncertain assumption that we can calculate ‘acceptable’ levels of pollution. They also ignore the factthat we do not know the cumulative effects of many chemicals acting together. What may be an‘acceptable’ level for one pollutant may turn out to be quite hazardous to public health whencombined with the ‘acceptable’ levels of many others. In the final analysis, irrespective of ideologicalposturing, government action has been the most effective source of corporate sensitivity to theenvironment.

Second, large-scale, corporate-oriented resource extraction does not adequately address thelivelihood needs of impoverished rural populations. Nor does it sufficiently protect native peoples andtheir cultures from the ravages of modernization. Large-scale agribusiness and mining do providesome employment, albeit at very low wages and frequently in substandard working conditions.Moreover, the capital-intensive ventures throw many more peasants off the land than are employed,driving them further onto the frontier to clear more forest for land or into urban shantytowns puttingmore pressure on already woefully inadequate services (Montbiot, 1993; Painter and Durham, 1995).The pattern is aggravated by the influx of desperately poor people from other regions of the countryinto the area where the new concerns are being set up. These migrants compete with localcommunities, often disrupting and displacing them. The resulting social tension frequently erupts inrural violence (Schmink and Wood, 1992.)

Third, the land hunger of these poor and displaced people places great pressure on a country’sprotected areas, making unworkable the dream of nature preservation. Land invasions into nationalparks are common both for the purpose of subsistence agriculture and for placer (small-scale) mining.Again, social tension between migrants and native peoples frequently erupts; it is often exacerbatedby the influx of entrepreneurs who follow them to buy cleared land or to forcibly wrestle it from them(Barraclough and Ghimire, 1995). This pattern has repeated itself several times in Brazilian Amazonia(Schmink and Wood, 1992; Ozório and Campari, 1995).

As the Brazilian case exemplifies, the problem is aggravated by the weakness of the responsible stateinstitutions: the extension services of ministries of agriculture, environmental ministries, and parks andforest services. Bureaucratic rivalry may also intervene. Agriculture and mining ministries may (at leastimplicitly) support invasions. Since they are higher on the hierarchy of ministries (and betterorganized) than agencies of the environment, they often nullify the latter’s mandate.

The grassroots development approach

Given these problems, dealing with the livelihood, or social justice, component of sustainabledevelopment calls for complementary efforts or, as some argue, a completely different approach tonatural resource use. We call this the grassroots development approach, which focuses onstrengthening local communities and fomenting small-scale economic activity rooted in sustained-

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yield practices (Schumacher, 1973; Ghai and Vivian, 1992; Friedmann and Rangan, 1993; Utting, 1993;Ghai, 1994). It privileges the values of local autonomy, solidarity, self-regulation, and citizenparticipation in decision-making over the penetration of market forces, community disintegration,and the reduction of participation to the implementation of a few projects. By organizingcommunities and building small-scale enterprises, more of the income generated stays in thecommunity in the form of higher wages, social benefits, and capitalization. Economic sustainabilityalso depends on the formation of cooperatives to pool resources and know-how, and of linkingthem to local, regional, national, and world markets. By the same token, environmental sustainabilityis better served by small-scale use, because, together with appropriate technology, it offers a betteropportunity to mimic natural processes (Hartshorn, 1989). Because of the interconnectedness ofnature, excessive human intervention in any one area (as occurs with large-scale development)damages the whole web of life.

The Plan Piloto Forestal of Quintana Roo, Mexico, is a good example of the grassroots developmentapproach. An alliance of forest peasant communities (Ejidos) wrested control of their forests fromprivate interests and government corporations. The Plan Piloto, with help from the government andinternational aid agencies, began to market its own timber (mahogany). Member communitiesreceived better prices for the timber than before, employed more personnel at higher wages, trainedpersonnel in management, began to add industrial value to the timber instead of just selling whole logs,and redistributed portions of the profits to member communities. There are many such cooperativesin Mexico – for an introduction, see Paré et al. (1997).

A significant strand of the grassroots development perspective takes a different stance from currentneoliberal trends with respect to the role of the state and social participation. The state has animportant role to play in the crafting of industrial and extension policies favouring grassrootsdevelopment (Lipschutz and Conca, 1993). Thus, the strengthening of state institutions is vital to carryout increased functions. Otherwise, community enterprises, networks of cooperatives, and links tomarkets are not likely to flourish beyond a few individual instances. Non-governmental organizations(NGOs) are considered central to this process, as well as the inclusion of social groups in the policy-making process. By contrast, a more civil society-centred strand of the grassroots developmentapproach argues against deeper involvement of state institutions. Instead, it emphasizes the nexusbetween NGOs and organized communities (Browder, 1989; Leonard, 1989; Ekins, 1992).

Regardless of the position versus the state, at its irreducible core, participation is about a focus onorganized communities as a vehicle for the self-determination of subordinate class and ethnic-basedsocial groups (Ghai and Vivian, 1992: 1–19; Friedmann and Rangan, 1993: 1–10; Ghai, 1994: 1–12).Moreover, participation is about more than just helping to implement policy. It extends to broaddeliberation by organized civil society in defining policy agendas, prescribing solutions, and formulatingpolicy. Costa Rican forestry NGOs have a rich experience in these political activities (Brockett andGottfried, 2002; Silva, 2003).

Both critics and supporters of the grassroots development approach to sustainable developmentrecognize several difficulties with its implementation. First, in relation to its emphasis on small-scaledevelopment it is capital-intensive, especially in terms of human capital. Where will the financingcome from, given that the private sector will not invest in such efforts? Up-front costs are significant:from planning stages involving the leadership of local communities, to the assignation of experts inthe field, to coordination with government offices, and to the purchase of equipment. Second, theideal time line for such projects is a long one: five to ten years. The learning curve to use technologyand to learn organizational skills can be a long one. Many programmes are shorter than this. Third,such projects are plagued by potential collective action problems within the community or betweenthe governmental, international, NGO, and community components of a project. These difficultiesmay be exacerbated by participant state agencies, which frequently lack the personnel, equipment,training, and authority to fulfil their role adequately. Fourth, the techniques themselves may beexperimental and unproven.

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THE POLITICS OF NATURAL RESOURCE EXTRACTIONIdeally, a well-rounded policy framework for sustainable development would integrate both the large-scale, market-oriented and the grassroots development approaches (Silva, E. 1999). Too muchemphasis on the former does not solve the problem of rural poverty and associated environmentaldegradation. By the same token, an over-emphasis on grassroots development would probablydeprive a nation of necessary resources for healthy economic growth.

But the world is not ideal. Moreover, selecting the trade-offs between the two models forsustainable development is especially difficult to achieve in one of the most popular approaches todecision-making: the rational actor model, where policy-makers are appraised of a problem andoffered a list of options best suited to solve it. The principal obstacles for the effective use of thistechnique are the scarcity of financing and the logic of globalization. They ensure that politics – theauthoritative allocation of value – plays a significant role in determining policy outcomes: whether themarket and grassroots approaches will be integrated or whether one will dominate the other (usuallymarket over grassroots). In other words, politics will influence the agenda from which the choicesoffered to policy-makers will be drawn. Whether effective grassroots development solutions are puton that agenda is not guaranteed.

A political economy approach to public policy offers a good starting point to understand the politicsof reforming policies for the sustainable development of natural resources. It helps us to identify themain actors, interests, and power as defined by their location in international and domestic economicand state structures. Such approaches also emphasize the role of knowledge and coalitional behaviouramong actors as key to understanding outcomes (see Box 6.2).

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BOX 6.2 Extractive reserves in Brazil

The creation of extractive reserves in Brazilian Amazonia constitutes the most famous examplethat runs the gamut of actors: international, state, private sector, peasant, and indigenous peoples(Schwartzman, 1991). In the 1970s and early 1980s, the establishment of large ranches ignited astruggle over land between large-scale ranchers, on the one hand, and smallholders, rubbertappers, and indigenous peoples, on the other. Initially, large-scale landowners easily prevailedbecause traditional rivalries divided these subordinate social groups. Ideas, however, brought themtogether. A Brazilian NGO came up with the concept of the extractive reserve: areas of land thatwould be set aside for low-impact extraction of natural resources. With this idea environmentbecame a new issue capable of uniting social groups that had been in conflict with each other. Allcould identify with the need for land and the preservation of the resources necessary for theirlivelihood and/or cultural survival (Keck, 1995). However, even when local peoples formedalliances, they could not prevail. Local and state governments (Brazil has a federal form ofgovernment) generally backed large-scale landowners. Moreover, alliances between organizedlocal peoples and Brazilian national unions and political parties were also ineffective. The federalgovernment was adamantly in favour of large-scale development. This was when internationalactors tipped the balance in favour of local peoples. First, the Brazilian NGOs were in contactwith powerful US-based international NGOs. These took the fight to the US Congress, whichbrought pressure to bear on the World Bank to postpone loans to Brazil. At that point, theBrazilian federal government took note and decreed the establishment of extractive reserves.Unfortunately, this heroic effort has not had the success it deserved, for the policy of extractivereserves has run into many economic problems (Assies, 1997; Hall, 1997).

International actors include governments, especially their development aid agencies; transnationalcorporations; multilateral development banks, such as the World Bank; and international organizationslike the United Nations (Haggard, 1990). Their interests regarding environment and development varywidely. Depending on the circumstance, these actors – especially when they are from developedcountries – possess significant political and economic power, which they can bring to bear in nationalpolicy debates.

The domestic side includes state and social actors. The most important state actors are thepresidency, relevant ministries and agencies, and political parties represented in the legislature. Socialactors run the gamut from large-scale economic interests to peasants, smallholders, and nativepeoples. In this schema the structure of state institutions (their cohesion, the tightness of policy-makingteams, the hierarchy of ministries, and their porosity to social forces) is crucial for shaping the powerresources of state actors and social groups (Skocpol, 1979). By the same token, the economic andorganizational capabilities of social actors affect their strength or weakness in relation to state actors(Migdal et al., 1994).

Environmental NGOs are significant social forces in their own right (Porter et al., 2000). They canbe important advocates of market-friendly or grassroots development approaches to forest policy inthe policy formulation process. When they are professional organizations, their policy stances generallyderive from the intellectual and scientific ideas of their middle-class staff. When they have a peasantbase, their economic interest often leads them to advocate grassroots development ideas aboutcombining environment and development (Keck, 1995). Some of the large NGOs of the developedworld are also important international actors. Domestic NGOs can also be significant actors in thepolicy process. Their power often depends on their financial and organizational capabilities and thequality of the expertise available to them.

Understanding actors and interests backed by ideas that inform policy stances and power offers agood starting point for analysing the politics of environmental policy-making (Hurrell and Kingsbury,1992). However, a number of studies have shown that actual policy outcomes depend on theinteraction between them (Ross, 1996; Silva, E. 1999). Frequently, policy outcomes depend on thedynamics of coalition formation between social groups, state institutions, international actors, andNGOs. These alliances define the sum of power that competing coalitions can muster in support ofalternative policy stances (Gourevitch, 1986; Frieden, 1991; Rueschemeyer et al., 1992).

Reforming natural resources policy

Reforming natural resource policy along sustainable development lines poses a significant challenge.The range of policy options is well known and broad. It includes infusing large-scale resource use withan environmental component to ensure either sustained-yield practices or a sharp reduction inpollution or both. But it is also recognized that these practices alone will not provide conditionssufficient to alleviate pressure from impoverished rural populations. Nor will they protect the welfare,cultural heritage or survival of native peoples. This is why reform of large-scale resource use must beaccompanied by efforts to promote grassroots development. Integrating both approaches to thesustainable development of natural resource use, however, is not an easy task (Silva, 1994). Strongpolitical conflicts may stand in the way of including grassroots development components to policyreform. Nevertheless, these can be overcome. What it takes to do depends on the initial dispositionof state and dominant class actors towards such programmes, the degree of local social conflict,whether or not local groups were organized, and the role of international actors.

Where government and dominant social classes are cohesive in their resistance to grassrootsdevelopment, it takes high levels of social conflict and very broad alliances of local, national andinternational actors to force their inclusion. As the case of extractive reserves in Brazil suggests (seeBox 6.2), high levels of social conflict fused a strong coalition between well-organized regionalsubordinate social groups with national political and institutional affiliations. This brought the issue tothe national political arena. However, domestic groups by themselves are usually not strong enough to

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prevail. They may agitate but cannot win. Greater pressure from international sources is required.Here, international NGOs, linked with those of the developing country in question, can begin anawareness campaign in developed countries and lobby their government and international institutionsto take action. Threatening to suspend loans and other sanctions usually gets that attention of policy-makers in developing countries.

Where some key sectors of government actors and dominant social classes support sustainabledevelopment at the grassroots for one reason or another, local actors may succeed largely on theirown, but international actors and local NGOs can make important contributions to policy-making.Tension between dominant and subordinate social groups is often a catalyst for organization in ruralcommunities, which provides the drive from within to demand policies favourable for grassrootsdevelopment. Knowing they cannot act alone, communities often actively seek allies. When they findthem, and especially if they are government actors, the organized community will strive to infuse policycontent with its interests. International actors, often the development agencies of more socialdemocratic governments, provide critical support for local communities in their efforts to shapepolicies emanating from relatively sympathetic government offices. They legitimize the demands ofradicalized communities and help with project design and management.

Where most relevant government actors are largely indifferent or weak, international actors may bethe most important catalysts for the inclusion of grassroots development dimensions to resource usereform. The efforts will be project-oriented and the specifics of the grassroots developmentorientation will depend on the goals of the lead international agency involved. It cannot be sufficientlystressed that success demands involvement of local communities and a very long-term presence.Moreover, one must always keep in mind that scaling up projects – expanding their application toother areas – requires active government assistance. International presence or pressure alone cannotdo the job.

Including a grassroots development component to natural resource use never has been an easytask, and globalization makes it even more difficult. The emphasis on free markets by internationalagencies and governments impedes consideration of the non-market special needs of ruralpopulations in developing countries. Those needs centre on the redistribution of national wealth viasubsidies (credit, inputs, price supports) and involve the promotion of an industrial policy to createmarkets for their products. Globalization, however, favours large-scale industry and concentration ofwealth rather than small-scale production and more equitable distribution of wealth. As a result, manyinternational agencies now focus on strengthening institutions for environmental management ofpollution and parks for preservation only. They also advocate payment for the environmental servicesrendered by ecosystems, such as carbon sinks, gene banks, biodiversity and scenic beauty (Heal, 2000).None of these proposed solutions threaten the large-scale market development perspective.

Nevertheless, social tension in the countryside and lack of employment in cities to absorb displacedrural populations still provide a fulcrum with which to apply pressure for the inclusion of thegrassroots development dimension of sustainable development. The rural poor continue to organizeand increasingly frame their demands with reference to environmental problems and conservation.This provides social and political allies among environmentalists domestically and internationally. It alsosupplies a cadre of professionals capable of working together with organized communities to deviseplans for attaching a grassroots development component to carbon offset agreements, pollution taxcredits, energy taxes and effective parks management. Equally important, although it is not clear thatthis is occurring, new international institutions must build in participation and support for grassrootsdevelopment (Haas et al., 1993; Young, 1994).

CONCLUSIONIn many ways, at the dawn of the new millennium, the countries of Latin America face the sameproblem which has existed since colonial times. Certainly, there have been advances in diversification

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and, crucially, industrialization in a number of places. Countries such as Brazil and Mexico are, to acertain extent, breaking away from resource export dependency. However, the majority of countriesremain dangerously reliant on primary products for income generation. In this way, they remain highlyvulnerable to external conditions and the whims of the global market place, and face considerableinternal problems in managing rentier, enclave and, sometimes, foreign-dominated export sectors.Furthermore, ecosystems and local environments are placed under stress, given the continuedpremium on resource exploitation. Although this situation is not a consequence of recentneoliberalism, its emphasis on the short-term logic of comparative advantage has compounded theproblem. Furthermore, non-interventionist logic has augmented the distributionally regressive impactsand negative environmental implications associated with resource export development. As thischapter has shown, neoliberalism has largely failed as a remedy for primary product-dependenteconomies as it clearly prejudices sustainable development on a number of intricately interwovenfronts.

Population growth in Latin America and the drive for renewed economic growth in the context ofglobalization and free-market economics have significantly increased pressure on natural resources.These problems have been augmented by the rising concentration of wealth among the rich. This hasswelled the ranks of the poor whose migration patterns overwhelm the carrying capacity of fragilemarginal lands and shantytowns lacking basic services. Taken together, these events deplete vital naturalresources, expand pollution, and, in general, degrade the environment. In short, the quality of life ofpeople in rural and urban settings declines.

The concept of sustainable development – struggling to become a paradigm – was born to addressthese trends. It recognizes the connections between economic development, poverty, andenvironmental degradation. As a result, it does not ask policy-makers to give up the goal of economicgrowth for the sake of the environment. From this perspective to do so would be to destroy it. But itdoes urge them not to ignore the livelihood needs of the poor and the integrity of the environmentas they pursue their economic ends.

Accomplishing these aims is a difficult proposition. Scarce funding and the divergent interests ofexperts who advise policy-makers have generated many competing policy prescriptions to advancetowards the goal of sustainable development. Virtually all of them call attention to trade-offs betweenthe major components of the concept. A number of key questions policy-makers must ask frame thetrade-offs they face. The emerging environmental agenda in Latin America and among multilaterallending banks reflects the choices made to date.

At what scale do projects deliver the most efficiency? Proponents of large-scale projects argue theyreach the most people or largest area with the least chance of implementation chaos. Attention tolarge-scale business, farms, water treatment, mining complexes, and the like has immediate effects.Their implementation is easier to monitor (fewer firms to control). Since fewer organizations areinvolved, there is less opportunity for project failure due to miscommunication or conflicts of interest.Proponents of smaller-scale projects argue that large-scale ones frequently break down due toequipment failure, unforeseen side-effects (e.g. siltation of water plants), or fiscal problems in theagencies involved. Smaller-scale projects have lower start-up costs, use more inexpensive andenvironmentally-friendly inputs (e.g. recyclable materials and compost). Moreover, simpler technology,such as more efficient ovens and modest plantation groves in rural areas, can relieve pressure on fuelwood collection, a major source of deforestation. Active participation by local peoples with clearbenefits fosters a stakeholder outlook crucial for project success.

By the same token, the question of how to address the livelihood needs of the impoverished is alsolinked to the issue of scale. At a very basic level, one camp argues that relatively unfettered marketforces spearheaded by large-scale domestic and foreign enterprises will drive economic growth. Thiswill increase employment, which is what people need. Others maintain employment alone is notsufficient. Market forces in Latin America may generate employment, but at low wages which makes itimpossible to access necessary services – health, education, sanitation. In many cases, penetration of

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market forces increases poverty. As a result, additional policies are required that focus on small-scaleeconomic projects with the active participation of local peoples.

Additional questions suggesting trade-offs between economic growth, social justice, andenvironmental quality abound. What relationship between public sector and private sector institutionsbest serves policy formulation and implementation? Are market incentives or regulation the mosteffective way to ensure results? How to protect fragile lands, forests, and remaining wilderness fromthe onslaught of economic development and the migrant poor? Do national systems of protectedareas work best under a strict preservationist regime? Or, in the absence of concern for the livelihoodneeds of the rural poor, do these systems succumb to land invasions and environmental degradation?

The answer to these questions, as expressed in policy, must necessarily involve politics: the processof authoritatively allocating value. Exhortations of the need for political will do not suffice. Existingsocio-economic systems, the manner and beneficiaries of natural resource extraction, who receivesbenefits and who does not, are all sustained by coalitions of private interests, government actors andinternational agencies. Change requires the construction of countervailing coalitions. How muchchange and in what direction – how the questions raised above are answered – depends on the exactnature of such coalitions and the compromises they entail. At the core of the problem, however,significant structural impediments to development – including, most notably, the region’s continuedrole as a global resource periphery – continue to retard meaningful progress. Free-market economicsis incapable of resolving this condition – simply ‘rolling back’ the state can make matters far worse. Inorder to transcend the paradox of plenty, the time is ripe for the re-incorporation of a number of theideas of dependency and structuralist thinking which, as this chapter has endeavoured to show, remainrelevant. Such ideas must be altered to reflect changing global realities and past weaknesses (Kay, 1989;Dietz, 1995). However, at the centre of such an endeavour should be an attempt to foster the creationof an effective, economic permanence-minded, environmentally conscious and politically inclusive statewhich can regulate the less fortunate impacts of resource exploitation and implement long-term plansto foster broad-based sustainable development.

AcknowledgementsThe authors would like to thank Bob Gwynne for essential input into this work.

FURTHER READING

Auty, R. 1993 Sustaining development in mineral economies: the resource curse thesis, Routledge,London. This is the most detailed and thorough discussion of the ‘resource curse’.

Barham, B., Clark, M., Katz, E. and Schurman, R. 1992 ‘Nontraditional Agricultural Exportsin Latin America’, Latin American Research Review, 27(2): 43–82. This is the best introduction to thenon-traditional agricultural export debate, is clear on definitions, provides a useful reference list, andintroduces a number of country case studies (including Chile).

Cleuren, H. 2001 Paving the road for forest destruction: key actors and driving forces of tropicaldeforestation in Brazil, Ecuador, and Cameroon. Leiden University Press, Leiden. This provides acontemporary comparative analysis of the political economy of forest destruction.

Gibson, C., McKean, M. and Ostrom, E. 2000 People and forests: communities, institutions, andgovernance. Cambridge University Press, Cambridge. This book provides a wide overview of theforest issue at the global scale, and a discussion of the role of institutions and governance,

Karl, T. L. 1997 The paradox of plenty: oil booms and petro-states, University of California Press, LosAngeles, CA. This is the most contemporary and, arguably, most sophisticated, analysis of the so-called paradox which is explored through the Venezuelan case but is also of general relevance toprimary product exporting countries.

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Sunkel, O. (ed.) 1993 Development from within: towards a neostructuralist approach for Latin America,Lynne Rienner, Boulder and London. Those who are interested in new or neo-structuralist ideas thisis an excellent collection of essays exploring a range of themes relevant to this chapter including;agriculture, environment, development theory, and secular decline, from a ‘revised’ structuralist pointof view.

World Bank 2003 World development report 2003: sustainable development in a dynamic world:transforming institutions, growth, and quality of life. Oxford University Press, New York. This illustratesthe incorporation of the environmental agenda into mainstream lending institution policy, and offersa fascinating read, not least because it is packed with useful statistics.

WEBSITES

World Bank, www.worldbank.org, focuses on economic and social development and promotesmarket-friendly approaches to sustainable development.

World Conservation Union, www.iucn.org, this is an environmental organization whosemembers include states, government agencies, non-governmental organizations, and individualscientists. It focuses on biodiversity conservation projects.

Forest Stewardship Council, www.fscoax.org, this promotes socially and environmentallyresponsible forest management.

International Institute for Environment and Development, www.iied.org, this is amember-based environmental nongovernmental organization that promotes sustainabledevelopment and seeks to influence public policy. It attempts to integrate both market-friendly andgrassroots development approaches.

United Nations Environmental Programme, www.unep.org, this is an internationalorganization that promotes research and projects in sustainable development.

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www.worldbank.org

www.iucn.org

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The challenge of economic modernization often places the states of developing countries under greatpressures, to which democracies seem particularly vulnerable. Democracy implies broad societalrepresentation in policy-making, accountability of executive branches to legislatures, deliberation,compromise and tolerance. Yet economic development frequently requires harsh trade-offs betweensavings for investment and redistribution for social needs. Recurring economic crises demand swift,decisive, comprehensive responses and impose steep costs on losers. Between 1964 and 1976, thosedilemmas generated political tensions that caused many Latin American democracies to give way toauthoritarianism. With few exceptions, the military governments that followed proved equallyincapable of managing the political economy of their nations. A wave of democratization – whichcrested in the 1980s – ensued. Today, most of the states in the region are democratic. Yet despite muchcongratulatory rhetoric, uncertainty over the deepening, consolidation and permanence of those newdemocracies persists as Latin America confronts the demands of globalization.

These cyclical bouts of authoritarianism and fragile democracies raise enduring questions about therelationship between economic modernization in the age of globalization and the state. Is there afundamental incompatibility between economic development and democracy? Will the current trendtoward democracy in Latin America persist? What are the chances for the consolidation of emergingdemocracies?

There are no hard and fast answers. Competing theories about the relationship between economicdevelopment, dictatorship and democracy fuel a diversity of opinion. Theorists diverge in theirunderlying assumptions, in what they mean by democracy and authoritarianism, and in what theybelieve to be the causes for the outcomes. Because their ideas shape public policy prescriptions,examining contending theories can shed significant light on public affairs debates and policy.

POLITICAL ECONOMY AND THE STATEUnderstanding the relationship between economic development and the problem of democracy firstrequires a brief excursion into the relationship between economics and politics. Because the state isthe ultimate repository of power and authority, it lies at the centre of this question. How well orpoorly state officials perform the functions of this key political institution has everything to do withdemocratic stability. However, it must be recognized that state officials are, unfortunately, toofrequently placed on the horns of all but unsolvable dilemmas.

States are long-term expressions of a society’s political power through which some social groupsand individuals dominate others within a given territory (Poggi, 1990). Max Weber (in Gerth and Mills,1958) stressed that the state exercises a monopoly over the legitimate sources of coercion and thatsocial domination is based on unequal access to them. The modern state is organized in a coherentset of bureaucratic institutions based on impartial, rational rule-making which differentiates it from theindividual, charismatic style of earlier states (Gerth and Mills, 1958; Nettl, 1968; Poggi, 1990). Moreover,

7Authoritarianism, democracy anddevelopment

Eduardo Silva

although the state is embedded in society, it must be differentiated from society. State managers mayhave their own interests, over and above those of the social groups they control in areas such aseconomic policy, the state’s organization, taxation and territorial expansion through war (Tilly, 1975;Skocpol, 1979). Their capacity to impose those interests depends on the porosity of state institutionsto social groups – the less porous a state is to social forces the more it is autonomous from them(Evans et al., 1985). Finally, the form of the state depends on how it is connected to society. Modernstates can be classified as liberal democratic, social democratic, monist (one party state), authoritarianand totalitarian, just to name the most commonly mentioned forms.

Our concern is with understanding the establishment, consolidation and stability of democraticstates. Political economy approaches are very useful for uncovering the strains states are subjected to.Political economy focuses on the effects of economic and social tensions on the state by examiningrelationships between (a) economic structure; (b) class-based social groups; and (c) politics. JeffryFrieden (1991:16) argues that all modern political economists study how rational, self-interestedactors combine to affect economic and social policy and to influence the form of the state. Thoseactors pursue their political aims both within and outside of established institutional settings.

Venezuela offers an example of these interactions. This country has been afflicted with a prolongedperiod of economic crisis and instability that began in 1984. Between 2000 and January 2003, conflictescalated between (1) politically marginal underprivileged social actors who wanted to change thecountry’s political institutions and channel more wealth to the nation’s poor ; and (2) propertied actorswho resisted such changes. The former, led by Hugo Chavez, won the presidency through legitimateelections in the late 1990s and pursued their goals through state institutions. Those goals includedefforts to change those institutions so that they would be biased in their favour. Meanwhile, they alsoorganized popular brigades, frequently resorted to violent demonstrations, and made questionableuse of the military. Upper- and middle-class opposition forces resisted and attempted to oustPresident Chavez. They used established institutions, such as the courts and electoral tribunals. Butthey also organized marches and demonstrations. This mobilization culminated in a long nationalgeneral strike to pressure the authorities to call a referendum on the president’s rule. After more thantwo months the strike failed. Notice how political economy focuses attention on actors, interests andpower. This allows clearer analysis of a situation and its likely outcome than approaches that focus onlegitimacy or moral right.

For political economists, the economic system itself, the structure of production, is a fundamentalstarting point for the analysis of economic and social policy and political change. It is the principalbuilding block for defining actors and their interests; it shapes relations of domination and subordinationamong social groups; and it determines some key functions of the state (Anglade and Fortín, 1985). Inmarket economies, capitalists (the owners or controllers of production and money) and labour areusually considered to be the main social actors. Capitalists, in the first instance, dominate labour byvirtue of their economic power. To simplify drastically, capitalists seek to maximize profits, which oftenmeans paying less to labour in the form of wages and benefits. It also means obstructing labour’sattempts to organize to increase their share of the wealth generated by their work.

Many political economists argue that classes must be broken down into smaller units (ordisaggregated) to properly understand processes of economic and political change (Gourevitch, 1986;Frieden, 1991). Thus, capitalists are most commonly subdivided by economic sector : financiers,commercial interests, industrialists, landowners, the construction sector, mine owners, etc. Economicsectors can be subdivided further depending on the capacity of subsectors to compete ininternational markets. Labour is frequently separated into urban industrial, service sector, governmentemployees, and peasants and/or rural labour. The middle classes – usually professionals – are alsotreated as a distinct category; and they are especially important for political change in Latin America(Rueschemeyer et al., 1992). Disaggregation along these lines permits analysis of how divisions withinclasses or of alliances between specific sectors of capital, labour and the middle classes affect thedirection of economic and political change.

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Politics and economics are intertwined in another way as well. A country’s economic fortunes havean impact on political stability. Prosperity – economic good times – usually reduces tension betweenclass-based social groups. If economic policies are generating economic growth, and if most socialgroups perceive a benefit from that growth, social pressure for change will be slight. By the sametoken, deep or recurrent economic crises exacerbate tensions between class-based social groups andgenerate conflict as they seek the establishment of alternative policies conducive to a resumption ofeconomic growth (Gourevitch, 1986; Haggard and Kaufman, 1995). If the crisis is severe enough, socialgroups may perceive that a change in the form of state is the only solution.

What are the implications of these features of capitalist societies for theories of the state and theproblem of democracy, authoritarianism and development? They point to two essential functions thatthe state – whether democratic or authoritarian – must perform if it is to remain stable. First, it iscompelled to maintain the overall conditions for capitalist economic development (Lindblom, 1977;Przeworski and Wallerstein, 1988). Second, the state must maintain the social order in which capitalistsdominate and labour and the middle classes are subordinate to them (Poulantzas, 1973; Mandel,1978).

How state managers approach the task of fulfilling those functions varies. In a synthesis of extensiveacademic debates, Christián Anglade and Carlos Fortín (1985: 19–23) have argued that state managersintervene in several ways to mediate class tensions that could interfere in the accomplishment of thosefunctions. First, state managers have to maintain conditions to ensure that businesspeople generatesufficient profits to maintain adequate investment levels. Naked repression, however, cannot accomplishthis in the long term. Thus, state managers also have to protect labour from excessive exploitation inorder to avoid rebellion and to keep up productivity. Second, state managers also intervene on behalfof specific economic sectors of capital to ensure the economic health of the nation through economicpolicies such as taxation, tariffs, subsidies, and monetary and fiscal policy. In this manner, the state maypromote industry over agriculture or export sectors over domestic market-oriented ones. Third, statemanagers may involve the state directly in production through public enterprise if the private sector isunwilling or incapable of significant investment of its own.

DEMOCRACY, AUTHORITARIANISM AND DEVELOPMENTAll capitalist states undertake these functions. However, how state managers fulfil those functionsvaries depending on state form, whether it is democratic or authoritarian. In democratic capitaliststates governments are elected by competition between two or more political parties with discernibledifferences on major policy issues. Electoral participation – voting – should be by secret and universalballot. Sufficient civil liberties must be guaranteed to ensure full and fair contestation and electoralparticipation (Dahl, 1971). Participation can also extend to the policy-making process throughnegotiation between political parties in the congress with the executive or directly through access tothe executive by the organizations of labour, capital and other groups. In some instances, democraticcapitalist states may also exhibit a high degree of concern over the economic rights of subordinateclass-based groups. This effectively extends the egalitarian principle of democracy to the economicsphere (Held, 1996).

Given these characteristics, in principle, democratic states protect subordinate social groups (themiddle classes and urban and rural labour) from excessive exploitation by business people andlandowners. Political parties may represent some of their interests and try to advance them from theexecutive, the legislature, or both, depending on the party’s electoral fortunes. Greater freedom toorganize may allow subordinate social groups to negotiate more directly with capital and statemanagers. Less able to rely on repression, and in the interest of maintaining political order, statemanagers have more of an incentive to give some concessions to subordinate groups. However, thoseconcessions cannot be allowed to upset the maintenance of a good business climate for investmentand economic growth; nor should they threaten the basic social order.

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Authoritarian capitalist states, to some degree or another, restrict political competition andparticipation. The most closed authoritarian political systems – such as Chile and Argentina undermilitary rule in the 1970s and 1980s – do not permit any. The leaders of authoritarian capitalist statesalso rely heavily on repression of social groups, especially labour and other subordinate class-basedand ethnic groups. But middle classes and selected business groups may suffer as well. Given thesecharacteristics, it is widely assumed that the managers of authoritarian states possess the capability toconcentrate more exclusively on maintaining social order and a good business climate than those ofdemocratic states. They may formulate policy with far less encumbrance (or none) from socio-politicalgroups than the leaders of democratic capitalist states.

Development places great strain on the states of developing countries (Chilcote, 1981; Handelman,1996). Development occurs when societies less economically advanced than the great industrialpowers of Europe, North America and Asia are drawn into political and economic relationships withthem. In other words, development is a process in which societies that had been peripheral to theglobal market economy are pulled into it. Globalization may be thought of as the most recent – andsome would argue qualitatively different – stage of this trend. The economic changes that result fromthe experience generate social change. Political tensions flare as new class-based groups compete withestablished ones, for example, new industrialists, middle classes and urban labour may clash withtraditional landed and commercial elites. A state that expressed the domination of the latter twoclasses may find itself under pressure to include the new social groups. Depending on how the conflictis resolved, the form of the state may suffer a more or less violent change. This occurred throughoutLatin America during the twentieth century, especially during the populist period of the 1920s to the1960s.

As societies are drawn into the world economy, state managers may have great difficulty devisingpolicies that promote economic growth. Shifts in the international economy have a strong effect onthe economies of under-developed nations. Because they depend on economically advanced nationsfor capital and technological know-how, booms, depressions and technological breakthroughs upsetestablished patterns of production more deeply than in the advanced countries. Developing countriesmust resort to drastic means to adjust their economies. This too places inordinate strains on states;subsequent conflicts over appropriate policy responses can lead to a change in state form.

In short, the process of development can generate situations in which state managers have difficultyfulfilling the functions of the state in market economies. They may not be able to generate policiesconducive to capitalist economic development. Moreover, they may be overwhelmed by socialtensions that make it hard to maintain a social order in which the private sector clearly dominates overother class-based social groups, such as labour, peasants and the middle classes.

Because development is such a wrenching process, it poses difficult questions for political order ingeneral, and democracy in particular. As we shall see, approaches to answering these questions fall,roughly, into two categories: political economy and US political sociology. We begin with the latter inthe form of modernization theory, contrast it with political economy approaches (dependency theoryand bureaucratic-authoritarianism) and conclude with an examination of contemporarymodernization theory and political economy. The intellectual history is key for understanding currentdebates over what to do to strengthen democracy.

Modernization theory

In the first 20 years following the Second World War, democracy surged in Latin America. It was anoptimistic era. Argentina and Colombia returned to the democratic fold after prolonged periods ofpolitical instability. Brazil and Venezuela established new democratic regimes; Chile and Uruguay’s long-standing democracies seemed secure. Even a number of Central American countries, following inCosta Rica’s footsteps, established electoral forms of government.

This trend seemed to confirm the expectations of modernization theorists who took an optimistic,and deterministic, view of the relationship between capitalist economic development and political

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democracy. In their analysis, the causal arrows pointed in one direction only. As countries modernizedsocio-economically, authoritarian and other traditional forms of government gave way to democracy.

Modernization theorists assumed that developing countries would follow the same evolutionarypatterns as the economically advanced nations. In the developed nations, they observed thateconomic modernization had brought about a transition from traditional culture, social organizationand political authority to more modern ones. In advanced countries, economic progress producedmore rational, goal-oriented thinking, a far more diversified social structure (middle classes, urbanindustrial and service labour, transformation of agrarian social relations), institutions to processincreased demands, and political democracy (Handelman, 1996: 11–14).

This approach did not believe the state was a useful concept. Instead, it embraced David Easton’s(1965) concept of the political system, which drew heavily on the sociology of Talcott Parsons (1951).In this view, government institutions (executive, legislative and judiciary) processed the demands ofsocial groups that cut across class lines. These demands constituted inputs into the policy process, andin processing those demands the government mediated group conflict. At the end of the process,governments produced outputs in the form of decisions and actions. This was a thoroughly US-centric,pluralist approach to the study of government.

Based on this schema, modernization theorists reasoned that changes in the socio-economic andcultural environment produced changes in political systems due to shifts in policy demands and thesources of support for government. As economically and politically advanced countries integrateddeveloping nations into the world economy, traditional agricultural societies would become modernsocieties. In the process, traditional societies would go through a sequence of changes that mirroredthose of Western Europe (Rostow, 1960). Gabriel Almond and Bingham Powell (1966) argued that inthe twentieth century the development of capitalism in economically advanced European statespermitted the emergence of full political democracy with greater attention to economic equalitythrough welfare.

Almond and Powell (1978) also argued that economic and social modernization caused politicaldevelopment, understood as a distinct concept. For them, political development consisted of twodimensions. First, it encompassed the evolution of ‘specialized political executive and bureaucraticagencies capable of setting collective goals and implementing them’ (ibid.: 358). Second, it posited ‘therise of broadly articulating and aggregating agencies [such as] political parties, interest groups, andcommunication media that serve the purpose of relating groups in the population to these goal-setting and goal-implementing structures’ (ibid.: 358). New social groups created and used theseinstitutions to press their demands for greater welfare and inclusion in the political decision-makingprocess. This generated an opening of political competition and participation where traditionalauthoritarian elites share power with new elites. Once a country reaches economic maturity, fullpolitical democracy appears. With poverty vanquished, the question of liberty and distributive issuesno longer threaten elites.

Some Latin American countries (Argentina, Brazil, Chile, Colombia, Venezuela, Uruguay and Mexico)were thought to have reached economic ‘take-off ’ and to be on the brink of economic maturity andconsolidated democracy. Social scientists noted the expansion of the middle class, and, especially, theemergence of party systems similar to those of the United States and Europe. Associational life alsoseemed to be flourishing with the emergence of organized interest groups among the professions,business and labour. Elected governments processed the demands of these socio-political institutionsand generated reformist policies that distributed some of the national wealth and life chances to thetraditionally less fortunate social groups of these countries.

Modernization theory strongly influenced US policy towards Latin America in the Alliance forProgress during the 1960s. Here, US development aid focused on economic infrastructure and thepromotion of US corporations in the region to spur rapid economic modernization. The attendantexpansion and strengthening of the middle class were accompanied by strong support for thedevelopment of reformist centrist political parties, such as the Christian Democratic party in Chile.

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The Alliance for Progress also backed agrarian reform to speed up economic modernization ofagricultural production, the differentiation of an agrarian social structure and the distribution of socio-economic benefits to the countryside. Agrarian reform was also supposed to blunt the revolutionarypotential of peasants and, therefore, help to avoid another Cuban revolution.

Although modernization theory fell into disfavour during the 1970s and 1980s, its central tenetswere worth developing because it has enjoyed a vigorous resurgence. The emphasis on economicmodernization, the change in political culture, the importance of associational life and thedevelopment of institutions such as political parties have been the focal points of widely applied policyprescriptions for democratisation in the 1990s and 2000s.

Under-development, dependency theory, and state form

In contrast to modernization theory, in the 1960s, dependency theory took a non-determinist view ofthe relationship between levels of development and state form. Economic modernization did notnecessarily foster political democracy. As the decade gave way to the 1970s, this approach seemedmore in tune with events as democracy gave way to military dictatorships in Brazil, Argentina, Chile,and Uruguay. Fernando Henrique Cardoso and Enzo Faletto (1979: 199–212) expressed the theorymost forcefully. Although heavily critiqued by Marxists (Chilcote, 1982), their analysis was rooted in aMarxist political economy. Thus, for them, states expressed the domination of the propertied classesover the rest of society. Their primary functions were to maintain social order and the conditions forcapitalist development; democratic states were safe as long as they fulfilled those functions. Whetheror not they managed to accomplish those functions depended on a number of factors. These includedthe composition of political alliances within and across class-based groups, their bases of power withinstate institutions, the organizational capacity of subordinate classes and the nature of their demands,and the presence or absence of internationally and domestically-induced economic crisis.

A fundamental insight was the argument that a developing nation’s domestic politics and theprospects for development had to be analysed in the context of that country’s insertion in theinternational economy. The economically developed nations of the world had pulled them into theworld economy. They dominated developing countries because of their superior investment capability,technological advancement, and military capability (in the case of the United States). This conditiondefined a situation of dependency. A country’s class structure and the economic and social problemsfacing the state had to be understood in terms of the nation’s connection to economically advancedcountries. The situation of dependency was also the cause of persistent under-development due tothe assumption that the asymmetrical power relations between developed and developing nationswould perpetuate the condition. Development might occur, but it would always be lagging anddifferent in its social, political and cultural consequences. This was called associated dependentdevelopment (Cardoso and Faletto, 1979; Evans, 1979).

Cardoso and Faletto argued that economic change lay at the root of the crises of the LatinAmerican state that began in the 1960s. They concluded that the globalization of the world economyforced states and domestic capitalists to accommodate transnational corporations. This required a shiftin alliances between state actors, international capital, domestic capital and the middle and workingclasses. The states of Brazil, Argentina and Chile, for example, collapsed under these tensions, usheringin military government. In these countries labour had its own political party (or parties). In the 1960sand 1970s those labour parties won presidential elections and used the state’s power and authorityto further include labour and peasants into the political system. Their governments heavily attackedforeign capital. This did not contribute to the business climate necessary to attract transnationalcorporations and to link domestic capitalists to them.

By contrast, the Colombian and Venezuelan states weathered the storm. Colombia was aided by itsparty system, dominated by two multi-class, catch-all political parties. Neither felt beholden to a lower-class constituency, thus they were in a better position to mediate between the external sector,domestic entrepreneurs and the lower classes. The country’s system of power sharing between the

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two political parties (the Frente Nacional) also helped. Meanwhile, the Venezuelan state was aided byoil money, which lubricated class tensions through redistribution of resources for all classes, upper andlower. The larger integration of business into the major populist party, Acción Democrática, alsohelped.

Dependency theory was not only an analytical framework for interpreting Latin America’s politicaleconomy. Leaders of populist, leftist and progressive political parties and movements drew ondependency theory for their rhetoric, policy prescriptions and political strategies. In many countries,dependency theory reinforced economic nationalism, culminating in the nationalization ofinternational and, sometimes, domestic companies in crucial sectors of their economies, such as oil inVenezuela, copper and other enterprises in Chile, meat packinghouses in Argentina, and the oil andsugar industries in Peru. This was deemed a key step to breaking the cycle of dependency. The statewould enjoy greater autonomy in determining the country’s economic destiny as it gained control ofmajor resources, especially those that generated foreign exchange. Dependency theory also shapedclass alliance strategies. Salvador Allende’s government in Chile (1971–73) attempted to forgecoalitions between urban labour, the middle classes, medium and small business and the peasants tocounter alliances between large-scale domestic business and international companies and the middleclasses. Brazil’s Labour Party under Joao Goulart (1962–64) tried a similar tactic. Land reform in bothcountries served as an important tool to cement alliances with peasants (a heretofore politicallymarginalized social sector) and to break the economic power of a traditional socio-political actor : thelanded aristocracy.

Dependency theorists, however, were not primarily interested in explaining the relationshipbetween development and the prospects for democracy or authoritarianism. They wanted tounderstand the socio-economic and political roots of under-development and the difficulty ofovercoming it (Frank, 1966; Dos Santos, 1970). Nevertheless, dependency theory made useful, lastingcontributions to political economy studies of development and its politics. The concept of the situationof dependency helped to refine our understanding of class structure, class relations and alliances, andeconomic tendencies in Latin America. Analysis of these factors, in turn, promoted a greaterunderstanding of the functions the state had to perform to meet the challenge of under-development.The choices and actions of national states and classes were conditioned by the preferences of theforeign sector, understood as international capital and the governments of developed nations thatsupported them. These foreign entities had to be accommodated.

In conclusion, dependency theory brought attention to what was different about the class structureand state functions of developing countries in relation to more developed nations, whether capitalistor socialist. The emphasis was on examining how different class alliances helped states to fulfil thefunctions of social dominance and economic growth in specific historical periods. This was animportant contribution, given the proliferation of competing theories that held that all countries wentthrough similar stages of economic, social and political development; what was adequate for explainingEuropean or North American history was also applicable to Latin America.

Perhaps more importantly, dependency theory differed from modernization theory in its policyprescriptions and implications for political action. Modernization theory favoured private sector-ledeconomic development and emphasized strengthening political institutions (especially centre-right andcentre-left political parties) and changing political culture (education policy to promote tolerance,moderation and rational goal-oriented thinking). Dependency theory prescribed nationalization andstate planning for economic development, redistribution of national wealth to lower class sectors ofsociety, effective political participation for lower classes, and the politics of class alliances to supportthose objectives.

Bureaucratic-authoritarianism

The crisis of the Latin American state that began in the 1960s seriously challenged the coreassumptions of modernization theory. Modernization theorists had taken a benign view of the

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effects that economic, social and political integration into the world economy had on developingcountries. Developing nations would follow the idealized sequence of economic, social and politicalstages of advanced, developed nations. Yet two of the most economically advanced countries ofSouth America, Argentina and Brazil, succumbed to a new type of military dictatorship in the1960s. Other economically advanced cases in the Southern Cone, Chile and Uruguay, followed suitin the early 1970s. By the middle of the 1970s, most South American countries were ruled bymilitary governments. How to account for this disturbing trend? Dependency theory, as seen above,offered some answers, but lacked sufficient elaboration to fully explain the turn to militarydictatorship.

Guillermo O’Donnell (1973) took up the challenge. First, he stood modernization theory on itshead, proposing a reverse determinism. Developing nations were not destined to replicate the path ofadvanced industrial countries. Greater levels of economic development did not lead to democracy;instead, they were equated with a new form of military dictatorship, a new authoritarianism.O’Donnell dubbed them bureaucratic-authoritarian (BA) regimes. Second, drawing on a number ofsources (Moore, 1966; Organski, 1965; Gerschenkron, 1962; and dependency theory), he constructeda political economy approach to explain the emergence of BA regimes.

For O’Donnell, the state stood at the centre of the dilemma. In the 1960s, the prevailing economicdevelopment model, import-substituting industrialization, had reached a crisis in Argentina, Brazil, andlater Chile and Uruguay. Economic growth was sluggish or non-existent and high inflation prevailed.Correcting these problems required substantial investment to go beyond light assemblies to the morecapital and technologically intensive stages of industrialization, which he called the deepening ofindustrialization. The problem for the state lay in how to mobilize human and material resources toaccomplish this end, an end that fulfilled one of the key functions of the capitalist state: providing forthe growth and development of the economy.

Latin American states faced an additional problem. They were hard-pressed to fulfil the function ofmaintaining social order. The evolution of class conflicts under democratic regimes threatened boththe dominance of propertied classes and the ability of states to maintain a good business climate. Indemocracy, populist and Marxist social movements, unions and political parties strongly pressuredgovernments. In some cases, they won presidential elections and pushed their platforms even harder.Their welfare policies, and at times revolutionary stances, threatened the established order. This threatfrom below frightened the upper classes. Industrial, financial and commercial classes allied withlandowning elites in defence against populists and would-be revolutionists. This coalition needed adictatorial state to impose economic and social order.

Enter the armed forces. The military in Latin America had developed the doctrine of nationalsecurity. This anti-communist doctrine held that without economic growth there could be no politicalorder. Thus, the military as an institution took it upon itself to provide political order throughrepression and to undertake conservative economic modernization strategies. They alone, went theargument, possessed the power and authority to mobilize material and human resources for nationaldevelopment. The eventual success of economic strategies would ultimately recast the society andpolity and make democracy safe for capitalism. The military also believed that recreating a goodbusiness climate would entice foreign investors back to their countries. And, given a situation ofdependency, foreign investment was key for economic success.

O’Donnell’s theorizing not only challenged modernization theory, but it also refocused attention onhow the structural conditions of dependency affected class conflict and political change. Whetherdemocracy survived in dependent capitalist economies in large measure hinged on the perception ofthe upper classes, the military and the foreign sector of the state’s ability to perform its functions.Given the acuteness of the crisis of economic development and the political strength of populistforces in the more advanced stages of socio-economic modernization, O’Donnell pessimisticallyconcluded that repressive military governments were Latin America’s political future, not democracy.Higher levels of economic development produced political authoritarianism.

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The theory helped to understand why Latin America was turning to authoritarianism in the 1960sand 1970s. However, because it stressed structural factors, the theory did not address conditionsdecision-makers could manipulate. Thus, it did not lend itself to policy analysis, especially prescriptionsfor democratization. The actors interested in democracy or the extension of social and economicrights to the urban and rural poor and otherwise disenfranchised were the objects of repression; theyhad no role to play in BA regimes.

Modernization theory revisited

With few exceptions, between the end of the 1970s and the middle of the 1990s authoritarianregimes gave way to democracy in Latin America. This democratizing trend underscored some of thebureaucratic-authoritarianism literature’s weaknesses, which were amply debated in a volume editedby David Collier (1979). Principally, it invalidated the argument that higher levels of socio-economicdevelopment had an elective affinity for military government. In addition, the literature onbureaucratic-authoritarianism had difficulty explaining the transitions themselves. Some scholars usedthe BA framework to analyse tensions in military regimes (Cardoso, 1979; O’Donnell, 1979; O’Brienand Cammack, 1985). However, these efforts could not account for the process by which transitionsto democracy from authoritarianism took place, nor could they prescribe policies to help the processalong and ensure the consolidation of democracy once it was established.

Instead, a literature that built on modernization theory emerged to describe and explain this newwave of democracy and to prescribe policy options and strategies for democratic consolidation.Samuel Huntington (1991) and Larry Diamond, Juan Linz and Seymour Martin Lipset (1989)identified numerous preconditions for democracy drawn from modernization theory. Theyemphasized the importance of adequate levels of socio-economic development and political culture.Huntington argued that the midrange of economic development, measured as per capita income of$1000 to $3000 (late 1980s’ dollars), correlated highly with countries experiencing transitions todemocracy. Diamond, Linz and Lipset added that steady growth and broad distribution of wealthwere more important than the fact of high levels of socio-economic development alone. In short,socio-economic development promoted civic culture, raised education, increased access to media,and provided resources for distribution that nurtured democratic values such as tolerance andcompromise.

However, unlike the original modernization theorists, they argued that socio-economicdevelopment by itself does not produce democracy. Other factors mediate, such as the policies ofexternal actors – whether they are supportive of dictatorship or democracy. Especially significant forLatin America was the shift in support from military government to democracy by the United Stateswith the demise of the Cold War. Huntington further argued that authoritarian regimes had to gothrough a legitimacy crisis before democratization became possible. He also noted a Christian religiousculture was more propitious for democracy than other religions.

The consolidation of democracy and the quality of democracy became increasingly pressing issuesas the 1990s wore on. The governability of Colombia, Peru, Ecuador, Paraguay, and even Argentina,Venezuela, and at times Mexico, not to mention Guatemala and Nicaragua, seemed questionable.Building on these ideas, Linz and Stepan (1996) and Diamond (1999), among others, developed theconcept of democratic consolidation, understood as the conditions for the stability and persistence ofdemocracy. These scholars argued democracy was consolidated when most citizens and all politicallyrelevant elites considered the democratic state to be the only legitimate means to settle competitionfor political office and to formulate policy.

With varying emphasis, these analysts agreed on five conditions necessary for fully consolidateddemocracies. Linz and Stepan (1996: 7–15) summarized them as follows: (1) a vibrant civil societybased on freedom of association and communication; (2) free and fair elections with universal citizenparticipation; (3) the rule of law, understood as constitutionally established, broadly accepted andobeyed legal culture; (4) a modern state apparatus with a monopoly of legitimate force based on

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rational-legal norms capable of regulating society and economy; and (5) a market economy in whichthe state mediates social and economic needs.

Diamond (1999: 77–93) added effective regime performance as a sixth condition crucial for buildingthe legitimacy necessary for democratic consolidation. This measure focused on two arenas: (1)adequate economic performance, understood as sustained increases in GDP, was crucial for providingimproved living standards conducive to regime support; and (2) political performance, which largelyreferred to upholding the rule of law, including protection from criminals and proper functioning of thelegal system, was also considered a crucial measure of regime effectiveness.

These conditions doubled as policy recommendations that have been the template for prescribedreforms throughout Latin America. For example, the United States has emphasized strengthening therule of law, especially in the anti-drug crusade, which has centred on Mexico, Colombia and theAndean countries. The United Nations and other international organizations, such as the EuropeanUnion, have worked tirelessly to ensure free and fair elections in countries where their exercise hasbeen questionable. The USA, the International Monetary Fund (IMF), and the World TradeOrganization have also steadfastly promoted neoliberal economic reforms, which they, as well as thescholars discussed above, believe are the only means to improve economic performance.

Throughout the 1990s and into the 2000s, the World Bank, the globe’s pre-eminent multilateraldevelopment bank, has constructed, articulated and implemented (through its loan conditionality) aneoliberal agenda regarding economic reform, state reform, poverty alleviation and sustainabledevelopment. Its free market economic reform measures reinforce those already prescribed by theUS government and the IMF. However, the World Bank also recognized that the state was a necessary institution for societies to function effectively (World Bank, 1996). As a result, it hasadvocated building effective states with reduced areas of responsibility. Those include the provision oflaw and order (especially with respect to enforcement of private property rights and contracts, butalso for personal security) and providing the institutional support necessary for the market to functioncorrectly. Reducing state responsibilities, in this view, also promotes the emergence of civil society.Poverty alleviation, putting a human face on capitalism, took on a neoliberal cast as well (World Bank,2000). Universal coverage was changed to private insurance for those who could pay, such as themiddle and upper classes. The poor received targeted, preventative care on a means-tested basis fromthe state, such as programmes for pregnant women and infants to strengthen them physically. Thisreduced infant mortality rates without having to spend on expensive health care facilities. Theemphasis is on keeping the young healthy leaving sick poor adults to suffer inadequate public healthcare. Education programmes were treated in a similar manner.

Some version of these policy prescriptions for the consolidation of neoliberal democratic capitalism– based on precepts drawn from revised modernization theory – has been implemented almosteverywhere in Latin America. Domestic political, economic and social elites have promoted thesereforms too, at least sufficiently to implement this agenda. Taking the lessons of the past to heart, themoderation of political elites, especially of populist and leftist parties in Brazil, Chile, Argentina andmany Central American countries has been key for the wave of democratization that has swept theregion. For the moment they have withstood the temptation to make demands the state cannotaccommodate without jeopardizing its relations to large-scale domestic and international capital. Theyhave also resisted resorting to mass mobilization. In short, to protect democracy they have held incheck behaviour that in the past generated the ‘threat from below’ central to O’Donnell’s analysis ofthe breakdown of democracy. Elite moderation and compromise also ameliorated conditions fordemocratic breakdown emphasized by Linz (1978) and Crozier et al. (1975). They argued that leadersfrom the left and centre of the political spectrum had made ill-advised choices. Too many demands hadoverloaded government’s ability to process them. This so reduced the effectiveness and efficacy ofgovernment that it lost legitimacy and the military stepped in.

Despite improvements, the revised modernization-cum-neoliberal agenda for transitions todemocracy and democratic consolidation still suffered from some of modernization theory’s original

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shortcomings in addition to some new ones. One of the lingering problems was that thepreconditions – such as socio-economic development and religious doctrine – do not explain why acountry has a democratic or authoritarian form of government. They may be correlated withdemocracy under the right circumstances, but the causal linkages are still missing and the rightcombination of factors is not understood.

A second problem was the number of factors used to understand transitions to democracy anddemocratic consolidation. Recognition of the complexity is welcome, but there was little theoreticalintegration of the variables; the relationships between variables are not clearly specified. The emphasison the political culture of elites offers hope that leadership can forge democratic outcomes wherestructural conditions may not be very favourable. But these studies offer no explanation why politicalelites embrace democratic values. Are they voluntary decisions or the product of historical pressures(Espinal, 1991)?

These analytic ambiguities are not just academic; they have real consequences for policy. For almost20 years, Latin American policy-makers have emphasized free market economics and state reform(also known as state modernization) to support the neoliberal economic agenda; flimsy social safetynets for the poor drift in and out of focus depending on fiscal conditions. The problem is that, with fewexceptions (notably Chile), neoliberal economic reform has not generated sustained economicgrowth, a key condition for democratic consolidation stressed by neo-modernization theorists, andnowhere has it made the distribution of income more equitable. Despite this lacklustre performance,in the 1990s, political elites steadfastly suppressed demands for socio-economic policy change. Instead,they pressed on with political-institutional reforms suggested by revised modernization theory. Thesefocused principally on ‘modernizing’ the state and strengthening the rule of law (police) in the face ofmounting corruption and lawlessness.

It is questionable, however, whether this approach constitutes an adequate policy response toprotracted socio-economic crisis. Karl Polanyi (1957) argued that people naturally seek to protectthemselves from the insecurities of the market. The suppression of demands for relief has resulted inpeasant uprising in Southern Mexico in the mid-1990s and widespread political instability in Ecuador,Peru and Venezuela in the late 1990s and early 2000s. In the last three cases a new populism arosethat made significant political inroads. It remains to be seen whether elites who support theneoliberal agenda will tolerate them. The election in 2002 of a centre-left labour party coalition tothe presidency in Brazil raises similar questions about the moderation of elites and the limits of eliteconsensus in economic hard times. A crucial issue for neo-modernization theorists is whether theirwork can transcend policy prescriptions that currently only support a neoliberal democratic capitaliststate.

Recent political economy theorizing

Recent theorizing in political economy concurs that economic development does not necessarilyproduce either democratic or authoritarian state forms. For political economists, whether one or theother prevails, as well as the stability of political regimes, depends, in the first instance, on the resolutionof class-based social conflicts. Otherwise, the fragile institutions stressed by modernization theoristsrun the risk of being overwhelmed by struggles among antagonistic social groups. Accordingly,contemporary political economists focus on the effects that economic conditions and the relativeautonomy of the state have on social conflict and regime stability. As will be seen, these analyses alsohave concrete policy implications. Because most Latin American countries have now experiencedsome combination of neoliberal economic reform and democratization, political economy studiesfrequently focus on the dual problem of economic and political change. They ask: what conditionsencourage free-market economic reforms and democratic states simultaneously?

Jeffry Frieden (1991) offers an elegant explanation for the connection between the Latin Americandebt crisis, economic change and the recent wave of democratization. Frieden argues thatinternational pressure for free-market economic adjustment has been relatively constant over a long

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period of time. Therefore, domestic class alliances, the extent of class conflict and the degree of stateautonomy were more important than external factors in both economic and political change.

For Frieden, capitalists are the key class-based actors. Because they control the public functions ofinvestment and employment (also called structural power), their support for any particular state formis crucial for political stability. Thus, in countries with moderate tension between labour and business(low class conflict), state managers should heed the policy preferences of dominant economic groups.Otherwise, economic elites may turn against the government. This occurred in Argentina and Brazil,where many important business sectors disagreed with the military government’s economic policies.Because the dictatorships ignored their demands, they supported democratization, thus strengtheninga multiclass coalition against military rule. Conversely, in situations of high class conflict, state managersmay have more autonomy in policy decisions. The dominant sectors of the upper classes are morewilling to submit to economic policy changes because they need the state to keep social order. Thishappened in Chile. The implication is that the absence of a multiclass alliance for democracy explainswhy it was practically the last South American country to redemocratize. Moreover, when thetransition to democracy took place, it did in accordance with the military’s agenda.

Frieden confined his analysis of political change to the regime loyalties of capitalists, assuming thattheir regime preferences weighed heavily in the process of transitions to democracy. This was asignificant, if not unique, insight. The limitation was that by themselves the regime loyalties of upperclasses did not determine the outcome.

Dietrich Rueschemeyer, Evelyne Stephens and John Stephens (1992) address this limitation.Following Barrington Moore (1966), they argue that democracy or dictatorship is the result of broadclass alliances. The power of those alliances is mediated by state autonomy and international factors.The authors stress that capitalist development weakens labour-repressive authoritarian classes,especially traditional landowners. It strengthens classes that have an interest in democracy: thebourgeoisie (capitalists), the middle classes and labour.

But the mere emergence of those classes is not enough to explain whether democracy ordictatorship will prevail. In Latin America, as in Europe, the bourgeoisie had an interest in creatingprotected, oligarchic, democracies that included them in policy-making but excluded subordinatesocial classes/groups. Depending on the case, this characterized Latin American politics from thenineteenth to the middle of the twentieth centuries. The struggles and organizational capacity of themiddle class, instead of labour as in Europe, turned the tide in favour of full democracy. Labour in LatinAmerica was simply organizationally too weak to perform the role. Thus, a middle class that did notfeel threatened by labour could ally with it, and some sectors of the bourgeoisie, to build democracy.Conversely, when middle classes make common cause with upper classes, authoritarianism mightresult. In other words, authoritarianism is likely to emerge in the presence of highly organized andinstitutionally and ideologically cohesive autonomous states (independent of civil society) and severeclass tensions. In recent transitions to democracy, the foreign policy of the dominant external poweralso makes a difference. Thus, US support for democracy as of the middle of the 1980s strengthenedthe movement to democracy in the region.

Rueschemeyer et al. developed a framework for analysis based on the relationship between classstructure and organization, state institutions and transnational forces. They focused on how long-termprocesses of capitalist development affected those variables and their impact on state form. StephenHaggard and Robert Kaufman (1995) developed a framework for analysis more suited to short-termstudies of transitions from authoritarianism to democracy and the prospects for democraticconsolidation. They also examined the socio-economic and institutional conditions under which elitesembrace democratic values; issues the new modernization theorists and the increasingly popularstrategic choice analysts (O’Donnell and Schmitter, 1986) had ignored.

Haggard and Kaufman argued transitions to democracy were most likely in cases with pooreconomic performance and lack of elite cohesion. Economic crises tended to undermine the statemanagers’ ability to purchase the compliance of social groups. Elite fragmentation weakened the state’s

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capacity to manage the crisis. Under these conditions of regime decomposition, the politicalorganizations of middle-class groups and labour could press for full political democracy and even allywith some disgruntled upper-class groups; but only if they moderated their policy platforms. In caseswithout economic crisis and where elites remained cohesive in support of military government,authoritarians were able to hold out longer and impose more restrictions on the democratic regimethat was to follow them.

The prospects for the consolidation of democracy depend on two institutional factors, according toHaggard and Kaufman. First, centralized executive structures are better because they facilitated theinitiation of economic reforms necessary to resume economic growth, without which there can be nolong-term political stability. Having initiated economic reforms, state managers must build supportcoalitions for the implementation of those reforms in order to sustain them. Second, Haggard andKaufman suggest that the structure of the party system is key for constructing such support coalitions.Specifically, they advocate building two-party systems. These tend to reinforce compromise andmoderation.

None of these studies, however, argued that labour played a significant role in democratization. RuthBerins Collier (1999) addresses this omission. Her work is ambitious. It links theories ofdemocratization based on class analysis with elite bargaining theories. Berins Collier carefully avoidsclaiming labour played a determining role. She shows that in most cases organized labour consciouslydeveloped strategies in support of democratization and that its actions affected the democratizationprocess. In concert with other social groups, it mobilized in the streets and also participated innegotiation over regime change with opposition and government elites. Which strategies theyadopted, and the allies they chose, depended mainly on the degree to which they were included orexcluded from official negotiations by the authoritarian regime. Although not strictly the subject of thischapter, it is worth mentioning that Berins Collier develops a finely crafted model of class-basedactions to account for distinct modes of transition to democracy in South America and SouthernEurope.

These political economy analyses share a common assumption. Democratization involves acomplex process of constructing multiclass coalitions to support both democratic institution buildingand a socioeconomic development model. Consequently, political economists offer the followingpolicy advice. Political leaders must forge social coalitions to support their policy initiatives and theinstitutions they seek to build. The relevant coalition partners are urban based: different sectors ofbusiness, the middle classes and labour. The urban bias is rooted in a tradition of assuming that agrarianinterests have a greater affinity for authoritarian regimes (albeit for different reasons depending onwhether they are large-scale landowners or peasants). Developments in Brazil during 2002 may callthose assumptions into question. The Brazilian Labour Party – with strong ties to rural labour unionsand social movements – won a presidential election there.

Another policy prescription flows from the recognition that class-based social groups have differentinterests. Thus, political leaders that represent these diverse interests must exercise moderation andcompromise to achieve democracy. Many analysts interpret this as an admonition to labour groupsand strongly reformist middle-class groups who in the past pushed too many demands thatdemocratic regimes could not meet without destabilizing their countries economically and politically.This was O’Donnell’s ‘threat from below’, or Crozier’s (1975) ‘excess of participation’. However, therecommendation also applies to upper-class elites and conservative middle-class leaders, as well as theoccasional right-wing labour organization. To ensure political stability, they must relent in their effortsto uncompromisingly implement their neoliberal agenda. Excessive reliance on repression and otherforms of coercion will not ensure long-term political stability, as testified by events in Ecuador, Peru,Argentina and Venezuela in the first decade of this century.

The prescription to focus on social coalition building is a strong one. Political economists argue thatin the absence of such support coalitions, efforts to build legitimacy for democracy based on formal-procedural rules of the political game, such as the rule of law, will most likely collapse, especially during

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economic hard times. In other words, the institution-building focus of modernization theorists isunlikely to prosper if social coalition building is ignored. Those institutions will most likely beoverwhelmed by social tensions generated from systematically excluding the demands of socio-economic groups from the policy and institutional design agendas. Latin America is full ofhistorical examples of this process, especially in the first half of the twentieth century and now at theturn of the twenty-first century.

This does not mean that advice to construct institutions to channel conflict, such as Haggard andKaufman’s suggestion to generate two-party systems, are without merit. It means that when these areused to exclude the demands of broad social groups from political negotiation, such institutionalarrangements can be overwhelmed by social mobilization and conflict. Even two-party systems havebeen proved vulnerable in Latin America, as occurred in Uruguay in 1973, and as is occurring inColombia, Venezuela and Argentina at the beginning of the twenty-first century.

Moreover, economic good times by themselves cannot generate social compliance; thedistribution of wealth is also crucial. Hence, political economists also need to address the conditionsunder which social justice can be advanced without threatening elites to the point where theywithdraw their support for democracy. The same applies to efforts to increase social participation inpolicy-making, which has been severely curtailed in many Latin American democracies. The variousefforts to protect democracy from the ‘masses’ produced a burgeoning literature on Latin America’spenchant for democracy with adjectives, such as tutelary democracy, protected democracy anddelegative democracy (O’Donnell, 1992; Loveman, 1994; Smith et al., 1994; Collier and Levitsky,1997).

CONCLUSIONIn the 1980s, a consensus across methodological perspectives emerged that no lineal relationshipexists between economic development and the form of the state. Economic modernization does notnecessarily lead to either democracy or dictatorship. Perhaps the greatest value of modernizationtheory, especially in its current incarnation, lies in its emphasis on elite strategies and the structure ofpolitical institutions. We have the sense that we can control them; we believe they are a matter ofchoice. Whether political elites value democracy, their tolerance, and their willingness to compromiseare clearly important. Whether political institutions mediate or exacerbate social and political conflictsis also crucial.

However, the modernization approach lacks a systematic view of the relationship between thesevariables. It also does not provide the tools to understand the multiple tensions that tear at politicalleaders, the wellsprings of social movements, or that institutions require social support. Thus, as arguedpreviously, policy prescriptions frequently ignore problems that require attention if political leaders areto exercise the moderation necessary for successful institution-building. These problems have plaguedmodernization theorists and the policy-makers who take their advice since the 1950s. They are verymuch with us today.

Political economy approaches offer tools to address those problems. They shift the focus onto theeconomic and political factors that influence the demands and power relations among social groups.These, in turn, shape the strategies of elites. Political economy also recognizes the existence of thestate and its role in society. Understanding the functions of the state in capitalist economies providesa sound foundation for analysing the effects of economic and social tensions on political stability overtime. The addition of factors such as international variables and the structure of political institutionsfurther advance our understanding of the prospects for democracy and the danger of backsliding toauthoritarianism.

Moreover, there are two elements of heavily criticized dependency theory worth rescuing. One isthe analytical importance of the region’s historical specificity. That is, understanding how the region’sunique economic, social and political history affects outcomes. Second, analysts should always bear in

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mind how the region’s particular insertion in the world economy influences socioeconomic andpolitical tendencies (Stallings, 1992).

In short, political economy draws our attention to the economic and social challenges facing stateactors and how these affect institutions and socioeconomic groups. Political economy-based policyprescriptions stress the need to build social coalitions (or support) for institutions. Constructingthat support requires broad inclusion of organized social groups in institutions, meaning that theynot exclude or skew power too much against significant social groups, even if they belong tosubordinate classes. The same advice applies to the distribution of socioeconomic benefits. Forexample, if neoliberal reforms leave most citizens prey to private power and do not provide bettermaterial conditions for masses of people, those masses will sooner or later demand protectionfrom private power. Political leaders will emerge to champion alternative agendas, challenge thepolicy consensus of established elites, and eventually question the utility of a rule of law in whichtheir material interests are ignored or, worse, consistently repressed. In other words, moderationamong all elites is not always possible, and institutions, no matter how well designed, may beoverwhelmed by social mobilization and political strife. Current emphases on the rule of law andinstitution-building simply may be perceived as instruments of exclusion and repression by anumber of social groups.

In the final analysis, prudent political leaders, functioning political institutions, and support fromprincipal social groups are all necessary for democracy to thrive and to avoid authoritarian reversions.While one would like to give a better report, Latin America at the beginning of the twenty-firstcentury seems about the same it was in the previous one. Tensions flourish in a number of familiarcases, such as Venezuela, Argentina, Colombia, Peru, and in some of the formerly war-torn CentralAmerican countries. Other cases, such as Chile, Mexico, Costa Rica, Uruguay and perhaps Brazil offerhope, as they have in the past. Policies there seem to draw on a blend of modernization theoryinspired and political economy oriented prescriptions.

FURTHER READING

Centeno, M. A and López-Alves, F. (eds) 2001 The other mirror : grand theory through the lensof Latin America. Princeton University Press, Princeton, NJ. A collection of essays that bring universaltheory into dialogue with specific Latin American history.

Chalmers, D. A., Vilas, C. M., Hite, K., Martin, S. B., Piester, K. and Segarra, M. (eds)1997 The new politics of inequality in Latin America: rethinking participation and representation. OxfordUniversity Press, Oxford. The essays in this volume explore the unfolding relationships among socialchange, equity and the democratic representation of the poor in Latin America.

Dunkerley, J. (ed.) 2002 Studies in the formation of the nation state in Latin America. Institute ofLatin American Studies, London. A general historical and sociological exploration of complex andcontested issues around the character of the Latin American nation–state.

Eckstein, S. E. and Wickham-Crowley, T. P. (eds) 2003 Struggles for social rights in LatinAmerica. Routledge, New York. This volume addresses a broad span of social rights struggles in LatinAmerica. Topics covered include environment, citizenship, workers’ rights, women’s movements,AIDS and indigenous people’s rights.

Murillo, M. V. 2001 Labor unions, partisan coalitions, and market reforms in Latin America. CambridgeUniversity Press, Cambridge. This book address why labour unions resist economic restructuring andadjustment policies in some countries and in some economic sectors while they submit to it inother cases.

Stokes, S. C. 2001 Mandates and democracy: neoliberalism by surprise in Latin America. CambridgeUniversity Press, Cambridge. An analysis of the reasons and effects of the betrayal of mandates by

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democratically elected governments, meaning when politicians promise one thing to get elected anddo another once in office. This is a growing trend in Latin America.

Tokman, V. E. and O’Donnell, G. (eds) 1998 Poverty and inequality in Latin America: issues andnew challenges. University of Notre Dame Press, South Bend, IN. This anthology introduces readersto fundamental issues of poverty and inequality under neoliberalism. It explores strategies of jobcreation and reconstruction, social welfare and social protection.

WEBSITES

Interamerican Development Bank, www.iadb.org, is the oldest regional multilateraldevelopment bank established after the Second World War. It supports economic and socialdevelopment projects.

International Labour Office, www.ilo.org, this organization promotes social justice andinternationally recognized human and labour rights.

Latin American Network Information Center (LANIC), www.lanic.utexas.edu, is aclearing house for sites about Latin America with many direct links to Latin American countries.

United Nations Economic Commission for Latin America and the Caribbean,www.eclac.cl, contributes research for economic and social development of Latin America and isgenerally critical of unbridled neoliberalism.

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At the beginning of the twenty-first century, Latin America is plagued by severe political and institutionalcrises that in some countries have brought democratic rule almost to the point of collapse. As a result,much of the hope and expectations that existed in the 1990s about the ability of the new democraciesto provide for higher levels of political stability and economic progress in the region have rapidlyevaporated. Today, pessimism, uncertainty and even despair have begun to typify the general moodexisting among many Latin Americans about the immediate future of their countries.

Whereas neoliberal economic and institutional reforms applied in the 1980s and 1990s profoundlytransformed Latin American societies, they clearly failed in most cases to create a firm basis foreconomic growth, social prosperity and political stability. For almost two decades, the pro-marketagenda defended by the so-called ‘Washington consensus’ represented an almost uncontested projectfor the region. In recent years, however, increasing poverty and poor economic performance haveresulted in street riots against neoliberal policies and the re-emergence of populist political leaderswho promise an active pro-poor social agenda.

The election of leaders such as Hugo Chávez in Venezuela, Luiz Inácio ‘Lula’ da Silva in Brazil andLúcio Gutiérrez in Ecuador – to just mention the most emblematic cases – can be seen as expressionsof a marked discontent with neoliberalism and a desperate search for alternative policies. This has notyet shown its capacity to provide an effective answer for the current economic and institutional crisis.In contrast, countries such as Mexico, Chile and some Central American nations seems to havedefinitively chosen a close commercial alignment with the United States and the acceptance of a clear-cut market-oriented developmental strategy. This might indicate the gestation of a new schism in theregion between countries that have finally accepted the neoliberal developmental path and thosecountries which are still attempting to pose some resistance to the ‘Washington consensus’ and theglobalization agenda.

This chapter analyses the rise of the neoliberal project in the region and its current crisis by focusingon its main socio-political and cultural effects on Latin American societies. It represents an attempt togo beyond the ‘transitional’ scope followed by most democratization studies during the last twodecades, which have focused on the specific ways in which the democratic transition process tookplace. However, little effort has been made to assess both the main features of the new democraticorder and the factors that have generated the current crisis.

NEOLIBERALISM, MODERNIZATION AND DEMOCRACYSince the restoration of democratic rule in the region in the early 1980s, the relationship betweenneoliberalism, modernization and democracy has been constantly plagued by severe tensions. So, forinstance, most of the democratic governments have been unable to successfully legitimate botheconomic neoliberalism and its related discourse of modernization. This, in my view, has been theconsequence of a series of factors.

8The new political order: towardstechnocratic democracies?

Patricio Silva

To begin with, we must not forget that both the neoliberal economic project as well as itsaccompanying discourse of modernization were applied in countries such as Chile, Argentina andUruguay by military regimes, that is, by forces opposed to democracy. The ‘modernization of society’constituted the ideé force behind the application of the neoliberal policies during those authoritarianregimes. This modernization project was translated in practical terms as the accomplishment of aseries of macro-economic goals such as the privatization of the economy, the reduction of statebureaucracy, the liberalization of markets and the strengthening of the export-orientated economicsectors. What we observe today is that, in fact, most of the current democratic governments havelargely continued to visualize modernity along the same macro-economic lines as did the formermilitary governments.

This element of continuity from the previous regime made it extremely difficult for the newdemocratic authorities to legitimate neoliberal policies during the 1980s and 1990s. The fact is that theimplicit call of the democratic authorities to accept the neoliberal economic guidelines provedunpalatable for the social and political forces who fought against the military regimes. They experiencethis reality as an inadmissible legacy of the past, and consequently they resist accepting the neoliberalmodel as being the economic engine sustaining the democratic fabric for the coming years. Thisphenomenon is present even in Chile where neoliberal policies have been relatively successful. Thecentre-left Concertación coalition, which has ruled the country since democratic restoration in 1990,has been constantly criticized ‘from within’ by the so-called autoflagelante faction. Although this sectoris part of the government, it has systematically rejected the continuation of neoliberal policies becauseit represents a heritage of the Pinochet era (Brunner and Moulian, 2002).

Second, an important obstacle in the attempts to legitimate neoliberal policies in the region is that,in many countries (such as Nicaragua, Venezuela and Ecuador), the adoption of neoliberal economicpolicies and its correlated modernization discourse have been regarded by broad sectors of thepopulation as being externally imposed. International financial institutions such as the InternationalMonetary Fund (IMF) and the World Bank have been denounced by several Latin American politicalforces and social movements for pressurizing Latin American governments to apply structuraladjustment policies (Petras and Morley, 1992). These ‘dictates’ from the North have left almost noroom to manoeuvre for the new democratic governments in the formulation and implementation oftheir own socio-economic agendas (Green, 1999). Paradoxically, this thesis (and the resulting rejectionof the neoliberal agenda) have found support in Latin America among quite heterogeneous politicaland social groups; these include the left, certain religious groups, some nationalist sectors (both insideand outside the army) and some entrepreneurial circles (afraid of free-market policies and especiallyof foreign competition).

The lack of popularity and support for neoliberal policies in many countries of the region has led toa quite peculiar situation. So while only very few political forces in Latin America dare openly toexpress their unconditional support for neoliberalism, neoliberal economic policies have become defacto dominant in the continent. In other words, almost no political force is seriously trying toelaborate an ideological legitimation for the new neoliberal order. One of the few exceptions in thisrespect can be found in Chile, where neoliberalism is not only enthusiastically defended by the right-wing parties and entrepreneurs but even, though in more implicit terms, by some sectors of the left(Moulian, 1997; Tironi, 2002).

Finally, another major difficulty faced by the new democratic governments in getting their neoliberaleconomic policies accepted by the people is related to the great social expectations generated by therestoration of democracy in the region. For many Latin Americans, democracy still means in the firstplace the existence of a government which really cares for the needs of the majority (that is, themasses) and which has to be actively and genuinely engaged in the struggle against poverty and socialinjustice. From this follows the expectation that in the new democratic era an active role for the stateis required to meet the consequence of the immense ‘social debt’ left by the former authoritarianregimes. What many people have experienced instead is that the restoration of democracy has been

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accompanied by a further abandonment by the state of its traditional social tasks, resulting during thepast decade in a dramatic deepening of the social inequalities in the majority of Latin Americancountries. This lack of a ‘social dimension’ in most of the neoliberal economic programmes applied inthe region has been severely criticized by leading intellectuals, as well as by the Church and non-governmental organizations (cf. Oxhorn and Ducatenzeiler, 1998).

From the very beginning, the restoration of democratic rule in the early 1980s was stronglyconditioned by the implementation of structural adjustment programmes by an increasing number ofcountries, following Mexico’s dramatic announcement in August 1982 that the country was unable tokeep its international financial commitments on the repayment of its foreign debt. This marked in theentire region the initiation of a profound shift in development strategies. Following the outset of thedebt crisis the traditional pattern of import substitution industrialization (ISI) was strongly criticized bydomestic and international actors who demanded the adoption of market-orientated reforms. Initially,many Latin American countries decided to apply non-orthodox stabilization programmes (for example,the Austral Plan in Argentina, the Cruzado Plan in Brazil, the Inti Plan in Peru) in an attempt to reducethe social costs of these austerity policies. By the late 1980s, however, it had became clear that theseand other stabilization programmes had failed to put an end to the crisis and to provide the expectedeconomic recovery. As Green (1995: 69) indicates, once ‘easy’ heterodox solutions had beendiscredited, neoliberalism spread rapidly across the region; these were the years when the long-termstructural adjustment of Latin America’s economy gathered pace. Trade liberalization, governmentcutbacks, privatization and deregulation have since then become the norm in almost every country.

While a general consensus emerged among most of the Latin American governments about theneed to abandon the traditional pattern of state-led industrialization and to modernize theireconomies by adopting neoliberal free-market policies, they have had immense difficulties intranslating the goal of modernization into political terms. For instance, rarely has an attempt beenmade to provide a clear explanation of how modernity is related to democracy or to indicate theconcrete differences existing between the modernization project of the former authoritarian regimesand the new democratic authorities. Both the pre-eminent role of structural adjustment policies underthe new democracies and the lack of a clear political project have resulted in the insertion ofneoliberal economics into the political realm. In this manner, official politics in contemporary LatinAmerica has tended to lose its own dynamic, having been in many cases reduced to a functionalmechanism for the implementation of the neoliberal economic project.

THE DEPOLITICIZATION OF SOCIETYContrary to what was broadly expected, in most Latin American countries the restoration ofdemocratic rule was not followed by a strong and sustained ‘political resurrection’ of civil society. Onthe contrary, one of the most striking features of the new democracies has been the growingdepoliticization of society and the marked absence of national political debates. This phenomenon ofincreasing depoliticization of Latin American societies has been the product of a complex blend ofpast and current political experiences faced by the people, as well as a consequence of the neoliberalmodernization project and its ideological impact on the people’s political behaviour.

The origins of this process of political deactivation have to be sought during the formerauthoritarian regimes, when systematic repression against any independent political expressioninaugurated a dark period of ‘forced depoliticization’. Paradoxically, state repression eventually led tothe emergence of a firm response from certain sectors of civil society. This was expressed in thegermination of active social movements and the creation of many NGOs that defended human rightsand attempted to ameliorate the social conditions of the rural and urban poor (Oxhorn, 2001).

At the same time as the use of physical repression, military governments in countries such as Chile,Argentina and Uruguay attempted to convince the population that ‘politics’ was synonymous withsubversion, chaos, decadence and corruption. For this purpose, the military simply exalted and

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manipulated the feelings of discontent with politics and politicians, which were already entrenchedamong some parts of the population as a result of the general political and economic crisis which hadpreceded the arrival of the military to power.

The extremely repressive nature of military governments also convinced many individuals that tobecome involved in politics could lead to big problems, as one risked not only one’s own life but alsothe physical integrity of family members and friends. Other people, after so many years of official anti-political indoctrination (through mass media and education), became finally convinced that politics was‘indeed’ intrinsically perverse. So, although at the end many people repudiated the systematic violationof human rights by the military and demanded an immediate re-establishment of the rule of law inthese countries, the restoration of democracy did not completely eliminate the deep apprehensionsand mistrust that had been engendered in the previous decades against politics in general, and politicalparties and politicians in particular (Silva, P. 1999).

Another factor contributing to the further depoliticization of Latin American societies has been thenegotiated nature of most transitions, as restoration of democratic rule was achieved following aseries of bargains between the democratic forces and the military authorities (Casper and Taylor,1996). During these negotiations the opposition forces involved tacitly or explicitly agreed not toactively encourage political effervescence among the people. Furthermore, several democraticpolitical leaders came to regard the continuation of the political demobilization of the masses as aprerequisite for achieving an ordered and peaceful democratic transition and to guaranteegovernability under the new democratic scenario.

Strong calls for political moderation also came from academic circles. A group of prestigious politicalscientists, for instance, offered in an influential four-volume study detailed practical advice to LatinAmerican civilian leaders about how to minimize the levels of political instability which usuallyaccompany transitional processes. In the last volume, O’Donnell and Schmitter recommended, amongother things, providing the armed forces with an honourable role in accomplishing national goals.Meanwhile, political parties were asked to abandon their traditional role as agents of mobilization tobecome instruments of social and political control of the population (O’Donnell et al., 1986: 32, 58).They furthermore recommended that democratic leaders should not upset the interests of thedominant groups, and not threaten the institutional existence, assets and hierarchy of the armedforces. With respect to the left-wing forces, they advised them to accept the political restrictions of thetransition process, leaving them only ‘to hope that somehow in the future more attractiveopportunities will open up’ (ibid.: 69).

The ‘cupular’ or top-down nature of the democratization process, which has been often portrayedas an ‘elite settlement’ (Higley and Gunther, 1992), produced a deep disillusionment (and a subsequentdemobilization) among many people, such as supporters of left-wing parties and members of socialmovements who had expected a more participatory process of democratic reconstruction. This,together with the conscious decision of political leaders to maintain the legacy of politicaldemobilization, has certainly played an important role in the further depoliticization of society.

Following the restoration of democratic rule, the expectation among popular organizations was thatthe new authorities would bring to justice those responsible for human rights abuses during themilitary governments. However, the specific way in which the new democratic governments finallydealt with the highly controversial question of human rights’ abuses also contributed to politicaldemobilization of the population, as a consequence of the considerable disappointment at the results.In Brazil, for instance, there was an implicit agreement between politicians and the military not to makethe prosecution of human rights violators a political issue. In Argentina, the Alfonsin governmentpassed in 1987 a punto final amnesty law by which prosecutions of most lower rank military for humanrights abuses were declared ended on the grounds that they had simply carried out orders.

In Chile, the Truth and Reconciliation Commission, established by the Aylwin government in 1990,brought a detailed report about the human rights abuses during the Pinochet regime. However, theexistence of the self-decreed amnesty law of 1978 protected the military from possible trials.

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Following the arrest of Pinochet in London in October 1998 and his return to Chile in March 2000expectations were aroused about his possible prosecution in his homeland. The ‘Pinochet affair’reached a defining moment on 9 July 2001, when an appeals court in Santiago declared GeneralPinochet to be mentally unfit to stand trial. Although the court decision was qualified as ‘temporary’ –implying that he could face a trial again if his health condition should improve in the future – mostobservers saw this as marking the end of the legal prosecution of Pinochet (cf. Silva, 2002).

A general amnesty law was passed in El Salvador in 1993 as part of the peace agreements betweenthe government and the guerrillas (Figure 8.1), and in Guatemala, the human rights issue remainedlargely unresolved (Jelin and Hershberg, 1996). The practical impunity obtained by the military in mostof the countries produced deep disappointment among significant sectors of society, resulting veryoften in indifference towards the government and politics in general.

Another factor to reinforce apoliticism among the Latin American electorate has been thetraumatic effects of the hyper-politicization experienced in the past. The high degree of social andpolitical confrontation preceding the military coups in the Southern Cone countries, together with theinstitutionalization of fear and repression during the military regimes, has now generated a kind of‘political exhaustion’ among the generations who consciously and actively lived through those years(Koonings and Kruijt, 1999). The same is true for people who for years have suffered from politicalviolence resulting from open or disguised civil wars such as in El Salvador, Guatemala, Nicaragua andPeru. The endless effervescence, the destabilization of daily life, produced in the long term a distressingpsychological situation and an unbearable (political) fatigue. Under these circumstances, thedisconnection with politics has become for many people a kind of personal ‘survival strategy’ in bothpsychological and emotional terms.

The increasing ‘social democratization’ experienced during past years by broad sectors of the LatinAmerican left is certainly another factor in contributing to the political deactivation of civil society.Most left-wing parties have explicitly abandoned the objective of revolution to replace it with thesearch for gradual and consensual changes in the struggle against poverty and social inequalities (cf.Vellinga, 1993). This has been the case with parties such as the Brazilian Social Democratic Party(PSDB), Mexico’s Party of the Democratic Revolution (PRD), the Chilean Socialist Party (PSCh), andVenezuela’s Movement to Socialism (MAS). As Castañeda concludes, ‘As left-of-center reformism in

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Figure 8.1 Graffiti saying ‘Death to the Guerrillas’, Central Colombia, 2001. Photo by Laura Maynard

Latin America is pushed to the fore and transformed into a meeting point for many other historicalcurrents of the Latin American left, it is also being driven to the center’ (1994: 174).

In the new democratic order, political parties have, in general, dramatically lost their appeal for thepopulation. This has been in part another aspect of the heritage from the authoritarian era, asrepression severely hit and dislocated political organizations. This resulted, in many countries, in theestablishment of a substantial distance and mutual alienation between political parties (most operatingclandestinely) and civil society, characteristics that continued after the restoration of democracy. Therendezvous between parties and the electorate after so many years of disconnection has been full ofsurprises. For instance, many parties had experienced dramatic ideological changes during theauthoritarian period and had become almost unrecognizable to the population in the democratictransition. In contrast, other organizations maintained their pre-coup ideologies almost unaltered, andhence became anachronistic in countries which in the meantime had experienced profoundtransformations in their demographic, socioeconomic and cultural structures.

The depoliticization of society has led to the breakdown of historical party loyalties as during thepast years a significant segment of the Latin American electorate has not voted for political parties orpolitical projects but for specific individuals. The presidential victories of political outsiders such asCollor de Mello in Brazil and Alberto Fujimori in Peru, in 1989 and 1990 respectively, are cases inpoint. As Little (1997: 191) points out:

both . . . came out of complete obscurity as self-proclaimed saviours of the nation and their promisesof a clean sweep of the political stables clearly struck a chord with the electorate. Collor . . . [and]Fujimori . . . symbolize a popular distance from the old party politics.

Both politicians fully compensated for the lack of firm party structures with the effective use oftelevision. In current Latin American politics, television has replaced parties, unions and ‘the streets’ asthe most important instrument for creating (and destroying) the public ‘images’ of the members of thepolitical class. Political leaders no longer speak to the crowd, but address directly the atomizedcommunity of millions of television spectators. Paradoxically, this modern medium could help togenerate a revisited version of old-fashioned personalistic politics. Fujimori, for instance, was able tocombine a smart use of the modern media (as he did during the hostage crisis of the Japaneseembassy in Lima in 1996) with old-fashioned populist methods (such as frequent visits to urbanshantytowns and rural communities, distributing presents and promising solutions for people’sproblems).

In the end, Fujimori lost the support of the masses following the accusations of fraud during the2000 presidential elections which allowed him to run a third consecutive term in office. In addition, heand his closest associate, the secret police chief Vladimir Montesinos, faced mounting accusations ofcorruption, nepotism and gross abuses against human rights. In November 2000 Fujimori fled to Japan,marking the end of his autocratic rule. His successor, Alejandro Toledo, has been so far unsuccessful indelivering the promises of eliminating corruption, bringing more transparency to the way hisgovernment rules the country, and improving the situation of millions of Peruvians who live inconditions of extreme poverty.

POLITICAL LEGITIMATION AND CONSUMERISMMost of the new democratic governments have attempted to counterbalance their lack of a politicalproject by putting special effort into expanding the level of consumption among certain segments ofthe population. One of the main arguments used by the authorities in legitimating the application ofpolicies directed to market liberalization was the promise of full access to better and cheaper foreignproducts. Indeed, after many years of applying neoliberal economic policies, the upper and middleclasses in countries such as Mexico and Chile have acquired very sophisticated patterns ofconsumption which have resulted in the configuration of veritable ‘consumer societies’. The increasing

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presence of foreign consumer goods in most Latin American capital cities has in many cases radicallytransformed the physiognomy of the streets, as thousands of new cars have invaded the roads and alarge number of giant shopping centres (malls) sell products from all over the world.

Although the main beneficiaries of this pattern of increasing consumption have certainly been thehigh-income groups, one cannot under-estimate the extent to which the rest of the population hasalso participated in the consumption of foreign goods. Many people who actually cannot afford theseproducts have obtained access to these goods by contracting consumer credits, or more often bymaking use of payment facilities (in monthly terms) offered by most large shops and stores. While thehigh-income sectors obtained access to modern European cars, to very sophisticated US or Japaneseelectronic products and to tourism abroad, the poorer segments of the population acquired radios,television sets, battery watches, foreign clothes and trainers, products to which they previously had lessaccess. As the current crisis in Argentina has shown, however, these consumer societies are built onvery fragile bases and they can disappear overnight due to the extreme pauperization of large sectorsof the middle classes in that country.

In fact, the idea of replacing ‘politics’ by increasing consumption constituted, together withrepression, one of the central mechanisms used by the former military regimes to depoliticize society.In the authoritarian conception of modernity ‘liberty to consume’ was intended to replace politicalliberty in an effort to deactivate civil society politically and to obtain the required civilian support forthe military rulers. Chile is a clear case in point.

The attempt by the military governments to redefine Chileans as consumers instead of citizens wasmainly directed to privatize the nature of the social relations within civil society. For this purpose, theregime tried to destroy all kinds of collective identities existing in Chilean society, such as party andneighbourhood loyalties and social solidarity with the needy, which were officially seen as unwantedheritages of a ‘socialist’ past. As a substitute for the search for collective goals, the military governmentoffered a neoliberal ideology which was entirely directed to the achievement of individual ambitions.In this manner individual freedom was redefined as representing the free access to open markets,while the ‘pleasure of consumption’ was presented as an instrument to express social differentiationand as a way to obtain personal rewards. From this perspective, the regime’s ideologues pointed outthat social mobility was in fact mainly a question of personal achievement (cf. Lavin and Larraín, 1989).

According to this conception of modernization, to be up-to-date in terms of the acquisition ofconsumer goods represented the single most important criterion for modernity. Moreover, theimitation of lifestyles and values imported from the industrial world as a result of the free-marketpolicies became the only way to participate in the experience of modernity; in other words ‘to bemodern’. As Brunner indicates, the market is unable by itself to produce normative consensus amongthe population or to generate social identities. Together with this, the market does not accept theconstitution of solidarity bonds and rejects any behaviour that is not based on rational calculations. Atmost, the market can only create lifestyles that are crystallized in the consumption of particular goods(1988: 97, 119). In the end, the expansion of consumerist behaviour in Chile generated a kind ofpassive conformism among the population, who eventually accepted the individualistic tenets of theneoliberal economic model based on the search for private satisfactions (Silva, 1995; Halpern, 2002).

The increasing internationalization of Latin American economies has not only strengthenedconsumerism in local cultures but has also led to the adoption of values, beliefs, ideas and evenpatterns of behaviour and cultural orientation that resemble those of the core countries. Manypeople have embraced a system of meritocratic and individualistic mobility, replacing the old systemin which one had to be part of a group (such as political parties) and in which mobility wasconditioned mainly by the capability of the group to exert political pressure on the state. Moregenerally, the ‘discovery’ of this new world of consumption convinced several social forces that theyhave a direct advantage in the continuation and deepening of the ongoing process oftransnationalization of their societies. In recent years, however, a growing discontent withglobalization has emerged among the masses and within certain intellectual and political circles, as

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the poor performance of most Latin American economies reduced the ability of the population tomaintain their previous levels of consumption.

Together with consumerism, the new democratic governments have also tried to secure thepolitical support of the population by attempting to obtain (and maintain) macro-economic stability.Today in Latin America it is no longer rhetoric but real socio-economic and financial achievements thathave become the main criteria to evaluate the quality of governments. After so many years ofneoliberal economic rationalism, many people in Latin America have learned to evaluate governmentperformances almost exclusively on the basis of economic success. Variables such as the level ofinflation, the dollar rate, volume of exports and the balance of payments are the main evaluationparameters. It seems that after many decades of over-ideologized discourses an increasing part of thepopulation has become extremely conscious of choosing tangible economic benefits.

As the Argentine case has shown, the ability of the Menem government to defeat inflation and toachieve macro-economic stability became decisive for his re-election in 1995. By the same token, theinability of the de la Rua government to deliver the goods led to its dramatic fall in December 2001.Because of the increasing importance of economic stability in current Latin American politics, thepossession of a team of prestigious economists in charge of economic and financial policies hasbecome a condition sine qua non not only for keeping the confidence of the business community(both national and international) but also that of the electorate. So, for instance, following the electoralvictory of Lula in Brazil, one of the most discussed matters by both the local and international press,as well as by key financial institutions, was the question of who was going to be appointed as the nextMinister of Finance.

THE TECHNOCRATIZATION OF POLICY-MAKINGFollowing the restoration of democratic rule, technocrats have acquired in many countries a clearpublic presence and a higher degree of acceptance and legitimacy among the political class and thepopulation than in the recent past. Technocrats are defined here as ‘individuals with a high level ofspecialized academic training which serves as a principal criterion on the basis of which they areselected to occupy key decisionmaking or advisory roles in large, complex organizations – both publicand private’ (Collier, 1979: 403). This is reflected among other things in the fact that the leaders oftechnocratic-orientated economic teams, such as the Ministers of Finance Fernando HenriqueCardoso in Brazil, Domingo Cavallo in Argentina and Alejandro Foxley in Chile, have gained significantpopularity among the electorate (Domínguez, 1997); indeed, Cardoso was elected President of Brazilafter his stint at the Finance Ministry. This situation, however, cannot be solely explained by referring tothe technocrats’ central role in the application of the recent stabilization programmes or to the factthat they are now operating in a legitimate democratic environment. An even more important factorfor the consolidation of technocratic politics has been the dramatic weakening and – in somecountries – a virtual disappearance of the forces which traditionally resisted technocracy in the past,such as left-wing parties, trade unions, student movements, and so forth. It is the latter factor whichalso helps to explain why, since the restoration of democratic rule, most countries have adopted (ormaintained) neoliberal economic policies (Silva, 1998).

One must remember that the existence of technocratic economic teams and the application ofneoliberal economic policies constituted one of the main features of the former military regimes. Thus,it is remarkable that, following the democratic restoration, electoral campaigns which openly orimplicitly supported neoliberal policies (such as those of Fujimori in Peru, Flores in El Salvador, andMenem in Argentina during his re-election) were successful. This was linked to the global hegemonyachieved by neoliberal ideology, the pressure of international financial organizations, the perceived lackof economic alternatives and the increasing apoliticism of the Latin American population (Espinal,1992). The more profound reasons why large segments of civil society are beginning to accept thisnew technocratic and neoliberal reality lie in the quite traumatic events of the recent political past.

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The military dictatorships inaugurated in the 1970s inflicted a major blow to the politics ofpopulism, based on clientelistic relations between the state and civil society. Indeed, populism suffereda significant psychological defeat as many people, right or wrong, internalized the view that populismhad been one of the main causes of the economic and political crisis that had preceded thebreakdown of democracy. This is partly the reason why in most countries in the region the electoratewas initially not inclined to support the adoption of populistic policies after the departure of themilitary. The recent strengthening of populism in Latin America has been mainly facilitated by the failureof neoliberal policies and the dramatic expansion of poverty in the region.

The adoption of orthodox adjustment programmes has almost always been accompanied by theappointment of technocratic-orientated neoliberal economists in strategic governmental positions(ministries of economic affairs, finance, central banks, planning agencies, etc.) who have beenresponsible for the formulation and application of these new economic guidelines. The extremevisibility which many governments have consciously given to the economic teams is related to theirefforts to send the right signals both to the domestic and to the international business community(Schneider, 1998). Moreover, Latin American technocrats have felt quite confident in the policiesadopted, as the policies encompass completely the neoliberal economic thinking which, since the1980s, began to achieve an almost uncontested hegemony. As Stallings (1992: 84) pointed out:

technocrats who had long argued for more open economies and a bigger role for the private sectorssuddenly found increased backing from the outside. They could count on political support from theUnited States and other advanced industrial countries, intellectual reinforcement from the IMF andWorld Bank, and empirical evidence of successful performance from countries that had followed anopen-economy model.

These technocrats have also played a strategic role in conducting negotiations with industrializedcountries as a means to reschedule existing debts and to obtain new credits and financial aid. AsKaufman (1979: 189-90) indicated, these technocrats are

more than simply the principal architects of economic policy: they [are] the intellectual brokersbetween their governments and international capital, and symbols of the government’s determinationto rationalize its rule primarily in terms of economic objectives . . . Cooperation with internationalbusiness, a fuller integration into the world economy, and a strictly secular willingness to adopt theprevailing tenets of international economic orthodoxy, all [form] a . . . set of intellectual parameterswithin which the technocrats could then ‘pragmatically’ pursue the requirements of stabilization andexpansion.

In this manner, local neoliberal technocrats have become the national counterparts of foreign financialexperts from lending institutions who assess the performance of the Latin American economies thatare currently executing adjustment programmes. As Centeno (1993: 325–6) points out, thecommunication between the foreign financial experts and the local technocrats has been clearlyfacilitated by their common academic backgrounds:

[they] not only share the same economic perspectives, but perhaps most importantly, speak thesame language, both literally and metaphorically . . . The technocrats do not necessarily have torepresent one ideological niche or the other, they simply share a familiarity with a certain languageand rationale . . . The graduate degrees from U.S. universities . . . enable these persons to presentarguments that their fellow alumni at the World Bank . . . understand and consider legitimate.

Although the above-mentioned international political and economic factors have certainly played adecisive role in legitimating and consolidating the position of technocrats within the political elite, anyattempt at explaining the technocratic ascendancy as being exclusively the result of external influenceswould be inaccurate. As the Chilean case shows, the ascendancy of neoliberal technocrats and theadoption since the mid-1970s of severe economic stabilization policy reform in that country were

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primarily a product of domestic political and ideological struggles resulting in a distinctive balance ofpower in favour of neoliberalism (Valdés, 1995).

The increasing technocratization of decision-making in most countries in the region has resulted ina general trend of governments trying to ‘technify’ social and political problems. The problem ofpoverty has been mainly approached in technical terms, and its solution is posed in terms of adoptingthe ‘technically correct’ social policies. By doing this, poverty and social inequalities have beenconsciously ‘filtered’ of their political, economic and social dimensions. This has resulted in countriessuch as Bolivia, Chile and Costa Rica adopting anti-poverty strategies with a strong asistencialistaorientation, intended to alleviate to some extent the hardship of the neoliberal policies. For thispurpose, Latin American governments have obtained technical and financial assistance from regionalinstitutions such as the UN Economic Commission for Latin America and the Caribbean (ECLAC) and theInter-American Development Bank (IDB), as well as from the World Bank and from developed nations.

DISENCHANTMENTToday in Latin America, a generalized mood of disenchantment with the accomplishments of the newdemocracies can be perceived. Some people are deeply disappointed by the inability of manygovernments to improve the social conditions of the less privileged segments of the population.Instead, and as a result of the application of neoliberal policies, the gap between rich and poor hasincreased in most Latin American countries. The restoration of democracy has brought a clearimprovement in the human rights records in many countries and in the general macro-economicsituation. Nevertheless, time and again the great inequality existing in the distribution of the fruits ofmodernization and economic growth between the different socio-economic and ethnic segments ofsociety becomes manifest. This is partly inherent in the nature of neoliberal policies as their emphasislies in generating economic growth and not in producing a better income distribution. Mostgovernments have abstained from playing an active role in the area of income distribution, as thatoption has been regarded as a step back to the old interventionist state.

The increasing impact of the process of globalization on the national economic and political agendashas also discouraged from many people believing in the real possibilities they have to influencedecision-making in their countries. Today, an important part of what is happening to their economiesis the result of regional trade agreements (such as Mercosur) and other arrangements and processesthat go beyond the national borders. The adoption of neoliberal adjustment programmes has beenseen by many in countries such as Nicaragua, Venezuela and Costa Rica as a clear loss of nationalsovereignty as they, rightly or wrongly, perceive these policies to be the result of foreign imposition.This has negatively affected not only the degree of legitimacy of these policies but also the status ofdemocratic governments as they appear as weak vis-à-vis the international financial institutions.

There is also a growing discontent among the indigenous people, as in many countries thedemocratic authorities have not been able to satisfactorily protect their civil rights and to guaranteerespect for and acknowledgement of their cultural contribution to national identity (see Chapter 10).In this respect, the commemoration in 1992 of the 500 years since the discovery of America waschosen by the indigenous movement all over the continent to protest firmly against their status assecond-class citizens. In countries such as Ecuador, Bolivia and Guatemala significant legal steps(through amendments in the Constitution and the adoption of special indigenous legislation) havebeen taken in recent years, directed at the elimination of formal discrimination and tutelage towardsthe indigenous population. Notwithstanding the willingness of several governments to accomplishsome tangible improvements in the general condition of the indigenous people, very little yet has beenachieved (Van Scott, 1995; Díaz Polanco, 1997).

Democracy has also experienced a loss of prestige through the high degree of political corruptionexisting in many countries in the region. This has been the case in Peru where the initially verypromising government of President Alan García ended in 1983. Corruption had penetrated the entire

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structure of power, including the president himself who finally fled the country. President Fujimori’skleptomania was even more rapacious. Unfortunately, Peru has not been an isolated case. PresidentsFernando Collor de Mello in Brazil and Carlos Andrés Pérez in Venezuela were forced to abandonpower in 1992 and 1993, respectively, following accusations of corruption (Little and Posada-Carbó,1996). Political corruption and the spread of nepotism were also among the main causes thatprovoked the fall of President Abdalá Bucaram in Ecuador in 1996. In February 2003, the ParaguayanPresident González Macchi narrowly survived a parliamentary impeachment in which he was chargedwith notorious misconduct and corruption.

In the past years, the growing influence of capital coming from drug-trafficking activities has furtherreduced the already low levels of probity characterizing state institutions in many Latin Americancountries. In countries such as Honduras and Guatemala, corruption related to narcotráfico has alreadypenetrated the judicial system, the army and the police forces, the mass media and almost all spheresof public life.

Increasing poverty, drug-trafficking, corruption and the material and institutional weakness of policeforces have led in recent years to a dramatic increase in the levels of violence and delinquency in mostLatin American countries. As a result, there are even people who feel that the levels of security havedecreased under the new democracies rather than increased in comparison with the situation underthe former authoritarian regimes. Opinion polls of inhabitants of the largest Latin American citiescontinually indicate ‘criminality’ as the most urgent problem the government should resolve. Thequestion is, of course, whether the growing levels of delinquency are the direct result of the existenceof democracy per se. Most probably this phenomenon has more to do with the ongoing process ofmodernization which has resulted in a gradual disintegration of traditional norms and values,mechanisms of social control, and so forth.

Some people in Latin America constantly compare the current democracies with the formermilitary regimes, often being inclined to blame democracy for almost all the problems affecting theirsocieties. Nevertheless, the militaristic option is today not very appealing for most Latin Americans, sothe only viable alternative to the current democracy, they perceive, is not authoritarianism but animproved democracy. This does not mean that the threat of a military takeover has been entirelyovercome in the region, as the failed coup d’état against Hugo Chávez in April 2002 has shown.

Paradoxically, the several deficiencies of current Latin American democracies have stimulatedpolitical indifference among the population, as has been the case in most Central Americancountries. Not even Costa Rica has been able to escape from this general trend, as the turnout inrecent elections has been low, despite the fact that voting in that country is compulsory. In thosefew countries in which the restoration of democratic rule has led to manifest improvements in thegeneral socio-economic and political conditions of the population, political apathy has becomegeneralized. Chile is a case in point. Since the restoration of democracy in 1990 this country hasachieved a relatively good performance in terms of socio-economic development, as the livingstandards of the entire population have dramatically improved since then. The political situation inthis country has been very stable as the ruling Concertación coalition has been able to arrangeworkable agreements with the opposition, permitting a successful consolidation of democratic rulein the country.

Nevertheless, strong apathy for politics has emerged among the population. During theparliamentary elections of December 1997 (voting is compulsory), almost a third of the people whoattended voting stations did not vote for any candidate (by leaving their vote void or by invalidating it).Moreover, there are more than 1.5 million youngsters, and 0.5 million adults who have not evenregistered on the electoral roll. The Chilean political class has become alarmed by the increasingpolitical indifference among the electorate. However, the phenomenon can be explained as being theconsequence of the political and economic stability now achieved. Similar patterns occur in mostWestern democracies. The disenchantment with democracy has not resulted in the adoption of anti-system attitudes, but has rather strengthened the general mood of apathy and depoliticism.

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THE FUTURE OF DEMOCRACY IN LATIN AMERICAAt the beginning of the process of democratic transition in the region several political scientistsexpressed their doubts about the chances for firm consolidation of democratic rule in the continent.Scholars such as Malloy and Seligson (1987) openly declared their scepticism about the prospects fordemocracy. They referred to the historical inability shown by Latin American countries in the recentpast to maintain democratic rule for a long period. Until now, the presence of democracy in the regionhas been characterized by a cyclical pattern in which democratic and authoritarian ‘moments’ havebeen constantly alternating. In other words, the current democratic period could simply be justanother democratic intermezzo that after a certain period of time could be followed by another waveof authoritarian rule.

Nearly two decades after the publication of the volume edited by Malloy and Seligson one can saythat the new democratic governments have faced very serious social, economic and political problems,and that generally their performance has not been very satisfactory. But despite all the difficulties theyhave faced so far, the probability of an authoritarian regression in the region has been substantiallyreduced. The reasons for this, however, have not been always a direct accomplishment of the newdemocracies themselves. So, for instance, the almost complete disappearance of the revolutionary lefthas eliminated one of the main grounds on which the armed forces in the past attempted to legitimatetheir military coups. While a large part of the left has adopted social democracy and showed a strongcommitment to the preservation of democratic rule, the military has consciously chosen to stay outof contingent politics and to concentrate its attention on the further modernization of its institutions(Millet and Gold-Biss, 1996). In addition, following the end of the Cold War the United States is nolonger disposed to support military coups in the region, as they made clear to the military whodeposed President Aristide in Haiti and to seditious officers threatening democratic rule in Paraguayand Ecuador. Since the late 1980s US foreign policy towards Latin America has begun to emphasizecountries’ human rights performances, the achievement of good government and the consolidation ofdemocratic rule (Wiarda, 1990).

Nevertheless, it is still too early to say that the armed forces have fully accepted their institutionalsubordination vis-à-vis the civilian authorities in their countries. In countries like Guatemala, Venezuela,Peru and Chile the army still maintains a strong presence in national affairs. In short, most of the newdemocracies have so far been unable to fully eliminate the ‘authoritarian enclaves’ left by the formerauthoritarian regimes (in the form of non-democratic legislation and special attributions for the armedforces).

In the coming years, poor management of each country’s affairs by their government andconspicuous corruption will remain serious threats for the Latin American democracies, as the falls inEcuador of Presidents Abdalá Bucaram in February 1997 and Jamil Mahuad in January 2000 haveshown. In both cases, the army played a decisive role in forcing them to abandon power and, in thatcritical moment, the constitution of a military government was clearly among the possible outcomes ofthe crisis. The legitimacy provided by democratic procedures towards elected authorities is certainly notenough to guarantee the support of the people under any circumstance as the fall in November 2000of the Fujimori regime in Peru has shown. What many democracies still have to prove towards thecitizenry is that this form of government is more efficient and successful in economic terms, and moresensible from a perspective of social justice than was the case during the previous authoritarian regimes.

In the years ahead, further technocratization of the democratic governments can be expected. Inmy view, the current technocratization of decision-making in government circles does not represent atemporary phenomenon, associated with the political and economic requirements of the democratictransition and the application of structural adjustment programmes; it has rather become an integralfeature of many Latin American democracies. Even in countries like Ecuador, Brazil and Argentinawhere governments have recently adopted a more nationalistic and populist rhetoric, one can findthat the most strategic positions in charge of the economic policy-making continues to be in the handsof technocrats.

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Since the restoration of democratic rule in the region one can argue that the concept of democracyhas lost much of its participatory implications in relation to the decision-making process. Instead, theSchumpeterian view of democracy is beginning to be tacitly accepted in practice. In this way,democracy is merely conceived as a method of reaching political decisions in which citizens reservethe right to decide by whom they will be governed through elections in which various elites competefor the electorate’s vote. Moreover, we see that today the use of traditional methods of civil pressureand protest (such as property seizures, unauthorized street protests, politically motivated strikes) aregenerally considered illegitimate acts by political elites.

Despite the fact that technocratically-orientated groups have become key actors in the new politicallandscape of Latin America, in many cases local public opinion is not very aware of the existence ofthis phenomenon. Negative collective memories about the populist past, profound changes in thepolitical culture of major left-wing sectors, together with the recent neoliberal transformations haveallowed the almost unchallenged ascendancy of technocrats in the continent.

Although it is quite probable that in the coming years a further depoliticization of Latin Americansocieties will take place, this certainly does not mean that the continent will be spared socialeffervescence or even violent political confrontations. The crisis in Argentina has shown thatdepoliticized masses are still able to mobilize themselves in the streets to show their totalcondemnation of politicians and party politics. Until now, the modernization process in Latin Americahas been mainly restricted to the financial and economic spheres. Profound changes must also takeplace in the social and cultural realms.

The goal of achieving the modernization of society – as has been repeatedly stated by mostdemocratic governments in the region – also demands huge efforts to obtain a substantial reductionof the existing high levels of poverty among the population. Real efforts have to be made to expandaccess to education, health and housing to those social and ethnic groups which are todaymarginalized from the fruits of modernization. The existence of real tolerance on the part of thepolitical establishment towards people and political organizations who do not agree with neoliberalpolicies and exercise their democratic rights to fight for a possible alternative social order still cannotbe guaranteed in most countries in the area. In short, the persistence of extreme poverty,discrimination against the indigenous and black populations, political corruption and excessive isolationof government technocracy will remain serious obstacles to the definitive consolidation of thedemocratic order in Latin America.

FURTHER READINGAvritzer, L. 2002 Democracy and the public space in Latin America. Princeton University Press,Princeton, NJ. This provocative study shows how citizens have made use of public spheres in the newLatin American democracies, focusing on human rights movements, neighbourhood associations andother local-level participatory experiences.

Camp, R. I. (ed.) 2001 Citizen view of democracy in Latin America. University of Pittsburgh Press,Pittsburgh, PA. In this excellent book ten leading scholars on Latin American political culture analyseand interpret the data provided by a large survey conducted among citizens in Costa Rica, Mexico,and Chile on the ways they define and understand present-day democracy.

Oxhorn, P. and Ducatenzeiler, G. (eds) 1998 What kind of democracy? What kind of market?Latin America in the age of neoliberalism. Penn State University Press, University Park, Pennsylvania. Acritical study of the social and political consequences of the application of neoliberal reforms in LatinAmerica in the 1980s and 1990s. Problems such as high levels of poverty, income inequality, criminalviolence, and the growth of the informal sector are directly linked to these reforms.

Peeler, J. 1998 Building democracy in Latin America. Lynne Rienner Publishers, Boulder, CO, andLondon. A thoughtful analysis of the Latin American experiences with democratic rule from the

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nineteenth century to the present. It provides a very useful introduction to basic issues of generaldemocratic theory and contrasts it to the Latin American reality. A strong plea is made fordeepening the current democratic systems by expanding popular participation.

Weyland, K. 2002 The politics of market reform in fragile democracies. Princeton University Press,Princeton, NJ. A good study on a series of political and economic reforms implemented in LatinAmerica since the mid-1980s and their underlying logic.

WEBSITES

Latin American barometer, www.latinobarometro.org, provides very useful information onpublic opinion in Latin America on issues related to support for democracy, authoritarian bias, andpolitical culture in general. This information is obtained through large opinion surveys which arecarried out in 17 Latin American countries.

Political Database of the Americas, http://www.georgetown.edu/pdba, is one of the bestresources of political data on Latin America on the internet, including information on electoralsystems, elections, political parties and civil society. This is an initiative of several institutions,coordinated by the Center for Latin American Studies at Georgetown University, Washington, DC .

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www.latinobarometro.org

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There are many ways of talking about the transformations that have occurred in Latin America andthe Caribbean in the past few decades. Political economy provides one set of tools, as demonstratedin the first part of this book that uses a political economy approach in order to talk about the structuralchanges that have (and have not) come to pass in the region over the last few decades. Suchinterpretations typically cast their analysis at a macro level, telling general stories of national andregional shifts and the broad forces that explain these changes. These macro-explanations are ascharacteristic of radical dependency theory as they are of neoliberal interpretations of change, andthey are important in many ways: they are the stuff of general political debate; they inform those typesof economy and society wide interventions that typically underlie public and multilateral policies andinterventions; and they tell the general story.

Another option – neither better, nor worse, but different – is to focus on how people weave theirway through, make sense of, rework and live out these structural transformations. Again there aremany ways of doing this: analysis of literature, poetry, photography and life histories are just some suchapproaches. Another approach that has been popular among some researchers – perhaps especiallygeographers – and which holds open links with the concepts and techniques of political economyanalysis has been that which aims to understand the dynamics of people’s livelihoods. Again this focushas taken many forms, and we will consider some of them in this chapter. Still, one strength commonto these different approaches is that adopting this point of entry can convey more sense of theexperience of, and responses to globalization and neoliberalism than do more structuralinterpretations. It also tells more disaggregated and local stories of the nature of globalization in LatinAmerica – a level of disaggregation that is arguably important material for thinking through the typeof (regionally and sectorally sensitive) neo-structuralist agenda traced in the first chapter of this book.Another potential quality of a concern for livelihoods is that it can – though need not – draw attentionto the creative responses that people craft and which might offer the seeds for reworking globalizationprocesses so that they are more inclusive, pro-poor and pro-environment. In each of these senses, ifmacro-explanations are better placed to speak to the economy-wide policies of government andinter-governmental actors, livelihood analyses are arguably somewhat more relevant for those actors– such as non-governmental organizations (NGOs), social movements and poor people’sorganizations – that operate at a more local level.

With this opening gambit in mind, this chapter will unfold as follows. It begins by outlining three(related) ways of conceptualizing livelihoods under conditions of globalization in Latin America.Second, it discusses some core themes in the ways in which livelihoods have changed in the regionsince the rise of neoliberalism. It then discusses some of the intersections between production andother elements of social change that a focus on livelihoods can illuminate – in particular those ways inwhich a look at livelihoods can help understand political agency. The fourth section considers the ways

9Livelihood transitions, place transformations: grounding globalization and modernity

Anthony Bebbington

in which organized actors in civil society have addressed questions of livelihood and development.Finally, the chapter takes the livelihoods discussion back to a reflection on globalization processes byreflecting on the extent to which livelihoods in the region are as much structured by transnationalprocesses and relationships as they are by local phenomena.

CONCEPTUALIZING LIVELIHOODS IN LATIN AMERICANotwithstanding the recent enthusiasm for ‘the livelihoods approach’ to development among bothresearchers and development agencies (such as, for instance, the Department for InternationalDevelopment of the British government), a concern for livelihoods is nothing new in the literature onLatin American development. Research informed by dependency and world systems theory (Kay andGwynne, 2000; see Chapters 1 and 4) often drew links between processes of under-development inLatin America and the dependent nature of poor people’s livelihoods in the region. This work tended toemphasize the extent to which the broader development model constrained and underminedpeople’s livelihoods. Other approaches – while not eschewing the ways in which broad processes ofcapitalist development in the region exclude people and limit their livelihood options – have taken adifferent approach. They have argued that a careful analysis of how people compose livelihood strategiescan reveal many lessons for policy and can suggest ways in which openings, however small, in theoverall development model might be reworked and taken advantage of, both by poor people andorganizations that aim to work alongside them. Each of these approaches points to some of the waysin which globalization is grounded in people’s livelihoods and particular locations, thus suggesting howwe might think of the links between place formation, livelihoods and globalization. Finally, some ofthese approaches also point to the relationships between the materiality of social life, day-to-daypopular practices, and forms of political resistance and engagement: they thus suggest links betweenlivelihoods, culture and politics. These are, then, the four sub-themes for this section.

Dependent development, dependent livelihoods

As noted in the introductory chapters, various forms of dependency theory, world systems theoryand Marxian political economy dominated socio-economic research in Latin America up to the 1980s(see also Kay, 1989). While research conducted under such theoretical rubrics often had a moresystemic and structural orientation, questions of livelihood were still often present. An importantconcept in this regard was that of functional dualism (de Janvry, 1981), and the notion was often usedto analyse questions of income generation, shelter and organization among the urban and rural poor.The notion of functional dualism asserted that it was unacceptable to analyse the modernizing sectorsof Latin American economies independently of the peasant economy in the countryside, or the urbaninformal economy in the city. Instead, it was argued, these two economies (the modernizing and thepopular) were structurally linked: indeed, it was argued that the modern economy needed the populareconomy as a source of cheap labour, cheap foodstuffs and cheap goods and services. The twoeconomies were thus dual, but linked, and the one was absolutely functional to the other. However,their relative power and resilience were quite different and as a result livelihood possibilities in thepopular economy were not only dependent on what was happening in the modernizing economy –they were also ultimately constrained. That is to say, the sense to emerge from much of this work wasthat the structural need for cheap labour, food production and other products and services meant thatpoor people would never (or hardly ever) be able to escape from their poverty. They would alwaysbe sources of something cheap.

In the urban economy this concept led to fascinating work on urban employment, the informaleconomy and petty commerce (Bromley and Gerry, 1979), as well as on the chronic problem ofshelter and housing provision (Burgess, 1978; Edwards, 1982; Gilbert and Ward, 1985; Gilbert andVarley, 1991; Fernandes and Varley, 1998). The thrust of much of this work was to question morepopulist notions of the possibility (and desirability) of self-help approaches to housing provision and

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micro-enterprise development (Rokowski, 1994). Of course, such work did not intend to denigratethe efforts and achievements of squatters or self-employed workers. Rather, the idea was to show thatin the end such initiatives would only go so far, and no further, because of the structure of thedependent political economy. This structure would ultimately constrain the possibilities ofaccumulation, and from time to time would deliver shocks of one sort or another which wouldundermine people’s savings, investments (e.g. in housing) and subsequent possibilities. This meant thatefforts (as were increasingly popular in the 1980s) to support and develop the informal economywere misconceived: the informal economy would only become a basis of viable livelihoods if therewere broader changes in the political economy. Such observations and analyses were directly relevantto policy discussions of urban poverty, and, for instance, fed into the debates on strategies forimproving poor people’s livelihoods that raged after the publication of Hernando de Soto’s (1989) TheOther Path (e.g. see Bromley, 1994).

While authors such as Bromley carried this argument forward for the urban sector, in rural areasthe touchstone for this type of interpretation was the work of economist Alain de Janvry (1981; deJanvry and Garramón, 1977; Deere and de Janvry, 1978). Though there were many themes in thisresearch, two are of particular relevance here. First, the work aimed to understand the nature of thepeasant economy, emphasizing inter alia the ways in which Latin America’s insertion into the worldeconomy systematically worked to the disadvantage of the rural poor and reduced the possibility thatall but a few of them would escape from poverty. Second, and given this context, the work questionedthe extent to which land reform and rural development programmes could really do much toimprove rural livelihoods. Indeed, the realities of much Latin American politics of the 1960s and the1970s led authors such as these to assume that national and international elites would never allowpolicies that might do more to address the causes of rural poverty.

As Chapter 4 has shown, these debates continue to be relevant in contemporary Latin America,where poverty rates and the overall quality of livelihoods at the start of the twenty-first century oftenseem little or no better than they did in the 1970s. Indeed, many analyses continue to emphasizesystemic constraints on livelihood improvement – both academic analyses as well as analyses derivingfrom certain social movements within Latin America. Edelman (1999), for instance, points to thesevere constraints that programmes of structural adjustment and economic liberalization have placedon Costa Rican rural (agricultural) livelihoods since the early 1980s. Yet at the same time – and hereEdelman’s work reflects one important difference between more recent approaches and those of the1970s – he also provides a vivid ethnographic sense of some of the ways in which rural people inCosta Rica have lived through the neoliberal period, and ways in which they have mobilized inorganized form to contest the most damaging of neoliberal policies.

Development openings, livelihood strategies

Thus, even if dependency theory has become less popular in the last couple of decades, some of itsmessages remain highly pertinent today, in particular those regarding the livelihoods constraints thatpoor people face under current macro-economic conditions. While taking that recognition as astarting point, livelihoods might nonetheless be conceived somewhat differently. That is to say, ratherthan view livelihoods primarily in terms of their dependence, they might also be seen as creativeresponses by poor people that might offer a basis for rethinking development strategies that canenhance livelihood opportunities, albeit within a broader political economy that still presents manyobstacles and still favours the interests of elites.

Again, this is hardly an entirely new point. Indeed, de Soto’s The Other Path referred to earlier mightbe viewed as just such an approach. Based on work conducted in Lima during the 1980s, a period ofchronic economic decline in Peru, de Soto and his colleagues argued that people had devised anynumber of remarkable strategies to make a living. However, rather than emphasize the extent to whichthe economic system constrained these livelihoods, de Soto instead focused on the pernicious effectsof government bureaucracy and state intervention, illuminating the various and significant costs that

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bureaucratic requirements placed on small-scale entrepreneurs. De Soto argued that a reduction ofsuch bureaucracy would make it far easier for small- and medium-scale entrepreneurs to establishbusinesses, create jobs, generate profit and thus contribute to the production of more viablelivelihoods. Indeed, unlike modern-day dependencistas, de Soto argued that liberalization was desirablefor livelihood improvement, and that the need was not to change overall economic relationships butrather to reduce government presence in the economy (de Soto, 1989; Bromley, 1994).

At around the same time that de Soto was developing his argument, Robert Chambers (1987;Chambers and Conway, 1992) was elaborating a somewhat different position on poor people’slivelihoods: one that occupied an intermediate position between de Soto and the dependencistas’approaches to livelihood. In a disarmingly simple but very influential working paper, Chambers (1987)argued that any conception of sustainable development must be based upon the rationalities thatpoor people manifest within their existing livelihoods (Chambers was writing in the context of theBrundtland Commission (WCED, 1987) and then later of the United Nations Conference onEnvironment and Development held in Rio de Janeiro, 1992). Chambers’ analysis emphasized theextent to which poor people struggle to compose livelihood strategies under conditions of constraintthat derive from overall lack of assets and structured disadvantage. While Chambers spent less timetheorizing the sources of this disadvantage (see discussion in Bebbington, 1994), his view wasapparently closer to that of the dependency theorists than de Soto’s. Indeed, the implication of hiswork has always been that institutional change can be a source of livelihood improvement – that thereis, in other words, room for manoeuvre within the constraints of political economy. While not writingspecifically on Latin America, this work has influenced thinking in the region (as elsewhere).

Chambers’ work is important because it has been a point of departure for more recent approachesto the relationships between livelihoods and development that aim to engage both with Chambers’deep respect for the validity of poor people’s own strategies, as well as with the real problems ofpolitical economy. Here we comment in particular on one approach – that focusing on assets – tostudying livelihoods that falls into this vein and that has been elaborated over recent years in variousbodies of research, including work on Latin America (e.g. Moser, 1998; Bebbington, 1999; see alsoScoones, 1998). Asset-based frameworks focus on ‘what the poor have, rather than what they do nothave’ (Moser, 1998: 1). These frameworks understand livelihood strategies as the ways in which peoplegain access to these assets, combine them in particular ways and transform them into livelihoodoutcomes (Bebbington, 1999; Figure 9.1). For further information, see Bebbington (1999), Scoones(1998) and Moser (1998). In particular, the following types of asset are emphasized:

• Human capital – the assets that one has as a consequence of one’s body: knowledge, health, skills,time, etc. This can include labour, though some frameworks (e.g. Moser, 1998) prefer to identifylabour as an asset in and of itself.

• Social capital – the assets that one has as a consequence of one’s relationships with others andone’s membership in organizations – such relationships in turn facilitate access to other resources.

• Produced capital – this includes both physical assets (in the form of infrastructure, technology,livestock, seeds, etc.) and financial assets (in the form of money, working capital and physical assetsthat are easily converted into money).

• Natural capital – in the form of the quality and quantity of the natural resources to which one hasaccess.

• Cultural capital – the resources and symbols that one has as a result of the culture of which oneis a part.

In addition to having a broad view of the assets upon which people draw, the framework also has awide view of what people pursue in their livelihoods – or in other words, what they produce whenthey transform these assets. In this sense, these frameworks work with a multi-dimensional view ofpoverty (Moser, 1998). The framework portrayed in Figure 9.1 conveys the notion that peopleproduce not only material income (or income in kind) in their livelihoods, but also meaning and

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capabilities. That is to say, there is an inherent relationship between livelihood and culture, and betweenlivelihood and political capacity: livelihoods are in and of themselves meaningful (Escobar, 2001a), anda change or loss of livelihood possibilities necessarily implies cultural change; likewise, a reworking ofassets necessarily means a change in the ability of, and the ways in which, a person will participatepolitically. It is also likely to have implications for the concerns that they will pursue in that politicalparticipation. Furthermore, just as livelihood trajectories and decisions have cultural and politicalconsequences, they are also driven by cultural and political concerns – or in other words, livelihooddecisions are not only economically driven and structured, they are also imbued with cultural andpolitical significance.

As they combine their assets in pursuit of their objectives, it is supposed that people tend to pursuethose livelihood strategies that do the following:

• are the most consistent with the portfolio of assets that they control at that point in time;• reflect their long-term aspirations as well as immediate needs;• seem to be the most viable given the opportunities and constraints made available by the

circumstances within which they live.

Thus, for instance, where families have access to land, and where agricultural market conditions arefavourable, then there is a greater possibility that people will pursue livelihood strategies based onagriculture. Conversely, in other cases in which families have little land, but do have skills that aredemanded in labour markets, as well as networks of relationships that ease their access to suchmarkets, then it is more likely that at least some family members will pursue livelihoods based on off-farm employment – in some (or many) cases such strategies may also lead them to spend extendedperiods working in other regions.

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INSTITUTIONSSOCIAL STRUCTURES

DEVELOPMENT

INSTITUTIONSSOCIAL STRUCTURES

USE

TRANSFORMATION

REPRODUCTION

Household andits members

Materialwell-being

Meaning CapabilityAccess

Naturalcapital

capitalHumancapital

Socialcapital

Culturalcapital

Produced

Figure 9.1 A livelihoods framework

In thinking about livelihoods in this way, it is also important to introduce a time dimension in the sensethat people’s livelihood practices at the present may differ from their strategies for the future. Putanother way, where people invest the majority of their time and effort now may not reflect theiraspirations for the future. Indeed, it may be that a livelihood strategy works at two levels simultaneously,with people accessing and using the resources they need to meet immediate family needs, while alsotrying to steadily build up those assets which, when accumulated over time, will allow them or theirchildren to pursue a different sort of livelihood. One example of this (which has been encountered oftenduring recent research in the Andean countries: Bebbington et al., 2002; Zoomers, 1999) is that whererural families not only pursue agriculture to meet immediate needs, but are also investing in those assetsthat allow their children to gain education so that they can move out of agriculture (and even out of thecountryside). This ‘capital switching’ is a dynamic process that likely reflects what is happening (or isdesired) in much of the countryside, but which agrarian conceptions of the campesino may not catch.

Likewise, in emphasizing the importance of access to resources, such frameworks also emphasizethe ways in which broader social structures, and market, state and civil society institutions affect thisaccess and the ways in which people are able to transform, reproduce and accumulate their resources(Figure 9.1). For instance, the influence of the state on livelihoods can be profound. This influence isexercised in many ways: through laws that influence who has access to resources; public policies andprogrammes that provide resources and also influence market conditions; state-sanctioned violencethat makes control of assets insecure, and depresses local economies; levels of repression ordemocratization that influence the relative inclination of more powerful social groups to take theassets of the poor, and so on. Edelman (1999), for instance, shows just how deeply rural livelihoods inCosta Rica were influenced by public programmes, and thus how adversely they were affected when,in the course of adopting neoliberal policies, the state began to reduce the scope of thoseprogrammes and scale back protection for smallholder agriculture.

The ways in which institutions and social structures affect livelihoods are described in other parts ofthe book. For instance, land reform programmes (see Chapter 12) reflect attempts to changeinstitutions so as to increase access to land for some people; squatter settlement land titlingprogrammes aim to change poor peoples’ access and security of control over urban property; thepromotion of extractive industries affects the quality and security of environmental assets. Likewise,social movement struggles of various types (see Chapter 10) often reflect attempts to challenge theformal and informal institutions and policies that restrict their members’ access to certain assets (e.g.land); the security of their control over those resources (e.g. because of violence); or their ability totransform them in particularly productive ways (e.g. because of policies that allow cheap imports andthus reduce the price people can command for their agricultural products); or because of racism orsexism that reduces black, indigenous or women’s ability to gain access to employment even thoughtheir educational level is more than adequate. These are just some of the senses in which the asset-based framework attempts to keep political economy and the institutions of market, state and civilsociety at the forefront of how we think about livelihoods and development.

Asset-based notions of livelihood are just one effort to formalize and structure a whole range ofdiscussions of poverty and livelihoods that have been around for several decades. In many respects,these different approaches to livelihoods are not so much mutually exclusive as different in what theyemphasize and in the language they use. For instance, although recent research by Zoomers andcolleagues (1999; 1998) on livelihoods in highland Bolivia uses a somewhat different language, itsconcerns remain very similar. In that research, livelihood strategies ‘are defined as “the way householdshandle opportunities and limitations” or, more specifically, “the way families respond to change,resulting in the reallocation of land, labour and capital resources”.’ Thus, livelihood strategies aredirectly related to external context (agro-ecological situation, market access, infrastructure and thepresence of development institutions), the availability of resources at the household level (labourcapacity, land and capital) and the family’s set of goals and priorities’ (Zoomers, 1999: 18). Indeed,rather than arguing over the best framework for conceptualizing livelihoods, and emphasizing the

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differences among different approaches, perhaps what is most important to keep in mind is that thesedifferent approaches generally share a similar set of general concerns and emphases (see Box 9.1).

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BOX 9. 1 Common themes in livelihood approaches

While there are various approaches to studying livelihoods, they share some commonorientations. They tend to do the following:

• focus on what people actually do, rather than derive conclusions from broader theoreticalstatements about how the political economy works;

• emphasize people’s ability to be creative, believing that in that creativity lie the seeds ofdevelopment alternatives;

• tend to emphasize diversity among livelihoods and thus argue for more participatoryapproaches to politics and policy formation that will help make that diversity visible;

• believe that the material basis for getting by is very influential in how people live their lives,allocate their time and engage politically, without believing that explanations can be onlymaterialist;

• emphasize more locally based research and the power of case studies as a basis for theorizingabout development, both in Latin America and elsewhere.

Grounding globalization: livelihoods and place formation

The tendency for studies of livelihood to be more locally oriented and to focus on case studies pointsto the relationship between livelihoods and processes of place formation in Latin America. ‘Place’ is animportant but also a difficult, vague and slippery concept in contemporary social science. In its moststraightforward sense it draws attention to the character and ‘feel’ of localities – a ‘feel’ that often variesdepending on who is encountering that place. In more recent times, discussions of place have oftenbeen combined with reflections on the ways in which the character of places and of the activitiespursued within and through them are affected by frequently long-standing processes linking thosepeople and places to others in often far removed locations (Massey, 1991; Bebbington and Batterbury,2001; see later in this chapter too).

Livelihoods help constitute both the feel and the material nature of places. What people do, whatand how they build, what and how they cultivate, what and how they consume – all these facets oflivelihood are part of place formation. However, the facets of livelihood influencing this placeformation are themselves influenced not only by the decisions and preferences of people, but also byglobalization processes and national political alliances that help determine which livelihoods are goingto be possible in which places. These influences occur in many ways. Perhaps the more obvious onesrevolve around the influence of neoliberal economic policy. For instance, the opening of agriculturalmarkets and other related economic changes can steadily undermine the competitiveness of small-scale agriculture, leading ultimately to its demise, and the abandonment and/or consolidation oflandholdings – thus changing the nature and feel of rural places. Globalization can also open upopportunities for new types of economic activity: employment in the maquila industry in northernMexico, in the booming, new greenhouse-based flower industry in northern Ecuador or thetransformation of Chile’s Central Valley due to the massive growth in fruit and wine exports; or therise in particular locations of fair-trade coffee and cocoa production for sale in Northern markets. Ineach of these cases the new activities change livelihood possibilities and the ‘feel’ of places.

Global relationships affect the feel of localities in other ways. Once the colonial centre of Lima wasdenoted a World Heritage Site by UNESCO, informal street vendors (the same type ofproto-capitalist entrepreneur celebrated by de Soto) were slowly pushed out in the name of urbanpreservation and in the hope that this would make Lima that much more attractive to international

and national tourists – and thus a better business prospect for those Limeños catering to the high endtourist industry (Seppänen, 1999). Here globalization in the sense of both global conservationprogrammes and the international tourist economy intersected with particular national andmetropolitan interests in Peru, and led to a remaking of central Lima that involved the exclusion ofvendors’ livelihoods from its streets.

Of course, a clean, colonial downtown Lima without legions of street vendors can seem anenchanting, fascinating and much more desirable site to a tourist or even an upper-middle class Limeño.But it can also engender anger and a sense of exclusion for those vendors who previously soldproducts and pursued their livelihoods on its pavements and along its pedestrianized walkways. Thismerely highlights the notion that different social groups experience places in different ways, dependingon their particular interests. Similar processes to those in Lima can also occur around national parksand other protected areas, when rural residents’ ability to harvest natural resources, plant crops orpasture their animals is changed once an area is designated ‘protected’. Indeed, the viability of thoseprotected areas can often be threatened as such excluded groups either protest against or in one wayor another sabotage conservation initiatives which they view as undermining their livelihoods andbenefiting international tourists and elite national interests (Naughton-Treves, 2002). It is partly for thisreason that, recently, one of the more urgent themes in conservation initiatives in Latin America hasbeen to find ways of accommodating both place and environmental conservation with the livelihoodinterests of local groups (Zimmerer and Young, 1998).

Moving beyond these particular contexts of conservation, it is possible to make the more generalargument that many places in Latin America have become more conflictive in the neoliberal period ascertain livelihoods have become systematically disadvantaged under conditions of globalization. Suchconflicts can take many forms, from increasing violence (as Moser and MacIlwaine, 2000, discuss forthe case of urban Colombia) to more organized forms of protest. Looking at changes in livelihoods istherefore not only a way of addressing the ways in which globalization ‘touches ground’ in distinct waysin distinct places in Latin America, it is also a window on helping understand contemporary forms ofplace-based (and wider) protest in the region.

Livelihoods, culture and politics

When talking of livelihoods, it is easy to assume that one’s focus is on how people make a living. Ofcourse, this is to a great extent true. But we cannot separate the question of how one makes a livingfrom the sorts of meanings people apportion to that living, and the ways in which they will struggleboth to defend and to enhance what they value in their living. This is not the place to delve deeply intothe complex and at times arcane debates on the ways in which making a living, culture and politics arerelated, but suffice to say at least that they are indeed related (e.g. see Smith, 1989, for the case ofhighland Peru). Cultural concerns can affect choice of livelihood, such as the values that lead people towant to keep their family together, send their children to a distant high school, or live in the same placethey grew up. Conversely, how people make a living can lead to changes in what they value – in whatis meaningful to them. In this sense, livelihoods are deeply imbricated in the production of popularcultures of the types discussed in Chapters 2 and 10.

These concerns will also affect how people engage politically. Of course, not all popular politicalaction in Latin America is related to livelihood concerns, but there can be little doubt that much is.There are many senses in which this is so. One of the easiest to see is the way in which people struggleto defend or gain access to the assets they need to put a living together. Examples abound here: thelong slow struggle for land on the part of peasants prior to, during and after land reform laws (e.g.Smith, 1989); the on-going efforts of the Landless Peoples’ Movement in Brazil (the MST, or Movimento dos Trabalhadores Rurais Sem Terra) to gain access to land (Wolford, 1998; see Chapter 12);the slow, often invisible but heartfelt struggles of communities to improve the quality of schooling intheir neighbourhoods; families’ efforts to gain access to electricity that allows their kids to dohomework, but also allows them to run small-scale machinery for home enterprises, and so on.

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Arturo Escobar, one of the most visible and important commentators on development in LatinAmerica, has argued that a central motivation for contemporary social movements is the ‘defence ofthe local’ (Escobar, 1995: 226), a key part of which is presumably to defend how their members makea living in those localities. But the ways in which they defend these localities often involves relationshipswith actors in other localities. Escobar has argued this primarily with reference to the Afro-Caribbeancommunities of the Pacific Coast of Colombia (Escobar, 2001b), but similar patterns emergeelsewhere. Marc Edelman (1999; 1998a) has traced ways in which peasant mobilizations in the NorthWest of Costa Rica have been linked over time with national and Central America wide peasantorganizations, all sharing the same concerns – to challenge neoliberal economic policy and to push forpolicy alternatives that will make it easier for peasants to continue making a living, and thus to continueliving, in rural areas.

While Escobar, Edelman and social researchers in general have tended to focus on the ways inwhich poor people pursue livelihood concerns through social movements, there are doubtless alsorelationships between these livelihood concerns and how people choose to participate in politicalparties and formal electoral processes. A livelihoods approach, therefore, does not – or at least shouldnot – avoid paying attention to the political and cultural issues raised in Chapters 2, 8 and 10. What itdoes do, though, is ask us to think a bit more about the links between changes in the ways in whichpeople get by in Latin America, cultural changes, and changes in the ways in which people engage inpolitics. These themes structure the next few sections of the chapter.

LIVELIHOODS SINCE NEOLIBERALISMIf we take Zoomers’ (1999) definition of livelihood – ‘the way households handle opportunities andlimitations’ – then, given the diverse and geographically varied ways in which neoliberalism andglobalization have reworked these opportunities and limitations, we would expect to findconsiderable variation in the ways in which livelihoods have changed in the past two decades. That said,it is worth reflecting on some more general tendencies in these livelihood trajectories in this period.

While the impacts of neoliberalism and structural adjustment on livelihoods have been varied in theregion, for many, the post-adjustment period has been one of increasingly precarious livelihoods, inboth rural and urban areas. Responses to this crisis have been both ingenious and also increasinglyconstrained. Caroline Moser (1992; 1998) has traced these responses for more than two decades inCisne Dos, a neighbourhood of Guayaquil, Ecuador, where by 1992 fully 77.2 per cent of residentswere living in poverty. Using an asset-based approach, she then traced the ways in which peopleconfronted this crisis. First, more women began to mobilize their labour in order to earn cash (from32 per cent of women in 1988 to 46 per cent in 1992). Likewise, men began to dedicate more timeto work as they migrated out of the city to seek employment. Family members also had to dedicatemore time in order to access basic services whose overall quality was declining. Just for the case ofsanitation services, families spent on average 45 minutes a day collecting water, and increasingly shiftedto private vendors because public supply was failing. Families also began to use their houses togenerate income (by working from home, adding a small store, etc.). Finally, in addition to these newways of using human (labour and skills) and produced (houses) capital, families also mobilized theirsocial capital – between a half and three-quarters of families borrowed money from friends andneighbours to buy food, and between 15 and 25 per cent of families depended on friends for childcareso that they could work (Moser, 1998: 8).

A significant theme in the image portrayed by Moser is that families in Cisne Dos have had todedicate more time to tasks in order to compensate for the declining ability of the government toprovide services. This was so either because they had to spend more time searching or queuing, etc.,or because they had to earn more money in order to purchase privately those services that thegovernment could no longer provide with any quality (for instance, by 1992 fully 50 per cent of familiesused private health care when they got sick). In a completely different context – rural Costa Rica –

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Marc Edelman’s research during the 1980s and 1990s tells a disconcertingly similar story. Costa Rica’swas arguably the most elaborate social democratic state in all of Latin America, and its social andeconomic programmes reached most corners of the country, touching most livelihoods in one way oranother. Since Costa Rica’s own debt crisis (which Edelman dates as 1980–82), cutbacks in publicspending led inevitably to reductions in state-provided social safety nets (e.g. family benefits), socialservices (e.g. health care), and productive services (agricultural extension, credit, etc.). This in turn hadramifications for people’s livelihoods, as they either spent more money and time accessing theseservices from the private sector, simply reduced their use of such services, and/or drew on other socialand institutional relationships in order to access them from other sources.

Another theme in both Moser’s and Edelman’s analyses is the notion that livelihoods have becomeincreasingly diverse, flexible and mobile. That is, individuals and families have incorporated moreactivities among the things that they do – and need to do – to get by. Certainly in rural areas in LatinAmerica it is very difficult now to talk of purely agricultural peasant families (see Chapter 12). In astudy of 11 countries for which data was available, in nine of them between 65 and 92 per cent ofrural women worked in non-farm activities by the late 1990s, and between 25 and 54 per cent of mendid (Reardon et al., 2001). In Peru, 51 per cent of the net income of rural households came from off-farm activities (Escobal, 2001). In Costa Rica, Edelman talks of people combining farming with trade,VCR repair work, being a mechanic, and so on. In urban areas families combine self-employment,working for others, trade, and a range of other petty activities. While such multi-activity livelihoods arenot only recent phenomena (e.g. Bromley and Gerry, 1979), they appear to be even more pervasivenow (Reardon et al., 2001).

As part of this diversification of strategies both within the family and over time, migration has alsotaken on an increasingly important role (see Chapters 5 and 11). Again, this is not in and of itself a newphenomenon, but in rural areas the significance of migrant income appears to have increased. This isoften a step along the way to making the decision (especially for young adults) to move morepermanently to urban areas. But as Moser’s case also suggests, even in urban areas, as livelihoodsbecome more unstable people have opted to begin migrating elsewhere, often to centres of exportindustry based on natural resource extraction in the mining, fisheries, hydrocarbons, timber sectors(sectors which have themselves been among the primary beneficiaries of neoliberalism: see Chapter6). Migration to these areas has, in its turn, favoured the growth of urban areas at the centre of theseextractive economies (Portes, 1989). Increasingly, such decisions have also led to internationalmigration, as witnessed by the increasing number of Latin Americans seeking livelihoods in the USA,Spain, the Netherlands, etc. (Jokisch and Pribilisky, 2002; also see below).

Under neoliberalism, then, livelihoods have become more diverse, multi-active and mobile in additionto becoming in many cases more vulnerable. These are changes that clearly reflect the political economictransformations that the regions’ economies have undergone in the last two decades. However, they alsoreflect the assets at people’s disposition, while at the same time leading to a change in the relativesignificance of those assets in livelihood strategies. The increasing importance of non-farm income forrural families means that land – though still vital – has become relatively less significant as a source oflivelihood, while human capital (as skills) and social capital (both as contacts helping people access work,and relationships that help people cope with crisis) have become more important. Likewise, in urbancontexts, human and social capital have become increasingly important (Moser, 1998) – and social capitalappears to have become particularly important in helping people deal with increasing levels of violencein the places in which they live (Moser and MacIlwaine, 2000) even though levels of trust andcooperation have at the same time been seriously damaged by such violence (Moser, 1998).

Having said all this, it is also important to note that neoliberalism in Costa Rica also led to theopening of new economic opportunities, above all in activities linked to exports, and that a goodnumber of people and families have reoriented their livelihood strategies to these sectors. This is animportant caveat because other observers (e.g. Hamilton and Fischer, 2003) have suggested that insome cases (they write on Chimaltenango, Guatemala), poor people have benefited from the new

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export markets that have emerged under neoliberalism (in their case markets for horticultural crops).Indeed, even in the case of Cisne Dos men were migrating to work in shrimp farms, themselves abooming (if environmentally destructive) sector of the Ecuadorian economy under neoliberalism.

So, even if much research conveys a strong sense of increasing livelihood crisis for many of the urbanand rural poor in Latin America, this is not always or necessarily the case. Perhaps the more importantpoints to recognise are that: (a) the opportunities and threats opened up to livelihoods underneoliberalism vary geographically (see Chapter 3); (b) people’s ability to take advantage of theseopportunities, or the likelihood that their livelihoods will be seriously compromised, depends greatlyon the assets they have at their disposal – their human, produced, natural, social and cultural capital –and the institutional conditions affecting the security and productivity of those assets; and (c) whateverthe case, people reallocate these assets as their adjust their livelihood strategies to these newcontexts. This reallocation in turn has implications both for the assets that people are most likely tostruggle to gain access to, politically as well as on a day-to-day basis, and for the most appropriate areasof intervention for programmes that aim to improve the livelihoods of poor people under suchconditions. We return to these two points in the next two sections of the chapter.

LIVELIHOOD POLITICSAn important theme to emerge in research on social movements in Latin America (Alvarez et al.,1998; see Chapter 10) has been that political engagement in Latin America in the neoliberal periodhas reflected identity and citizenship-based concerns as much as material concerns. Indeed, some havecautioned that some discussions of social movement politics in the region have gone as far as todownplay the continuing significance of material livelihood concerns in politics (Edelman, 1999). Whilethe livelihoods framework sketched earlier on in this chapter cannot, and certainly should not, be usedas a basis for trying to explain all forms of modern, popular political activity in the region, at least oneof its merits is that it draws attention to the inseparable relationship between the material and thecultural in livelihoods (Escobar, 2001a), and as such dissuades analysts from ‘over-explaining’ politicalactivity in one or another way. It suggests that when people engage in struggles over material concernsthey are also struggling to protect and project particular meanings; and also that in many cases,struggles over meaning are also very often also struggles to defend or enhance material interests (orin the language of the framework, to defend or enhance their control over various assets, and/or theproductivity of these assets).

Again, using the language of the framework, these struggles might be oriented either to gain directcontrol over assets, or to change the institutions and social structures that govern access to and theproductivity of those assets. One can think of many cases of the former type of struggle. Perhaps theclearest example is the long and continuing history of particular groups’ struggles to gain access toparticular parcels of land. The land invasions of the 1950s and the 1960s in many countries in the region(Stavenhagen, 1970; Smith, 1989), and the continuing invasions by the MST in Brazil (Wolford, 1998)are just some examples here. In some of these cases – and of course this is the great struggle of theMST in Brazil still – the cumulative effect of these invasions was the implementation of land reformpolicies that in one or another way did change the institutions governing access to land, and didchallenge some of the social structures linked to the control of land. But in many cases, these strugglesand mobilizations are localized and at best lead to the local group gaining access to the land. In cities,the land invasions by shanty dwellers – invasions not only of the past but also very much of thepresent – constitute an urban analogue of these rural struggles. This is all the more so if the housingbuilt on the land acquired increasingly becomes a productive asset for the household, used as a homeworkshop, small store or guarantee for a loan for some other form of economic activity (Moser, 1998).Yet it is important to note that rarely are the gains from such struggles shared equally among the poor,and in such squatter settlements processes of social differentiation among landowners and tenantsbecome often and quickly apparent.

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Material gains such as these struggles over land also constitute significant cultural gains, not onlybecause they allow a particular way of living, but also because they convey new meanings about thedignity and political potential of the poor. In a similar vein, mobilizations to protect the naturalresources that local populations depend upon have also had simultaneously cultural and materialconcerns – as, for instance, in the on-going struggles of the Mapuche/Pehuenche in Chile against dambuilding, or of the U’wa in Colombia against oil development.

Struggles to gain access to land (natural capital) have perhaps been the most visible form oflivelihood politics aimed at gaining direct access to resources, but there have also been importantstruggles to gain access to other assets. People have struggled for access to roads, credit and a rangeof other forms of produced capital; and an important arena of struggle has been over access toeducation (human capital). Some of this struggle is on a very individual and day-to-day basis, as parentsreorganize livelihood strategies (by changing residence, or by changing age and gender work roles inthe family) in order that their children might go to school for more days of the week, and for moreyears. Other of these struggles are more organized. At the most local level the efforts of parents toorganize Parent Associations strong enough to pressure teachers to come to school all week, or toassume a role in managing and improving the local school, reflect examples of this. Indeed, research inCusco in the rural highlands of Peru has suggested that such struggles are among the greatestpriorities of adults (García, 2000). In some cases, such struggles have spilled over onto a national stage,and have ultimately influenced some of the rules governing how poor people are able to gain accessto human capital. An example of this has been the ways in which the national indigenous movementsin Ecuador have influenced policy governing education for indigenous peoples (Box 9.2).

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BOX 9.2 Indigenous organizations and the politics of education inEcuador (source: Selverston-Scher, 2001)

That education has constituted one of the primary concerns of the indigenous movement inEcuador is not surprising, given that many of its leaders themselves were involved in programmesof bilingual education in the 1970s and the 1980s. What, however, is interesting is the extent towhich these organizations have been able to shape elements of educational policy in the country,and the extent to which certain moments of government policy have facilitated this process.

While early (and very important) literacy programmes (some conducted by public institutions)focused on Spanish literacy, by the late 1970s the government was supporting literacy training inQuichua and the development of curricula for bilingual education. This programme – managed bythe Centre for Research in Indigenous Education (CIEI) at the Catholic University of Ecuador –opened 300 bilingual schools from 1979–84, and illiteracy rates dropped from 25.7 per cent to12.6 per cent in the same period (Selverston-Scher, 2001: 88). Once the government changed in1984 to a more authoritarian regime the programme languished, but on the election in 1988 of acentre-left government, the Confederation of Indigenous Nationalities of Ecuador (CONAIE)negotiated with the government the creation a National Directorate for Bilingual Education(DINIEB) that would sit within the Ministry of Education and Culture but would be staffed andrun by CONAIE itself (giving CONAIE and its affiliate organizations the considerable power ofselecting teaching staff in bilingual schools).

Indigenous organization around education has thus clearly affected public institutions andeducation policy and politics in Ecuador, opening up significant spaces for indigenous participationand management of education. Whether this management has been handled well, however, isanother matter. Since 1988 ‘DINEIB has been wracked by political and economic difficulties’(Selverston-Scher, 2001: 89), clientelism has continued, and conflicts among currents within theindigenous movement have been played out through DINEIB.

If successful, livelihood-based struggles that challenge and change the institutions and socialstructures governing control and use of assets, have far greater and far longer-lasting impacts on thequality of many more people’s livelihoods than do more localized struggles to gain access to assets. Yet,perhaps not surprisingly, such political struggles are far less frequently successful. In part, this is becausesuch forms of livelihood politics are often spontaneous and short-lived. Nowhere has this been clearerthan in mobilizations (so-called ‘IMF riots’) against neoliberal macro-economic policy that – thoughhighly visible – have rarely led to significant to policy changes. In other words, the more dominant thepolicy and the political economic structures that sustain it, the less likely it is to change even in the faceof significant protest.

Of course, such ostensibly spontaneous mobilizations are not always that spontaneous. They oftenbuild on concerns built up from everyday political engagements and networks of solidarities oftenconstructed in the course of people’s composing their livelihoods. Also in many instances they havedepended upon coordinating and organizing activities of social movements and other more formalizedorganizational structures. Yet even in those cases where such mobilizations have been grounded in astrong fabric of popular organizations struggling, inter alia, to protect their members’ livelihoods, theireffects have been limited. One of the conclusions of Edelman’s (1999; 1998a) research on peasantmovements in Costa Rica and Central America was that, although they achieved many things and wereable to participate in discussions about economic and agricultural policy in the region, ultimately theyhad little or no impact on the nature of those policies. They were unable to change policies thatliberalized trade, removed price guarantees and that in various ways undercut the economic viabilityof the small-scale farming sector.

Yet this may not always be so. The national indigenous movements in Ecuador (discussed in detail inChapter 10) have influenced more areas of policy, particularly in the education sector but also tosome extent in rural development more broadly (though arguably still not in macro-economic policyformulation). And in Mexico, the Zapatistas have – because of their broad base of support and their use of arms – softened policies, institutions and social relationships that have historicallyprejudiced the access of the indigenous and rural poor to a range of assets and political processes. Yet even in this case, the influence thus far on broad macro-economic policy in Mexico must bedeemed limited.

LIVELIHOODS, NGOs AND DEVELOPMENTOne of the reasons for studying existing livelihood strategies is that they may point to options fordevelopment interventions that might have implications for policy and practice. On the one hand, theymight – within the conditions of the existing macro-economy – point to interventions that hold outmore hope of enhancing people’s incomes, capabilities and sense of fulfilment. On the other, suchanalyses might help identify specific policy changes that could create new opportunities for people toenhance their livelihoods. This second point is important, because if one is to advocate a form ofneostructuralism as a new policy agenda for Latin America (as does the introductory chapter to thisbook), it is vital to give some details of what this agenda would be: what sorts of state intervention,what sorts of livelihood enhancing, targeted protectionism, what sorts of new relationships betweenstate and society?

Many NGOs in Latin America have argued for some time that this is indeed what they aim to do.They have attempted to understand existing livelihood strategies, and on that basis have deviseddevelopment interventions and policy recommendations. It is therefore instructive to consider someof what has derived from these experiences – to see how far an analysis of livelihoods really can pointto policy change, and under what conditions. This is what this section attempts to do, taking the ruralareas of Andean countries of Bolivia, Ecuador and Peru as a point of reference.

While rural development NGOs are very diverse and are discussed in more detail in Chapter 12(see also Bebbington, 1997), it is a reasonable generalization to say that most of them aim – through

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different means – to enhance the quality of rural people’s livelihoods. Most do this primarily or onlythrough project interventions that aim to provide assets directly; fewer, though some, aim to challengedominant institutions and social structures, and to develop alternative policy ideas that might theninfluence the thinking of governments and other agencies. Some NGOs do this alone, while otherscombine this and direct interventions, aiming to derive broader policy and political lessons from theirown projects.

One measure of the quality and relevance of these approaches is to assess their actual impacts onpoor people’s livelihoods. In practice, there are only few studies that have been able – mostly forreasons of funding and time – to do this with some degree of research intensity and broad coverage.The results of these studies are, however, not especially encouraging (Zoomers, 1998, 1999;Bebbington et al., 2002). Of the many reasons for this limited impact one that stands out is that projectinterventions may well not address the primary constraints on rural livelihoods. Many of theseconstraints – as intimated in the literature on dependent livelihoods – relate to those dominantinstitutions and social structures which underlie: limited access to land; market slumps due to cheapimports since trade liberalization; racism and its multiple impeding effects (see Chapter 2); inequalitiesin relationships of power that led to overall government neglect of and policy biases against peasants.

However, another reason for this limited impact seems to be that NGOs have often misperceivedthe nature of rural livelihoods. They have tended to continue acting as if rural livelihoods dependedprimarily on agriculture for income generation, and as if the medium and long-term vision of peasantswas that they and their children would continue to be agriculturalists. Yet as we have seen above, thechanges that have occurred in rural livelihoods particularly in the neoliberal period suggest that rurallivelihoods are less and less based on agriculture. Indeed, one study in parts of Peru and Bolivia showedthat many families (including quite poor ones, if not the very poorest) were making great efforts toinvest in assets that would help their children leave the countryside. In particular, they went out of theirway to invest in children’s education. They did this by direct investments (spending money so kidscould go to school), but also by less direct means. They would, for instance, develop social relationshipswith people living near secondary schools so that their children could stay with them during theschool week. Those who were slightly wealthier would also aim to acquire small plots of land in urbanareas and slowly build a house so that ultimately the children could sleep there while schooling. Oncethe children had finished secondary school, these houses would then be somewhere they could livewhile they pursued their new urban livelihoods (Zoomers, 1998; Bebbington et al., 2002). Incircumstances where campesinos seemed to be dedicating significant resources to a strategy of slowlyshifting their families’ livelihoods out of agriculture, it is not surprising that rural developmentinterventions aiming to foster increased investment in agriculture should have limited success. Whatis perhaps more surprising is that NGOs should have been so slow in recognizing these tendencies,and in recognizing the changing significance of certain assets, and of certain economic activities, withinlivelihood strategies.

In such circumstances, what might constitute more effective interventions? Here people’slivelihoods, and their discussion of what they aim to pursue through them, might offer some clues. Inthese studies, people (especially women) repeatedly referred to education as the asset that matteredmost to them. They also showed through their strategies – as noted above – that this was indeedimportant. People struggled, perhaps above all else, to build up their and especially their children’shuman capital.

A second asset that appeared important were social relationships (or social capital). However, whilemuch rural development literature assumes that the most important forms of social capital for ruraldevelopment are those linked to peasant and other types of rural people’s organization, in thesestudies people had not made much effort to invest their time in strengthening such organizations.Instead they had aimed to develop the social networks that would allow them access to information,housing and other such resources – resources that would help them school their kids, find work asmigrant labourers, pool resources in times of crisis, etc. It is notable that Moser’s work in urban

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Ecuador (Guayaquil) and Colombia has come to quite similar conclusions (Moser, 1998; Moser andMacIlwaine, 2000).

Other work has also suggested that financial capital – often delivered in very small and flexible loans– is increasingly important in these new livelihood contexts. This capital helps people slowly establishthemselves in new activities and places (see Figure 9.2). In many cases, these activities are very small-scale– selling prepared food on the streets of Lima (assuming one has not been evicted by urbanpreservation programmes!) or on the squares of small towns; buying equipment to work as plumber,electrician or builder ; buying a cow to fatten and sell. However small, these activities each require an initialfinancial investment that can be onerous for poor people. There is also evidence that loans for housinginvestments to help people consolidate their urban base are also very helpful and readily repaid.

What does all this mean for rural development NGOs? It may mean that it is more important toprovide interventions of a sort that help people build the livelihood strategies they see as mostdesirable and most feasible, rather than interventions that presume to know the type of livelihoodstrategy that people most want. In the area of credit and savings, in fact, an increasing number ofNGOs have indeed recognized this and have created new organizations specifically concerned tooffer credit to poor people, and to help people save (in however small amounts). This has beenparticularly so in Bolivia where NGOs and NGO-owned financial service companies provide the bulkof credit to the rural poor, and large amounts to the urban poor. While in some cases the credit is stilltied to particular agricultural activities, borrowers often find ways of ‘bending’ the credit to their actualneeds. In human capital formation it might mean programmes that help people find the sorts oftraining they want – rather than the NGO deciding on the nature of the training to be given. And insocial capital formation it might mean helping people and groups make the links they see as most fit,rather than fostering the emergence of the more or less pre-defined types of peasant, producer,women’s or other such organizations that NGOs have typically supported in the region.

This is all easier said than done, however, and it is easy to be wise after the event. Indeed, there is agrowing body of thought (published and spoken) which is gratuitously unfair to NGOs, many of whomhave worked and struggled politically under levels of hardship that their critics would never have

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Figure 9.2 Male and female market traders, Otavalo, Ecuador. Photograph by Sylvia Chant

endured. It is also hard to change because most NGOs in the region depend on financial support fromother sources – in the form of contracts, project grants or institutional grants. In many cases theseresources come from Europe and North America, or if they come from Latin American governmentsdo so from public programmes that themselves have international funding. Thus, for interventions tobecome more open-ended and more adapted to the sorts of mobile, multi-activity and flexiblelivelihoods that people increasingly seem to live in the region, then these international sources mustalso change their views of the conditions on which they will transfer resources globally. This pointanticipates a theme we return to in the closing section of the chapter – the extent to whichlivelihoods, and livelihood possibilities, continue to depend on globalized as much as local relationships.

GLOBALIZATION AND LIVELIHOODS IN LATIN AMERICAAlthough a livelihoods analysis focuses our attention on a more local scale and on questions of humanagency, it is important to keep in mind the ways in which those local processes and livelihoods arerelated to processes that occur at wider scales. At the same time, it is also worth recognizing that thisinfluence of ‘the global’ on ‘the local’ is not only a phenomenon of the past 20 years, as accounts ofglobalization can often imply. In the closing section of this chapter, we address some of the ways inwhich Latin Americans’ livelihoods are affected by and embedded within global processes, and someof the ways in which, occasionally, livelihoods can affect these processes.

Historical continuities

In some sense, the very idea of ‘Latin America’ is itself a product of globalizing processes, referring interalia to the ways in which Europe and part of the Americas became linked from the period of theconquest on. Indeed, the conquest gave rise to a series of activities and relationships that transformedlivelihoods in the region, primarily through changing the relationships of power that governed thecontrol of land, markets and exchange relationships, natural resources, spiritual faith, and a whole rangeof other elements of everyday life. While the sorts of linkage between the Americas and Europe thatunderpinned these changes may not be the same as those that are today commonly referred to asglobalization, they were nonetheless linkages that led to the flow of resources and people across greatdistances, and the establishment of transnational networks affecting those flows (e.g. those related tothe government of Colonial Latin America, or to the functioning of the Catholic Church).

The tendency in much literature is to emphasize the extent to which these early globalizationsdestroyed livelihoods in Latin America: through expropriating land, introducing various forms of servileand indebted labour, through the decimation wrought by the introduction of European diseases, etc.However, even in these early global entanglements it was the case that local practices gave place-specific forms to globalization. Steve Stern (1993), for instance, discusses the sixteenth-century silvermining economy in Potosí, Bolivia, to show how indigenous workers aimed to resist the types of labourrelationships that the early Spanish entrepreneurs aimed to impose on them – and how they wereable to rework some of these labour relationships. Spanish colonizers ‘discovered’ Potosí in 1545,encountering the vast silver mountain located there in the midst of the Bolivian altiplano. On realizingthe immense quantities of silver in the mountain (it is still being mined today), the Spanish introduced‘enormous sums of capital’ and new technology, transforming the physical landscape with dams,aqueducts, and refineries. At the same time, they aimed to introduce labour systems (the encomiendaand later the mita) that attempted to control workers and (in this case) ensure that the mines couldfunction effectively allowing the transfer of silver back to Spain – a globalized transformation oflivelihood and landscape reminiscent of contemporary accounts of new mining and natural resourceextraction investments by multinationals (see below, and see Oxfam America website).

Yet Stern shows that in practice, indigenous labourers were far more difficult to control than suchexplanations imply. In the early years, Spaniards depended on both free Indian miners and encomienda

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workers who retained important levels of control over production and even over the ore extracted.Furthermore, Indians controlled much of the ore smelting market. When in the 1570s the SpanishCrown introduced the servile mita labour system which ‘sent thousands of labourers to the mines andrefineries for a one-year stint of poorly remunerated work’, the Spanish gained far more control of theproduction process. Yet by the early 1600s this control was again being systematically resisted andchallenged by labourers – both indentured and free – who pushed to increase their income frommining by moving from a wage-based system to a ‘sharecropping’ arrangement in which they keptsome of the silver ore as payment and/or mined the veins for themselves on weekends. While the mitayos were unable to change the conditions of their work, free labourers – over half theworkforce – succeeded in retaining apparently significant shares of the silver finally refined in Potosí.This, however, is not to deny that far vaster quantities of precious metals were not shipped back toSpain.

In parts of the Andes globalization processes then, already touched livelihoods 450 years ago.Furthermore, in defence of their livelihoods some people were able to rework the ways in whichglobalization processes worked themselves out in specific places. This case study is particularlyinteresting, because if we fast-forward to the late twentieth century in Cajamarca in the Andes ofnorthern Peru, it is apposite to ask how similar these processes are today. Among the various minesand mining companies in the department, Cajamarca is home to Latin America’s largest gold mine,owned by the US-based Newmont Mining Corporation (this section draws heavily on Bury, 2002). Themine, developed only during the 1990s now covers an area larger than the city of Cajamarca and itsdevelopment has, as in Potosí, involved the infusion of immense amounts of capital and technology.Clearly, again, livelihoods have been transformed in the process: farmers have sold land and moved outof agriculture; others have experienced water contamination; urban water supplies are, many argue,threatened; road networks have been expanded; urban employment opportunities have increased inresponse to miners’ spending, though these opportunities are mostly in the service sector and are notalways legal; a city has been transformed (ibid.).

Globalization – this time in the form of a transnational mining company and global commoditychains linked to gold – has reworked livelihoods: closing opportunities for some, opening them forothers (ibid.). But, as in Potosí, local human agency concerned to defend livelihood interests has partlyreworked the process of globalization. Both rural and urban social movements have emerged tochallenge some (or all, depending on the particular livelihood interests of the movements’ members)of what the mine does. In some instances, their responses have themselves become globalized, as themovements have made links with national and international non-governmental organizations. Throughthese networks of relationships, pressure has been placed on the mine, on its US owner, and on theWorld Bank Group (which financed some of its operations) to change elements of the mine’soperations. Nonetheless, as in the colonial case, Newmont and its affiliates have still transferred vastwealth to the USA, and – another historical continuity – it is poignant to recall that Cajamarca was thesite at which the Spanish executed the Inca Atahuallpa while also taking the ransom in gold that hadbeen mobilized by the Inca in order to pay his release. Nonetheless, it is important to keep in mindthat – be it in the sixteenth or the twenty-first centuries – these globalization processes do not gouncontested.

Transnational linkages

These responses draw attention to a further global dimension to livelihoods in some regions of LatinAmerica. These livelihoods encounter globalization not only in the form of external investments byglobal capital, the local effects of economic policy under neoliberalism, or the new social policies thathave accompanied neoliberalism. People can also encounter it through their involvement in inter-organizational and social networks that directly or indirectly link them to actors in other countries,either in Latin America or in the global North. Again, such linkages are not absolutely new. As just oneexample, the Catholic Church and orders within it (such as the Jesuits, Franciscans, or Dominicans)

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have long spanned North and South, and have affected livelihoods in particular places where theChurch has had a presence. In more recent times, these intra-church networks have connectedparishes in Latin America with parishes or other groups in the North and have channelled resourcesand ideas in ways that impinge on local livelihoods. In more recent times, as Protestantism hasexploded in the region, especially in its evangelical form, different networks linking people and placesin Latin America with church groups in the North (especially the USA) have also emerged, and haveagain served to channel resources and ideas in ways that are significant for livelihood options.Depending on the networks involved, such resources have been used for activities as diverse asbuilding drinking water systems, funding primary schooling, or lobbying for land rights.

While transnational linkages related to the Catholic Church are perhaps among the longest-standing manifestations of this phenomenon, there are of course many others. We have already talkedof the different ways in which NGOs and social movements affect livelihoods. However, it is alsoimportant to recognize that the activities of these organizations often mobilize resources accessedfrom sympathetic groups outside Latin America. These groups are diverse, ranging across non-governmental organizations, governments, social movements, trades unions, human rights groups,environmental organizations and many others in Europe and North America. The relationshipsinvolved are not always easy ones, and a perhaps growing number of NGOs in Latin America complainwith ever more annoyance that their ostensible ‘partners’ in Europe or North America are increasinglyinclined to impose conditions before approving resource transfers (Aldaba et al., 2000). But even so,it remains the case that these networks continue to exist, and link organizations that ultimatelyintervene in and have effects on livelihoods in particular places in the region. In this sense NGOs inLatin America are not just organizations with projects in particular places. They are also parts oftransnational networks that change people’s livelihoods in the places where those networks touchsolid ground in Latin America.

We can, then, think of globalization as working not only through the economic networks thatstructure the movements and investments of capital, but also through transnational networks – orwhat some have called global civil society (MacDonald, 1997) – that channel resources for socialchange and attempt to lobby for policy and political change. Livelihoods in the region are affected byeach of these dimensions of globalization.

To close this section, it is worth commenting on one other sense in which livelihoods have becomeincreasingly transnational. An increasing number of people in Latin America – more in some countriesand some places than others – have begun to construct livelihoods that are based both within andbeyond Latin America (Jokisch, 1999; Kearney, 1996; 2000). This phenomenon is particularly apparentfor those who spend periods of the year, or several years at a time, working in the USA. By 1997estimates were that there were 13.1 million people living in the USA who had been born in LatinAmerica and the Caribbean (Jokisch, 1999). There are 400,000 people in the USA from Ecuador alone(Jokisch and Pribilsky, 2002), and on Colombian television, telephone companies advertise their long-distance services by explicitly appealing to Colombians to maintain their links to family members nowliving in various parts of the USA.

In addition to these US–Latin America livelihoods, there are also increasing numbers of peoplewho have moved to work in Spain. For instance, following the last few years of economic crisis inEcuador, many Ecuadorians have travelled to Spain to work (Jokisch and Pribilsky, 2002). Othermigrations include those of Bolivians to Argentina and Chile (Cortes, 2000; Preston, 2002). Ofcourse, many of these migrations involve a permanent move and so to the extent that they do notinvolve a constant circulation between and identification with two countries they cannot be thoughtof as transnational livelihoods. Nonetheless, these migrations still affect livelihoods in Latin America inmany ways: they may lead to labour shortages (increasing workloads for those staying in LatinAmerica); and they may lead to remittances of money earned in the North back to migrants’ homefamilies and communities, even if the size and frequency of such remittances generally decline overtime. While in the mid-1990s the IMF estimated that migrants from Ecuador sent $406 million back

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‘home’ to Ecuador each year (Jokisch, 1999), by 1997 this amount had risen to $643 million, and by2001 to $1.41 billion (Jokisch and Pribilsky, 2002). Many of these remittances are from one familymember to other family members, but in cases where a number of migrants move to the samedestinations, they have sometimes organized collective remittances. Marie Price, for instance, hasshown how migrants from Cochabamba, Bolivia, who have moved to northern Virginia in the USAorganize to support community development, welfare and infrastructure projects in their homevillages in Cochabamba.

So some international migration is permanent – but for other people, such migration is morecircular. There is much evidence of people building homes in two countries at once, circulating to andfro between them, often illegally and dangerously. Jokisch (1999), for instance, has shown how ruralpeople from Cañar (in the southern highlands of Ecuador) have migrated to New York. In this processfamily networks have been stretched transnationally, but resources accessed in New York, and newsand people from Cañar, continue to circulate through them (in ways facilitated by the Internet,Western Union and Ecuadorian businesses in New York). Many of these resources are then investedin landscape transformations in Cañar. Many people have invested in conspicuous, modern two- andthree-storey brick houses in rural landscapes where until recently the norm was single-storey cinderblock and adobe houses. They have also invested in cattle, and one consequence of this migrationappears to have been that in Cañar, agriculture (which requires more labour) has declined and therehas been an increase in livestock production (which requires less labour). Livestock also requires asignificant investment in animals, which has been made possible by money earned in New York. As aresult of all this, Cañar has become for some people mainly a place where one demonstrates one’ssuccess in migrating, by building flashy houses. For others, it becomes a place for resting and ultimatelyretiring on the basis of earnings gained in the USA. For still others, Cañar remains a place ofproduction, of peasant agriculture and traditional practices. For all people, though, the ‘experience’ ofCañar has changed during this process of transformation and living in parts of Cañar at least isassociated with having contacts in the USA.

CONCLUSIONLivelihoods have without any doubt changed profoundly in the neoliberal period, even if this iscertainly not the only period of Latin American history in which they have been globalized. Thesechanges – though diverse in nature – have often involved an increase in livelihood vulnerability in ruraland urban areas, an increasing pressure on the viability of small farm agricultural livelihoods, increasinglevels of mobility, and a trend towards more multi-activity livelihoods. Again, none of these are newphenomena restricted only to this period, but they do seem to have intensified in the period since1980.

These changes imply challenges for forms of development programme and for popular politicalstrategies. Focusing on the nature and dynamics of these new livelihoods, and on the many andcreative ways in which people get by within, and respond to the contemporary political economiccontext in the region may provide pointers for rethinking such programmes and politics. Whatever thecase, while a focus on livelihoods certainly does not obviate the need for careful analysis of politicaleconomic context, it does caution against making sweeping theoretical and policy generalizations. Itsuggests that perhaps the most effective way to develop policy, politics and theory that can cope withthe contemporary context in Latin America is to grow them from the grassroots (Blauert and Zadek,1998; Bebbington and Bebbington, 2001).

ACKNOWLEDGEMENTSParts of this chapter draw on Bebbington (2002). Thanks to Denise Humphreys Bebbington for insightinto the dynamics of small-scale financial services among the poor.

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FURTHER READING

Bebbington, A. 1999 Capitals and capabilities: a framework for analysing peasant viability, rurallivelihoods and poverty, World Development 27(12): 2021–44, for more empirical and conceptualdetail related to the way this chapter discusses rural livelihoods.

Bebbington, A. and Batterbury, S. (eds) 2001 Transnational livelihoods and landscapes.Ecumene 8(4). This Special Issue contains three papers on Latin American livelihoods which addressthe issues discussed in this chapter from a political ecology perspective.

Bromley, R. and Gerry, C. (eds) 1979 Casual work and poverty in Third World cities. New York,John Wiley. Many useful case studies on urban livelihoods.

Moser, C. 1998 The asset vulnerability framework: reassessing urban poverty reduction strategies.World Development 26(1): 1–19. A good introduction to the study of urban livelihoods.

Zoomers, A. 1999 Linking livelihood strategies to development. experiences from the Bolivian Andes.Amsterdam, Royal Tropical Institute/Centre for Latin American Research and Documentation.Useful resource for the study of the changing Andean livelihoods.

WEBSITES

Department for International Development, http://www.livelihoods.org, a helpful site forlivelihoods.

Grupo Chorlavi, http://www.chorlavi.cl, a very useful and well-maintained site for issues related tothe rural economy and rural livelihoods.

Oxfam America, http://www.oxfamamerica.org/advocacy/art2607.html, this website is useful forexploring livelihoods and extractive industries.

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Transformations in civil society over the past few decades in Latin America point to the need tounderstand broad structural processes alongside local actors’ concerns about livelihood and theircreative responses to shifting political systems and economic situations. Political systems in the pastthree decades have moved through various waves of authoritarian and exclusionary regimes toelectoral democracies in which the role of civil society and social participation is lauded by nationalpoliticians and aid agencies alike. In the economic sphere, actors have responded creatively toeconomic crisis by organizing new forms of social reproduction (that is, feeding, teaching and caringfor community members), as nation–states have transformed the ways in which resources aredistributed following international measures to restructure their economies. The major structuralchanges in national and regional politics and societies over these decades relate to the macro-levelprocesses of neoliberal reform and globalization. Explanations of civil society transformations at themacro level clarify the consequences of state reforms and nationwide political processes whileinforming debate in Latin American public opinion.

By contrast, looking at civil society transformations among grassroots actors provides a distinctentry point for understanding social and political change in the region. Information on actors’differentiated experiences of, and responses to, political and livelihood change provides us with anunderstanding of what organized civil actors can achieve (or not) under conditions of neoliberalismand globalization. Drawing on outlines of regionally and sectorally sensitive neostructuralist andlivelihood approaches (Chapters 1, 9), this chapter examines how different social actors in civilsociety organize themselves through informal political activities (on formal politics, see Chapters6, 7).

The chapter begins by outlining what we mean by civil society and informal politics, and informalpolitical action. Second, it discusses the patterns of civil society mobilization in the 1970s and 1980s.In Latin America’s ‘high modernization’ period (Chapter 2), many countries had weakly organizedcivil society while formal (electoral, party-based) politics was generally absent, due to theauthoritarian military regimes that swept to power in those years (Chapter 6). Yet paradoxically,those same decades experienced the mobilization of diverse actors in social movements and otherforms of collective action. The third section considers the degree to which informal political actionamong civil society actors contributed to the transitions to electoral democracies. In the fourthsection, we discuss how neoliberalism and globalization have contributed to the on-goingtransformation of Latin American civil society in the past two decades. Both neoliberalism andcivilian action contributed to macro-level constitutional reform in many countries, while furtherdifferentiating between the livelihoods and identities among local actors and institutions. Civilsociety was transformed internally by growing income inequalities and externally by changingrelations with the state and new institutional actors such as non-governmental organizations(NGOs).

10Civil society, grassroots politics andlivelihoods

Sarah A. Radcliffe

CIVIL SOCIETY IN LATIN AMERICA: SOCIAL DIFFERENCE, RIGHTSAND THE STATECivil society is classically viewed as the sphere of society existing outside the capitalist market andoutside the state (Adler Hellman, 1995). Civil society plays a key role in maintaining society by meansof practices and values persisting in diverse groups such as families, households, and religious andcultural organizations, among others. Two consequences follow from this. First, civil society actors areconcerned crucially with their position vis-à-vis the market and the state, and are often involved instruggles over the distribution of responsibilities for livelihood and social reproduction among thethree spheres. Second, civil society is very heterogeneous, crosscut by differences in gender relations,class difference, race–ethnicity, culture, and location, which position individuals very differently vis-à-visthe state and markets, and each other.

Civil society’s relationship to the state and the market has often been framed in terms of rights,which specify the access to livelihood, security and political society enjoyed by individuals in a country(Arce and Long, 2000). The classic description of rights from T.S. Marshall remains useful in outliningthe different kinds of rights that states have guaranteed (or not) for their citizens. Ideally, civil rights arethose that sustain individual freedom and freedom of expression, religion and property, guaranteed bythe justice system. Political rights by contrast refer to the right to vote, to be a member of a politicalauthority, and be elected as a representative. Finally, social rights refer to the goods and services thata state provides to citizens, through social programmes and public services (such as education andhealth). In Latin America, different types of political regimes historically created different ‘packages’ ofrights, changing over time in a continual ‘reconstitution of the regime of rights’ (Calderón et al., 1992:29; Foweraker, 1995). The state’s rights regime shapes the ways in which the market, civil actors andstate organize the distribution of resources, access to livelihood and security. Latin America has whatmany commentators argue is a regionally specific set of rights where in mid-twentieth-centurypopulist development, states expanded social rights under conditions of closely controlled politicalrights and under-developed civil rights (Roberts, 1995). Corporatist regimes organized social rights(access to welfare provision) via unions or state-recognized associations, thereby limiting others’access to these goods (Calderón et al., 2003). Under authoritarian governments, civil and politicalrights were repealed as voting, political organizations and public meetings were banned. However, inBrazil social rights were extended under the military, until economic crisis forced cutbacks. With thereturn of electoral democracies, civil and political rights were newly established on paper although on-going economic crisis often entailed limited social rights (Foweraker, 1995: 28). More recently,neoliberal reforms and globalization reconfigured regimes of rights yet again (see below).

Latin American civil society is heterogeneous, with extreme income and cultural differences withinnations, combined with racial-ethnic diversity, gender and rural–urban and cultural differences. Socialheterogeneity is moreover combined with social hierarchies, the valuing of certain social categories(white-mestizo, male, urban) over others (indigenous/black, female, rural), a characteristic that JorgeLarraín attributes to the long tradition of authoritarianism in the region (Chapter 2). Baroque and laterEnlightenment principles contained implicit normative values by which social actors were judged. InLatin America, citizenship – and hence rights of various kinds – has long been tied to certaincharacteristics (male, white-mestizo, urban, upper income), thereby limiting other social actors’citizenship status and civilian role. Social heterogeneity and hierarchy through the twentieth centurywere built into conceptions of citizenship, development and state–society relations, shaping actors’relationship to livelihood, the market and the state. For many actors, Enlightenment goals of equalityand inclusion are still to be realised (Schuurman, 1993: 187), generating what Elizabeth Jelin describesas ‘struggles from below’ (1990: 15).

However, as they are engaged more immediately with local livelihoods and specific cultures, manyLatin Americans do not perceive the issue in macro-structural terms. Rather, their livelihoods bringthem into the socially transformative experiences of migration, education, new forms of employment

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and nationalism, each of which changes the meaning of citizenship and social identity. Involving millionsof people from the mid-twentieth century, (largely urbanward) migration and education reconfiguredcivil society and social difference. Education provided new work opportunities while creating a newsense of pride and recognition among poor and rural populations. New racial–ethnic categories werecreated in cities (such as the Peruvian cholo) while new gender divisions of labour, informal sectors andhousehold forms emerged (Chapter 11). Rapid urbanization inevitably transformed civil society,political consciousness and social interaction. Urban migrants began to interact with nation–states andlabour markets in new ways, demanding resources as well as full citizenship. State-sponsorednationalism attempted to create a universal sense of belonging to transcend profound social gulfs,while social actors forged local ‘geographies of identities’ (Radcliffe and Westwood, 1996). Thenation–state promoted ‘good citizenship’ through civil participation in military service, nationalistschool lessons and state rituals. In many rural areas, state corporatist organizations forged newidentities and local civil organizations, such as the comunas in rural Ecuador. Culturally, new forms ofmass culture and mass politics (advertising, demonstrations, campaigning, unionization) drew peopleinto a new relationship with the political sphere (Calderón et al., 1992: 25). All of these processessignificantly transformed the conditions for civil society structures and informal politics, and created awider public awareness of the language of citizenship and rights. Geographical processes constitutesocial movements and reinforce the politics of social difference. Latin America’s uneven developmentand urban and regional bias generate the uneven distribution of resources, cutting large swathes of civilsociety out of development. In this context, insecurity and precarious development gains generate civilmobilization for title to housing in urban shantytowns or to agricultural land in rural areas.

As mentioned above, the interactions between civil society, the state and the market are often thesource of tension, negotiation and contestation especially as citizens’ livelihood depends upon stability,access to resources, and forms of recognition defined by the nation–state or forged in capitalistmarkets. Theoretically, these tensions are debated and negotiated in the public sphere where citizensagree responsibilities and rights. However, in Latin America, the public sphere has historically beenlimited or non-existent (Foweraker, 1995: 30), and in this context, citizen debate and forms of informalorganization have been associated with alternative ‘counter-publics’ (Alvarez et al., 1998). The strugglesof civil society actors in Latin America to establish their position vis-à-vis the state (civil, social andpolitical rights) or the market (economic rights) has been the topic of much research.

An overview of this work reveals that the social and institutional features and political identitiesinvolved in these struggles shifted slowly over the twentieth century, as the nation–state and themarket were transformed. During the politically and economically nationalist period of mid-century,civil society negotiations were often channelled through union structures (many tied to the state) andstate-approved local associations. By channelling civil representation, this corporatism attempted tokeep separate groups of civil actors directly tied to state-controlled institutions. Nevertheless, despiterapid industrialization and modernization from the 1950s to 1970s, many groups in civil societyremained outside these networks of resource distribution and political representation, giving rise todiverse forms of ‘self-help’ in shantytowns and neglected rural areas (Lehmann, 1990: 150; Scott, 1990).Self-help reflected uneven development and the actions of a state premised on social hierarchies andassociated patterns of exclusion.

By contrast, during the ‘lost decade’ of the 1980s and particularly under authoritarian and militaryregimes, civil society had few formal outlets for public debate and representation. In this context, socialmovements became the locus of political action among civilian actors. More recently, civil society andthe public sphere have been transformed once again in the context of globalization and neoliberalreforms of the state and the market. Despite new constitutions and the rise of the ‘third sector’ of non-governmental organizations, the nation–state has been the main referent for civil action and demands.In contrast to Western social movements that turned their back on the state’s ever-extending reach(Touraine, 1981), Latin American civilian mobilizations generally coexist and cooperate with the stateand political institutions. However, as throughout this time the public sphere remained insecure and

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weak, state and civil society relations were often characterized by a ‘terrible tension’ (Calderón et al.,1992: 25). The political right to participate represents an assertion of citizenship as it is a preconditionfor democratic decision-making, and may also entail the wish to put (new) rights on the politicalagenda (Foweraker, 1995). Civil society action thus ‘shifts between resistance, protest and proposals’(Escobar and Alvarez, 1992: 4), depending on the context of the state and the market. Civilmovements are often focused around ‘constellations’ of specific issues or grievances, unlike politicalparties’ manifestos or programmes that tend to address a wide range of issues (Scott, 1990: 16–26).

CIVIL SOCIETY MOBILIZATION IN THE 1970s AND 1980sDuring these decades, civil society was highly organized in what have been termed ‘new socialmovements’, whose expansion in numbers, confidence and geographical extent surprised leaders,public opinion and scholars alike. Paradoxically, such civilian mobilization occurred at a time when inmany countries of the region military – and in some cases, highly authoritarian – regimes were inpower, when ‘politics as usual’ could not occur. Military regimes, whether authoritarian or more benign,closed down political parties, disbanded unions and forms of corporatist representation, and clampeddown on the public sphere through restrictions on the media, public meetings and social association.Yet in this context, civilian actors organized themselves – sometimes at considerable risk to their lives– to express their concerns regarding livelihoods, the market, the state and rights. In other words, therelationship between the spheres of civil society, the state and the market did not disappear, but wasdramatically reconfigured with long-term consequences for both civil society and the state. Thissection first addresses the ways in which theories have approached this period. Second, the sectionexamines a number of different forms of civil action in these decades, addressing livelihoods, rights,social identities and cultural meaning. In the final part, we discuss the role of economic transformationsand growing global integration in beginning to shape civil action and its agendas.

Understanding the paradox: theoretical perspectives

Why did social movements emerge during the 1970s and the 1980s? Are they due to livelihood issues,to questions of opportunities and survival that exist in Latin America regardless of the regime inpower? Or is this mobilization primarily due to people’s identity vis-à-vis other members of civil societyand the nation–state, an identity informed by livelihoods? While these questions suggest that there aretwo distinct ways of understanding the paradox of civilian mobilization, recent approaches stress theequal importance of livelihood, culture and political opportunity.

Resource mobilization theory (RMT) tends to stress the question of livelihood, and the structuralconditions under which civilian actors mobilize. According to this approach, groups act in response tostructural economic and political conditions. Recognizing that non-formal politics can be both rationaland important, these approaches focus on the methods adopted by organized civilians to gain accessto a particular resource or right. Also, social movements require resources and inputs from members,and leaders to make strategic decisions (Foweraker, 1995). Actors are understood to mobilize toprotect economic interests and livelihood. For example, peasant farmers’ land invasions to recoverfields taken by landowners are argued to relate to the threats to peasant survival caused bylandlessness or subdivided plots. However, this primarily economic interpretation of livelihood is oftenproblematic in Latin America (as elsewhere in the world), as it disregards the political and socio-cultural context within which livelihoods are created, maintained and struggled over (Sheffner, 1995).First, access to resources is structured by the socially exclusionary interaction between the state, themarket and civil society. Beyond individual economic concerns, civil mobilization challengesgovernments that systematically fail to guarantee rights to certain citizen groups for non-economicreasons. For example, Latin American women’s movements challenge legislation that restricts marriedwomen’s control over children and property. Second, civil actors’ livelihoods are embedded withincultural meanings that inform the value of different resources to social actors and thus shape their

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willingness to mobilize in their defence. For example, social organizations of Amazon indigenouspeoples fight for access to land, not only because it is the basis of their daily livelihood and survival, butalso because of its cosmological and cultural significance.

The second major theoretical contribution to understanding civil mobilization is identity theory, alsoknown as new social movement (NSM) theory. This approach stresses the identity dimensions of civilorganization, arguing that the meanings invested in struggles are not economic but rather social andcultural. Accordingly, civil movements are not merely struggles over production and consumption butalso crucially about meaning, communication and representation (Melucci, 1995). By documenting themeanings, life-worlds and everyday actions, people’s motivations, hopes, desires and meanings oforganizations become clear (Escobar and Alvarez, 1992; Melucci, 1995; Schuurman, 1993; Scott, 1990).Stressing the macro-level exclusions of certain social categories from recognition and status, newsocial movement theory suggests that mobilization emerges from individuals’ and groups’ intrinsicsearch for social recognition and identity. As Latin American society comprises various ‘Others’, theargument goes, so these ‘Others’ seek by means of grassroots and informal organization to have theirviews heard, their right to self-representation acknowledged and their right to decision-making overdevelopment and livelihood secured. Evers argues that social movements are driven by the need toexpress an identity, a way of ‘doing society’ in which individuals/groups can realize their full ‘subject-hood’ (1985: 48). Gaining power is thus not as important as civil movements’ aim of democratizingauthoritarian political cultures through the slow transformation of meanings (Alvarez et al., 1998).NSM theory has been harshly criticized for ignoring the material factors behind mobilization, and forglossing over persistent social inequalities within civil organizations (Roberts, 1997). Due to its focuson submerged identities, NSM theory tended not to define the achievements of civil action except inthe broadest terms.

Latin America’s diverse forms of civil society mobilization challenge both these theoreticalapproaches, leading to a theoretical synthesis. Current approaches to grassroots organization includea focus on the institutional and social opportunities offered by particular regimes, specific economicsituations and diverse socio-cultural traditions. Analysis of ‘political opportunity structures’ replaces apurely economistic interpretation with a more contextualized, regionally and socially sensitiveapproach to the material conditions for civil action. Additionally, the meanings and creativity of socialactors are acknowledged in recognition of political agency and the philosophical–psychologicaldimensions of struggle. Social movements are thus defined as a ‘collective actor constituted byindividuals who consider themselves to have common interests and, for at least some significant partof their social existence, a common identity’ (Scott, 1990: 6).

Alongside the growing awareness of social movements’ flexibility and multi-dimensionality comesthe recognition of the geographies of civil society. Civil society is often distant politically, geographicallyand socially from governments and state agencies, reflected in the region’s civil society organization(Davis, 1999). Civil actors create informal geographies of identities, shaping relations of affiliation andbelonging often at odds with state administrative areas (Radcliffe and Westwood, 1996). These placeidentities are not enclosed nor fixed, although they can often be local. Arturo Escobar (2001b) arguesthat the ‘defence of the local’ provides a core rationale for civilian action. The predominant pattern ofaction during the 1970s and the 1980s was a relatively local one, showing a cyclical pattern of activityand quiescence. However, this is not to say that groups remain limited to a local circumscribed area,as strategic alliances beyond this may be crucial. This does not prevent social actors from extendingnetworks beyond the local in order to coordinate action, agree a list of demands and construct aregional or national sense of identity. In the 1990s Central American peasant farmers coordinatedacross national borders to formulate alternatives to neoliberal agricultural policy (Edelman, 1998b).Similarly, the Peruvian peasant patrols are concerned with local livelihood security such as theprotection of livestock, but are also embedded within transnational networks of ideas and support,located in ‘larger networks of ideas, exchange and authority’ (Starn, 1992: 94) (Box 10.1). Moreover,‘local’ actors are often very aware of the ways in which broader structural processes – neoliberal

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reforms, regional trade agreements, and international legal provisions, among others – come to ‘mapout’ in a locality. Civil actors mobilized against the privatization of water resources in Cochabamba,Bolivia, voicing their concerns that government neoliberal reforms to ‘liberalize’ the water marketwould lead to a transnational company taking over water required for irrigation, drinking and cleaning(Laurie et al., 2002). Although this was a ‘local’ struggle, the actors involved saw themselves affected byinterconnecting local, national and international processes.

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BOX 10.1 The peasant patrols of northern Peru (source: Starn, 1992)

Started in the 1970s and widespread by the 1980s throughout northern Peru, the peasantpatrols, or rondas campesinas, arose out of peasants’ concern over security, namely theft of farmanimals and disillusionment with formal judicial procedures. Centre-left political parties as well aschurch catechists contributed to its formation. As rondas become embedded in the daily routinesof villages, conflict resolution mechanisms and women’s rondas emerged to deal with a wideningcircle of social issues. However, the rondas maintained their own alternative modernities in ruralhighland locations, drawing on a wide and hybrid range of institutional ideas, diverse forms ofcultural capital and social relations, local knowledge and forms of identity. Ronda participantsidentified as ronderos, as Peruvians, and as campesinos/peasants.

The geographies of public and private space are significant in Latin America in the way theydesignate the separation of nation–states and civil society. These geographies are not necessarilysecure or fixed, as demonstrated under authoritarian military regimes in Central America and theSouthern Cone countries where soldiers invaded ‘private’ domestic space to kidnap citizens. InArgentina’s ‘dirty war’, the military junta moreover issued strict rules about public and privatebehaviour in its efforts to create rigid control over civil society (Taylor, 1997). Hence, the boundariesbetween public and private have a ‘decisively political character’ (Touraine, 1981) in Latin America, asthey are contested and shifting. Where the ‘private’ space of the household was unable to guaranteefamily members’ livelihood, these ‘private’ concerns became the focus of public action and mobilization(cf. Sheffner, 1995; Foweraker, 1995). As Latin American private spheres have long been associatedwith (married) women and gender divisions of labour, issues of ‘private’ survival have often promptedwomen’s organization in defence of household living standards. Low-income women organizedthrough the lost decade of the 1980s and later to create community-based soup kitchens. These builton – but subtly transformed – women’s ‘domestic’ role and extended the scope of their politicalactivities.

Grassroots experiences and viewpoints: livelihood, opportunity and culture

Claims to specific rights often lie at the centre of mobilization, especially in the context of failedmodernization (Calderón et al., 1992). Mobilization for rights may include material and economic rights,such as secure land or housing title, agricultural extension or bilingual education. The origin of civil actionin the 1960s and at its peak in the 1980s are attributed to the failure of inclusive development, high ratesof poverty and social marginalization and a new politics of needs (Slater, 1998; Chalmers et al., 1997).Failure of development to grant what it promised generated interests in ‘better’ types of developmentand more equitable benefit distribution, combined in some cases with a questioning of the industrial,urban and technological path to development. In Mexico, austerity in the 1980s undermined the state’sability to buy out opposition, hence boosting the number and scope of social movements.

Uneven development favouring certain groups created a mismatch between urban groups in termsof access to collective consumption goods such as paved roads, water systems, adequate housing and

electricity supplies. The failure of municipal and national governments to provide poor, often migrantand squatter, populations with services – a package of goods comprising developmentalist states’promise of modernity – prompted urban civil society to demand them (Castells, 1983). Marches togovernment offices and self-help construction groups reconfigured the urban poor’s livelihood andsense of political worth, and inevitably contested economic and political gulfs in power, while owingmuch to specific – often rural – traditions of social organization (Degregori et al., 1986).Neighbourhoods became the location for personal and group networks (such as Lima’s migrantassociations) linking populations with churches, rural villages with migrant paisanos (countrymen) andstate institutions. These quotidian networks provided for a microstructure of organization (Evers,1985: 44), a local social pattern through which civil society could be imagined (Melucci, 1989; Scott,1990). By 1982 around 8,000 neighbourhood associations existed across Brazil, while in São Paulofavelas (shantytown neighbourhoods), civilian associations marched to demand assistance, formingstrategic links with popular leaders.

Civil action is prompted not only by uneven development, but also crucially by the ways in whichpeople identify and understand diverse forms of discrimination. In Latin America’s hierarchicalsocieties, rights and social recognition have been accessible to certain groups/individuals and notothers – rich, not poor ; urban, not rural, men, not women; whites/mestizos, not indigenous and blackLatin Americans. As social movement theory notes, individuals are prompted to carry out politicalaction when they self-identify as a group. Self-identity is not an essential core but is defined andunderstood within a specific historical, cultural and geographical context of ‘Othering’ and unevenaccess to benefits. Discriminatory meanings attached to ethnic–racial labels such as indigenous orblack prompt resistance by racialized groups who contest their exclusion from public space, their lackof access to social benefits, and the inability of national societies to recognize their culturaldistinctiveness (Van Cott, 1994; Minority Rights Group, 1995).

Civil action thus often questions the status quo, and the exclusions and negative meanings that areassociated with particular groups or places. Treated for much of Latin America’s history as non-citizensor as second-class citizens, women are just one of the groups that challenge their exclusion from rights(Dore and Molyneux, 2000; Molyneux and Craske, 2001). The association of rights with a publiccitizenship role came under pressure with women contesting the separation of masculine, public andpolitical space from the ‘feminine’ domestic sphere (Dore and Molyneux, 2000). While these gendereddivisions have long been breached by subaltern, peasant and indigenous groups (whose livelihoods relyupon female work and wages), the political sphere has long been defined by masculine culture andwomen’s exclusion (Melhuus and Stolen, 1996; Chant and Craske, 2003). Female citizenship arrivedlate, with voting rights conceded slowly in the mid-twentieth century, while formal representationproceeded at a snail’s pace. Ecuador granted the vote to women in 1929, while Paraguay granted thisright in 1961; most countries extended female franchise in the 1940s and 1950s. Women make upbetween 4 and 15 per cent of parliamentary representatives in the early 1990s’ post-transitiongovernments. Despite highly gendered patterns of formal politics, women made up the majority ofparticipants in social movements in the 1970s and 1980s, when other political avenues were closed.For instance, women made up 99 per cent of Chilean neighbourhood associations, purchasing andcooking cheap food, and calling for housing tenure (Lehmann, 1990). In Lima’s shantytowns, womenorganized communal kitchens, thereby freeing themselves to earn wages (Jelin, 1990). In the shantiesof Buenos Aires, Lima or Mexico City, the structural limits on women’s participation were clear –female reproductive and domestic work was increasingly difficult under conditions of economicausterity, prompting women to organize themselves.

Debates about Latin American women’s civil action centre on the question of livelihood versusidentity. Maxine Molyneux’s work on women’s rights and livelihood under the Sandinista regime inNicaragua pointed to the complexities of women’s citizenship rights. In Nicaragua, women’s civicaction has been explained in terms of practical concerns (livelihood issues of affordable food,education and health care, urban infrastructure) and on the other hand, strategic issues (gender

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ideologies that disadvantage women) (Molyneux, 1985). In effect, however, many of Latin America’sdiverse women’s groups are concerned with both livelihood and identity, both practical and strategicinterests. While feminists historically demanded legislative, familial and marital changes to empowerwomen, they are also concerned with the feminization of poverty and women’s access to resourcesand livelihood security. Their activism and lobbying of governments in addition to strong internationallinkages put Latin American feminist movements at the heart of civil and political life during the 1980s(Saporta Sternbach, 1992). Although initially urban and middle-class, feminists increasingly intersectedwith the popular women’s movements arising in the shantytowns (Lind, 1992).

As a highly significant actor in civil society, the Church – especially the Catholic Church – played acrucial role in many forms of civil organization during the 1970s and 1980s. During these decades, theCatholic Church re-oriented towards an ‘option for the poor’ creating new forms of civil associationincluding Bible reading and adult literacy groups. These Christian base communities (CEBs orcomunidades eclesiásticas de base) often provided spaces for social actors to meet and discusslivelihood and political alternatives (Lehmann, 1990). Especially where the state had been discredited,CEBs provided an organizational focus and a repertoire of cultural meanings (about oppression,exploitation and redemption) for marginal groups (Lehmann, 1996). In Chiapas state, Mexico, duringthe 1970s, Catholic catechists formulated petitions for land and basic services on behalf of ruralcommunities. The CEBs played a crucial supportive role in the early days of much citizen action,although the strength of basismo as a political credo has recently been questioned and the highlysignificant role of Protestant and diverse evangelical groups has been increasingly acknowledged.

Given its origin in alternative public spaces and specific cultural milieus, civil mobilization oftendesigns and operates a repertoire of actions that owe little to formal party politics or state rituals.Nevertheless, common experiences of education, migration and nationalism contribute to theserepertoires while organizations learn from each other (Eckstein, 1989). In São Paulo, grassrootsorganizations, CEBs and independent trade unions worked together in 1970s and early 1980s underthe military government (Adler Hellman, 1995). The ‘multiplicity of practices’ covers a wide range ofexamples (Calderón et al., 1992: 27), from colourful marches through the national territory, the use ofnew symbols and alternative media, systematic non-violent raids on supermarkets, to street theatre.Citizen protest often engages with power relations through geographical tactics, by transgressing theunspoken rules about who should appear where in Latin American urban and state geographies (Pileand Keith, 1997). Having been treated as ‘internal colonies’, indigenous and black peoples’ marginalityis overturned by their arrival in the centre of capital cities, such as the 1992 Ecuadorian ‘March for Life,Dignity and Territory’ to Quito (Sawyer, 1997), and black movements’ demonstrations in downtownSão Paulo (Minority Rights Group, 1995).

Culture and identity are key to understanding civil society, as the motivations behind political actionsare constructed in specific social, historical and geographical contexts. Communities are not born butare made and continually re-made as the situation changes (Melucci, 1995: 342; Foweraker, 1995: 12).However, when the state is the main interlocutor for civil society, its procedures often shape the waysin which civil society–state interaction occurs. Over much of the twentieth century, Mexico maintaineda strongly corporatist state in which the ruling PRI party structure had the resources and political willto manage civil expression and demands. Yet low-income urban women’s organizations respondeddifferentially to the resources on offer. Whereas some groups in the city of Guadalajara valuedautonomy from the PRI (cf. Escobar and Alvarez, 1992), other women’s organizations welcomed thelivelihood resources and political recognition that the PRI could offer via its networks (Craske, 1993)(see also Box 10.1).

At its most basic, livelihood raises issues of security and the right to life. Although played out verydifferently across Latin America, depending on the nature of the state, the market and the specificthreat to life, violence and insecurity for citizens have been major issues prompting civil action. Twocontrasting examples illustrate these themes. In Central America and the Southern Cone, diversegroups of women began to demand the return of ‘disappeared’ relatives who had been abducted and

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killed by the countries’ military regimes. In Central America, the groups comprised mostly indigenouswomen, whose connections with the Catholic Church granted them a political opportunity toquestion the regime’s policy of genocide (Schirmer, 1993). Informed by international human rights law,civilian women such as the CONAVIGUA organization in Guatemala campaigned againstdisappearance and state violence. As their knowledge of the situation grew, they criticized the regimefor its political violence (and lack of citizen security) and gendered violence against women.

In Argentina, a violent and military state gave rise to another ‘mothers’ movement, but the distinctculture and politics of this country shaped the pattern of civilian mobilization differently to CentralAmerica (Fisher, 1993). Again, women were at the forefront of demands for the return of ‘livingrelatives’ in the Mothers of the Plaza de Mayo organization (Box 10.2). Here, women of diverse classbackgrounds coordinated using the semi-private, ‘feminine’ spaces of teashops and children’splaygrounds (Radcliffe, 1993). Weekly parades around the Plaza de Mayo in Buenos Aires stressed thewomen’s maternal responsibilities and emotional ties to children. This ‘motherist’ identity chimed withthe military’s de-politicized view that the family was the ‘basic cell of society’ in a strongly Catholic andordered society (Taylor, 1997). The nature of women’s political organization is thus shaped strongly bythe political and cultural context within which they emerge.

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BOX 10.2 The Mothers of the Plaza de Mayo, Argentina

Between 15,000 and 25,000 people died in Argentina in its Dirty War (1976–83) against‘subversives’ and in defence of the ‘last bastion of Western civilisation’. With the shutdown ofpolitical activity, political activists and members of diverse organizations were perceived as athreat to stability and ‘disappeared’ after imprisonment, torture and murder by the ruling military.The Mothers of the Plaza de Mayo were established in 1977 to trace their ‘disappeared’ sons anddaughters, who had been abducted by the security forces or unnamed groups. Deliberatelyexcluding men from their organization, the women organized weekly processions around themain square in downtown Buenos Aires. Despite intimidation from soldiers, they maintainedpublic protest in the context of a highly restricted public sphere. Over time, they initiated a publicdebate about the legitimacy of the authoritarian regime. After the return to civilian rule, theMadres were at the forefront of demands for the persecution of military crimes and the bringingto justice of those responsible for disappearance, continuing too in their campaigns to accountfor all of the disappeared (Fisher, 1993; Taylor, 1997).

Women’s movements had varied outcomes, in part due to the diversity of groups involved. Suchdiversity, combined with the fact that many (mostly low-income) women were reluctant to definewhat they did as political (Jelin, 1990), means that the achievements of women’s civil action are bothdifficult and contentious to define. In the Brazilian women’s movement (comprising the full spectrumof neighbourhood, consciousness-raising and feminist groups), women were engaged in ‘deliberateattempts to push, redefine or reconstitute the boundary between the public and the private, thepolitical and the personal’ (Alvarez, 1990: 23). Low-income women extended their sphere of dailycompetence and involvement into community-based groups, which in some cases led them toquestion the prevalence of domestic violence and to gain self-esteem (see also Lind, 1992). Thewidespread mobilization of women in the past few decades perhaps provides a test case of theeffectiveness of civil mobilization. Newly established legal rights for women and measures to deal withissues such as domestic violence reflect the demands of diverse women’s organizations.

What were the achievements of social mobilization in 1970s and 1980s? Many forms of civilorganization during these years were local, but that is not to deny their impact on livelihood, and theformulation of new civil society–market–state relations. Moreover, social mobilization during this period

was often cyclical, moving through a pattern of greater and lesser visibility, and disappearing once theiraims were met (Foweraker, 1995: 100; Alvarez et al., 1998). Under politically, socially and economicallyexclusionary governments, civil associations inevitably varied in their demands and achievements. Whilesome organizations pursued political or social rights on their own terms, others chased afterentitlements that were embedded in patron–client relationships with political parties or state sectors(Foweraker, 1998: 275). Institutional change, more secure livelihood, new rights and social mobility canbe identified as possible material outcomes of civil organization, although subtle shifts in ‘cultural codes’and political culture may also occur (Melucci, 1995; Alvarez et al., 1998; Sheffner, 1995). Existing withinthe spaces between civil and political society, social movements’ gains are highly varied and multi-faceted, yet the significance of social organization for Latin America’s political culture is undeniable.

CIVIL SOCIETY AND THE TRANSITION TO DEMOCRACYThis section describes social movements’ role in transitions to electoral politics, and examines theirsignificance in transforming political cultures. In assessing civil influence on transitions, it is difficult togeneralize across the region’s varied regimes, political cultures and movements. Civil action had diverseimpacts on transitions to democracy, depending on the forms of organization, the regime and thenature of the transition. During transitions, social movements necessarily changed their engagementwith development processes and the structures of power. Groups of civil actors impacted on politicalcultures in ways that undermined authoritarian regimes’ legitimacy, rejecting the closure of publicspheres and holding former rulers to account. Nevertheless, civil organizations rarely had direct accessto the negotiations leading to democratic transitions to electoral politics (Foweraker, 1995), which hadlong-term consequences for politics and civil society. Where the transition to electoral democracy wasdecided behind closed doors in negotiations between political elites and political parties, socialmovements often did not have direct access to the negotiating table (ibid.).

In many countries, civil society impacted on transitions more by shaping political culture than byparticipation in political negotiations. In Argentina, spearheaded by the Mothers of the Plaza de Mayo,civil action democratized political culture, developed a public community and revitalized local politicsin the period leading to democratic transition (ibid.). By means of constant visible demands on themilitary, the Mothers of the Plaza de Mayo reoccupied public space and contributed to the loss of themilitary’s legitimacy. In Chile, by contrast, civil protests in the early 1980s failed to shift the Pinochetregime’s timetable for return to civilian rule and isolated radical protestors. Here a ‘submerged’ civilsociety could not defeat a powerful regime.

In this context, post-transition political roles for social movements were highly diverse across theregion with some countries seeing the return of party politics ‘as usual’, while other countries creatednew forms of political participation. Chile’s return to electoral politics sidelined social movements asthey incorporated civil leaders but not their demands, with negative consequences for popular groups’access to decision-makers (Schuurman, 1993). Arising under conditions of political authoritarianism,social movements were potentially the basis for more democratic and participatory politics, throughtheir attempts to re-open a debate in political culture and their efforts to make new organizationalforms. In this sense, social movements acted at crucial moments like ‘schools for democracy’, focusingon political rights, an expanded notion of citizenship and making political demands on the state. Socialmovements’ insistence on human rights and demands for political transparency and a ‘deepening’ ofdemocracy were often common threads (Foweraker, 1995). Nevertheless, scholarly optimism that civilorganizations would be ‘schools for democracy’ has recently been tempered by recognition ofpersistent legacies of authoritarianism and exclusion.

CIVIL SOCIETY AND SOCIAL DIFFERENCEIn the 1990s, civil society has been transformed again due to political and economic shifts that interactto re-configure social actors’ relationships to the market and the state. The extension of the market

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into spheres previously run by state organizations, combined with the ‘rollback’ of the state fromwelfare, extension services and distribution forced a re-working of the ways in which civil societyactors make livelihoods and do politics. In many countries, a ‘neoliberal’ form of politics (with strongpresidents and executive bureaucracies) has led to delegative or ‘partial democracies’ in which citizens’rights are compromised by lack of participation and exclusionary political cultures. With deregulatedlabour markets, budget cutbacks and limited, targeted welfare systems, larger numbers of citizens arereliant upon the harsh realities of the market at a time when global economic insecurity has plungedmany countries into low growth.

In this context, many commentators are highly sceptical of the promise that new civil society-oriented forms of representation and distribution can guarantee citizens’ rights. During transition,hopes were raised that civil actions and new ways of doing politics would lead to more participatory,‘deeper’ democracy. However, these hopes have often been disappointed despite civilian electoralrule, and international aid donors and political gurus’ praise for civil society groups as the solution toLatin America’s woes. As organized civil society actors become institutionalized under neoliberalismand globalization, the separation of society and the state is blurred on the ‘legal-institutional terrainlinking civil society and the state’ (Foweraker, 1995: 103). Nevertheless, more civil society actors thanever before have the right to vote (Andean populations illiterate in Spanish were granted the vote inthe late 1970s, affecting large numbers of poor people, indigenous groups, and women). Moreover,new constitutions introduced in the 1990s in many countries have attempted to reformulate the rightsand meanings of citizenship for many groups.

New constitutions: rights

The rights and identities of civil actors in Latin America have been profoundly transformed with theintroduction of new constitutions, although much remains to be done to translate these ‘paper rights’into changes on the ground. While the immediate reasons for these constitutions varied, the macro-structural context was informed by the falling legitimacy of political systems and civil action. Forexample, Peru’s authoritarian President Fujimori was challenged by civil protest and occupation ofpublic spaces, while in Ecuador widespread mobilization against a corrupt government led to theformation of a constituent assembly. In other words, in the wake of widespread military governmentsand civil mobilization, the return to electoral democracy often forced a constitutional change. Whilemany civil mobilizations and organizations have not contributed directly to the new constitutions, theirpresence and ability to express political opinions in a receptive public sphere have evidently shapeddevelopments. In Ecuador and Bolivia mobilization by indigenous movements fought back neoliberalreform, and succeeded in protecting and extending collective land rights (Deere and León, 2001a). Bycontrast, in Mexico and Peru, civil society was weakly organized with the result that harsh neoliberalmeasures for agriculture had profound effects on peasant livelihood and security.

Around the world, neoliberal reforms have been associated with recognition of ethnic citizenship,and Latin America is no exception, enacting ‘neoliberal multiculturalism’. New Andean constitutionsextended cultural and territorial rights to racial groups, namely indigenous and African-descentpopulations, such that Bolivian indigenous groups have rights to autonomous territories andgovernance structures although their livelihood and security remain problematic. In Colombia, the1991 constitution established new rights for the recognition of ethnic and religious minorities, and in1993, the ‘70 Law’ confirmed Afro-Colombian territorial and cultural rights (Minority Rights Group,1995). Although multicultural citizenship redraws the frontiers of citizen inclusion, the role of the statein guaranteeing social and civil rights often remains sketchy.

With citizenship defined in terms of plurality and difference, the representation of social actorswithin the institutions of the neoliberal state has changed. Constitutional change to recognizewomen’s, indigenous and Afro-Latin American rights has been accompanied by new forms ofadministration by which to meet the needs of and channel state (and NGO and international)resources to these groups (Bebbington and Thiele, 1993). Bolivia created a body to deal with ethnic,

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generational and gender affairs, while the Ecuadorian council of indigenous and black groups providesaccess to policy decision-making, albeit with tensions and problems, at the heart of the state (Box10.3). In many cases, these institutions reflect the capacity of social mobilization to shape politicalstructures in civil electoral regimes and international support for civil society organizations.Nevertheless, institutionalization does not guarantee a change in political cultures or equal access toresources. Whereas professional women became important representatives in new state women’sagencies (such as the Chilean SERNAM), low-income women often found themselves moreimpoverished and politically marginal (Schild, 1998).

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BOX 10.3 Ecuadorian indigenous movements move to the global stage

Ecuadorian indigenous movements emerged in the late 1970s and the 1980s to call for land-title,political representation and appropriate development. The movement’s capacity to mobilize thegrassroots (Zamosc, 1994), combined with its wide public legitimacy for attacks on corruptionand harsh neoliberal restructuring, made the Indian movement a political actor to be reckonedwith in the 1990s (Collins, 2000). Uneven development across the country – including over-worked small farms in the highlands, and the oil industry’s destruction of Amazonian areas – hadleft indigenous people with few livelihood choices apart from assimilation, poverty or migration(Sawyer, 1997). Deploying an anti-colonial discourse, the indigenous movement reformulatedEcuadorian citizenship as a question of multiple ethnicities and plural cultures, a framework thatwas eventually incorporated into the 1998 Constitution (Assies et al., 2001). By means oftransnational linkages to indigenous organizations, development agencies and advocacy groups,Ecuador’s indigenous people also challenged the models of neoliberal development during the1990s (Treakle, 1998). By exchanging information about alternative models, indigenousmovements combined development experiences from elsewhere in Latin America with newinternational legislation and multilateral agency policy to make development pro-indigenous andbring Indian populations out of poverty and into the centre of decision-making.

According to classical political theory, a citizen should and does claim a canonical set of rightsregardless of class, ethnicity, religion or gender. In Latin America, as noted above, social difference andhierarchies have made it most likely that male, mestizo, urban, elite groups have fitted the ‘model’citizen. The past 20 years of civil mobilization in Latin America, particularly among women, indigenousand poor people, have questioned this ‘model’ and introduced a multiplicity of social identities into civiland political society (Calderón et al., 2003). Indigenous and black groups have forced recognition ofmulticultural societies, while establishing rights to culturally appropriate development, education andgovernment. The introduction of divorce laws, quota laws and institutional structures to overseedevelopment for women all indicate the extent to which that mobilization has changed the politicallandscape in many Latin American countries. However, these rights are established at a time when thestate is pulling back from social provision and when politics has become highly bureaucratic, dependingon technocrats and intermediary organizations, such as non-governmental organizations (see nextsection). In this context, civil groups have focused on the formal political sphere although the widerpolitical and economic context through which livelihood, identity and security are guaranteed is inconsiderable flux.

New civil actors: institutionalisation of social movements and the ‘third sector’

Latin America has been characterized in recent years by the institutionalization of civil associations andthe emergence of the ‘third sector’, a term that refers broadly to non-governmental organizations.

While some commentators question whether NGOs can really be counted as a part of civil society(because they increasingly take on state functions and features), this highly significant shift in the civilsociety–market–state triad shapes livelihood and identity. NGOs are a highly diverse group, althoughthey generally show a degree of solidarity on behalf of the dispossessed groups (Bebbington andThiele, 1993). With a total of around 25,000 NGOs across the region, the density of NGOs variesacross the region with the largest registered numbers in Bolivia, Nicaragua and El Salvador (Jelin, 1995:93; Foweraker, 2001). In Ecuador, the greatest density of NGOs is found in areas with concentrationsof indigenous populations.

In recent years, NGOs have become brokers between civil society – especially grassrootsorganizations – and national/international funding for social development. NGOs generally gain themajority of their funds from the state, providing targeted social interventions at a distance. Forexample, in Brazil NGOs started to grow rapidly in numbers in 1985 with the beginning of ademocratic transition, assisted by CEBs (at one point, nearly three-quarters of NGOs were funded byreligious bodies). As neoliberal states retreat from the provision of social rights, NGOs mediatebetween diverse – often irregular, uneven and short-term – funding sources including nation–states,municipalities and international development agencies. International donors have been persuaded bythe argument that NGOs offer a more efficient and needs-oriented service delivery role than ‘topheavy’ states, and have favoured them in funding. With this in mind, multilateral agencies fund stateswhich in turn contract NGOs to act on their behalf, as in Peru where 90 per cent of NGO funds govia the state.

What impact do NGOs have on civil actors and the public sphere? Many commentators argue thatNGOs’ impact is mixed. Whereas they can provide needed social services – crucial at a time ofincreasing income differentials – NGOs have an ambivalent impact on civil and political society. First,NGOs are not necessarily accountable to civil society (this depends on individual NGO proceduresand ideologies). Second, they are often forced to be accountable to national and international donors.For example, in Chile, NGOs are politically autonomous but act as clients of the state (Foweraker,2001: 853). Third, competition between NGOs forces them to drop political mobilization in favour ofservice delivery. In Nicaragua, health NGOs now do less mobilizing of low-income women andquestioning of the health service model (Ewig, 1999). Fourth, social provision is targeted at specificareas and groups in increasingly technocratic procedures in which ‘clients’ – that is, citizens – have tostruggle to decide about the nature and content of the assistance offered to them (Calderón et al.,2003). Overall, NGOs are now a central feature of Latin America, mediating in diverse ways betweencivil society, the state and the market in ways that extend social rights in neoliberal and oftendisempowering ways.

Civil action in the context of neoliberal livelihood options

Under post-transition constitutional governments, civil and social rights have been downplayed,bringing into question the automatic extension of social, political and civil rights to citizens underelectoral civilian regimes. In the past 15 years, economic reforms have reconfigured the relationshipbetween political, civil and social rights. Although the state continues to have a major role in thedefinition and practice of rights, the combination of economic neoliberalism and publicdisenchantment with formal politics shifts the context within which civil society and citizens relate to,and practice, their rights (Roberts, 1997). In the early twenty-first century, how significant is socialmobilization in challenging the economic and social restructuring associated with neoliberalism?Manuel Castells, among others, argues that the network society is disenfranchising large populationsaround the world, who organize social movements in opposition to the New World Order (Castells,1997). With neoliberal rules of access, social movements and civil groups have entered energeticallyinto the political arena, bringing with them repertoires and languages, while learning the new ones.According to this perspective, groups such as the Zapatistas in Chiapas, Mexico, offer potentialalternatives to new forces of marginalization through the creation of a ‘project identity’ (ibid.: 65). As

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the first informational guerrilla movement, the Zapatistas strategically used the resources available innew telecommunications. Other writers are less optimistic about the room for manoeuvre underneoliberalism, arguing that in the post-transition period social movements have not been shown to besuccessful in affecting resource distribution (Foweraker, 1995: 104). Overall, we can say that given thepartial and uneven implementation of neoliberalism, restructuring opens up new avenues just as itcloses down others.

Two examples illustrate these mixed legacies of neoliberal livelihood and globalization. TheNorthern Mexican border maquila or assembly factories are one key site for neoliberal restructuringof work and social relations. In the mid-1990s, the killing of 50 women maquila workers prompted acivil organization to ‘fight the idea that women aren’t worth anything’ as citizens and workers (Wright,2001). This campaign combined efforts to guarantee security and livelihood in light of neoliberalmarket pressures (e.g. changing the low value of women’s labour, re-arranging shifts), as well as culturalmeanings. In our second example from Colombia, rural groups contest neoliberal destruction of eco-systems by means of organizations that similarly combine aspects of identity, livelihood and security.The PCN black peoples movement in the Pacific rainforest region organized to defend the territoryand environments upon which their livelihoods rested in bio-diverse habitats with varied resources(timber, fish, agriculture, gold). Although the 1991 Colombian constitution had granted rights to blackpopulations, these rights had to be translated into practice, by challenging logging companies andconstructing new ways of articulating environmental concerns with livelihood issues.

Just as neoliberal economic policies open up nation–state borders to international trade, multilateralagencies and intergovernmental bodies carry out policies that impact on civil society. The scope forcitizen action to shape these processes remains relatively limited, even when international bodies aresympathetic to civil ‘participation’ (Cooke and Kothari, 2001). Although adapted to mitigate furtherimpoverishment, structural adjustment policies are applied with little citizen participation. When theWorld Bank offered ‘civil society’ a place in negotiations in the 1990s, the international organizationsand states were the dominant partners, while grassroots civil society remained largely excluded(Friedman et al., 2001). Nevertheless, civil action and global networking can make a difference inshaping some international negotiations. In September 2000, representatives of Ecuador’s indigenousmovement had a seat at the Club of Paris discussions about the national debt, reflecting their highinternational profile and legitimacy (Espinosa, 2001).

Globalization: new geographies of civil action?

At the turn of the twenty-first century, the microstructures of everyday life and the heavily policedterrains of authoritarian regimes gave way to civil society action in a wider, multi-layered set of spacescomprising ‘informal, discontinuous and plural public spaces’ (Alvarez et al., 1998: 18). A global/localfocus has become increasingly important to understand actions beyond and ‘below’ the state thatshape rights, citizenship and civil action. In a deterritorialized world (where nevertheless unevendevelopment and global inequalities deepen), nation–state borders are less of a constraint on civilaction and in many cases are deliberately crossed by civil actors in order to bring about a ‘boomerangeffect’ on the nation–state (Keck and Sikkink, 1998). However, the reasons for civil actors’ mobilizationsoften show continuity with past decades, even in shifting technological, geopolitical and economiccontexts. Civil groups continue to speak of rights and citizenship, but they mobilize for these atmultiple scales and spaces.

International law from the United Nations and other inter-governmental bodies has during the pastdecades provided Latin American actors with the language and resources to press for political andsocial change in their own countries. One example is Latin American indigenous organizations’ use ofthe International Labour Organization (ILO) Convention 169 on ethnic territories to pressnation–states for collective rights to land (Brysk, 2000). By establishing indigenous peoples’ right toterritory, political recognition and appropriate development, the convention provided a benchmarkstatement through which to leverage for legal and constitutional change. In the context of

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globalization, citizenship can become multi-layered, as international law, the nation–state and collectiveterritories/local governments all shape livelihood, security and identity for civil actors.

The theoretical language used to talk about civil society action in a global context includesdiscussion of networks, webs and transnationalism, rather than state–society boundaries (Slater, 1998).Transnationalism refers to ties of non-state actors across national borders which have become morefrequent in Latin America in recent years (Radcliffe, 2001), while social movement networks haverapidly crossed national frontiers, the global North–South divide and divisions between social actors(Yúdice, 1998). International law, new communication media and transnational issue networks allcontribute to the reorganization of civil society action in Latin America. The Ecuadorian indigenousmovement, for example, is networked with a range of international actors, including the BrazilianWorkers Party (PT), European Green parties, transnational human rights organizations and indigenousadvocacy networks. The Ecuadorian indigenous movements are moreover well embedded withinSouth–South links, having active and creative ties with indigenous organizations in other Andeancountries.

Technological advances have expanded the possibility of ‘activism at a distance’ (Ribeiro, 1998: 325).New technologies, especially communication technologies, have assisted the explosion of globalized civilactions although face-to-face communication and meetings remain the most important component oforganizations’ decision-making. Due to regional markets’ liberalization, increased access to computersand late modernity’s emphasis on the image, more civil movements diversify their use ofcommunication tools. The sophisticated use of new communications methods such as websites andvideo by the Zapatista uprising in Chiapas Mexico since January 1994 is combined with the strategicuse of the photogenic figurehead of Sub-comandante Marcos (Harvey, 1998). Nevertheless, what isoften forgotten in relation to the Zapatistas is their continued reliance on ‘older’ forms ofcommunication and protest, including marches across Mexico, the reorganization of local territories andlivelihoods, and the strategic use of other civil actors (including the Catholic Church) as intermediaries.

Certainly transnational flows of images and ideas are made easier in a globalizing world, creating apotentially wider audience and support network for civil actors within Latin America. Transnationalissue networks have become established in, and beyond, Latin America, putting pressure on states andkey business actors to bring about change in human rights or environmental degradation (Keck andSikkink, 1998). While these networks can give rise to new political cultures and new brokers (Yúdice,1998: 370), Latin American civil society continues to have to engage crucially with states and themarket, through which livelihood and security can be ensured. However, these negotiations remainproblematic due to the slow pace of change in political cultures.

CONCLUSIONTheoretical approaches to civil society in the 1980s broadly suggested that social movementsrepresented a new way of ‘doing politics’, a form of politics that broke definitively with the past.However, in recent years that interpretation has been challenged on a number of fronts. First,continuities between the pre-social movement times and social movements are increasingly beinginvestigated and documented. Unions and civil associations (for example, urban migrants associations)provided an identity and an organizational framework that many civil actors later built on in the 1970sand the 1980s. With the return of electoral democracies in the 1980s and the 1990s came theunwelcome return of clientelism and corporatism, forms of linkage between civil society and thepolitical system that restricted full participatory decision-making and ‘substantive democracy’.Moreover, the existence of numerous political parties led to the fragmentation of civil organizations insome cases and, as described above, the institutionalization (NGO-ization) of civil association. Also,geographies and repertories of action, as in Mexican rural movements, show continuity with pastorganizations (Adler Hellman, 1995). The content of many civil concerns also shows continuities withthe past, namely issues of security, livelihood and identity.

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In relation to civil action, further questions have been raised in recent years about the exclusive focuson social movements as illustrations of citizen action. Is the Maoist terrorism of Peru’s Shining Path asocial movement? Most people would say not. Does the daily, small-scale foot-dragging resistance ofmaquiladora workers in Mexico comprise a civil action? Again, most commentators would say not butfor very different reasons. Recently, researchers have asked us to look beyond the narrow confines ofsocial movement-type forms of civil action, in order to understand the range and complexity of actionsundertaken by groups on a continuum from armed rebellion through to the hidden tactics of themarginalized (Fox and Starn, 1997). The sheer heterogeneity of civil, political and social forms defiessimple categorization, especially given their diverse social and political repertoires (Scott, 1986).

Third, although social movements were celebrated – and certainly in some cases, functioned – as‘schools for democracy’, the return to electoral democracies in the 1980s demonstrated clearly that,in many ways, politics was ‘back to normal’ and that was not necessarily fully participatory nordemocratic. With the return of political parties, the relation between civil society and the state was inmany situations characterized – as in previous decades – by clientelism and corporatism. Achievingmaterial goods and services in this context often comes through compromise with the state, therebyreducing the independence and autonomy of civil groups (Adler Hellman, 1995). Civil actors in theirdealings with technocratic, neoliberal and NGO-ized states continue to face an uphill struggle toensure participation, representation and accountability (Aguero and Stark, 1998). In exceptionalcircumstances, civil action and progressive elements in the state permit participatory oversight anddecision-making, although these are restricted currently to the municipal level. In Porto Alegre, Brazil,participatory budgeting takes place with community organizations that set the priorities for municipalplans ensuring that benefits go to each neighbourhood (Foweraker, 2001). In Guamote, Ecuador, an18-month participatory workshop defined development goals and means, led by the indigenousmayor and involving over 4,000 local people and local associations (Radcliffe et al., 2002).

Globalization has advanced steadily in Latin America during the past two decades, as neoliberaleconomic measures open the region to global capital and make them more vulnerable to globalmarkets. Globalization has also influenced politics with the introduction of international law andinternational social development bodies that strongly influence nation–states and their relation tocivil society in the region. Latin America’s population is not only mostly urban, but it is nowincreasingly linked to global consumer patterns and media flows. Civil society action has beenshaped centrally by modernity and globalization. Globalization provides civil actors with a widerrange of reference points, perhaps questioning their attachment to the nation–state. Yet globalizationdoes not guarantee livelihood and security for most Latin Americans, excluded as they are fromneoliberal growth policies and from increasingly distant nation–states and institutions. Whereglobalization can make a difference it has been in networking Latin American civil groups andindividuals with others in a similar position, and offering them a vision of what they can achievethrough coordinated action. In the meantime, however, uneven geographies of global developmentand the continuities in Latin American political cultures restrict political participation, and underminelivelihoods for many civil society actors.

FURTHER READING

Alvarez, S., Dagnino, E. and Escobar, E. (eds) 1998 Cultures of politics, politics of cultures: re-visioning Latin American social movements. Westview Press, Boulder, CO. A collection of 15 papers oncivil society, social movements and the state in the context of democratization, neoliberalism andglobalization.

Chalmers, D. A. et al. 1997 The politics of inequality in Latin America: rethinking participation andrepresentation. Oxford University Press, London. A detailed discussion of the neoliberal regime ofrights and its impact on civil society.

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Foweraker, J. 1995 Theorising social movements. Pluto Press, London. The best review of thetheoretical literature on social movements and the role of the state in Latin America.

WEBSITES

Ecuador’s indigenous organizations, conaie.nativeweb.org/index.html

Guamote’s local government, Ecuador, www.snvworld.org/localGovernance/part%205/Ecuador_1.htm

Latin American indigenous movements, abyayala.nativeweb.org

Porto Alegre participatory budgeting, www.worldbank.org/participation/sdn/snd71.pdf orwww.futurenet.org/24democracy/lewit.htm

Zapatistas in Chiapas, Mexico, www.ezln.org (in Spanish) or www.utexas.edu/students/navethen click on ‘About the EZLN’ icon on the left.

Zapatistas Internet lists and sources, eco.utexas.edu/faculty/Cleaver/chiapas95.html

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www.snvworld.org/localGovernance/part%205/Ecuador_1.htm

www.snvworld.org/localGovernance/part%205/Ecuador_1.htm

www.worldbank.org/participation/sdn/snd71.pdf

www.futurenet.org/24democracy/lewit.htm

www.utexas.edu/students/nave

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This chapter provides an overview of trends in urban livelihoods and employment in Latin Americabetween 1980 and the present. The discussion commences with an introduction to the concept of‘livelihoods’ and a brief resumé of how low-income households in towns and cities have diversified andintensified their livelihood strategies in the wake of economic crisis and neoliberal restructuring. Thesecond section of the chapter deals more specifically with employment, which remains the urbanpoor’s primary source of income (ECLAC, 2002b). Here, particular attention is given to the growth ofthe urban informal sector (UIS), and the informalization of urban labour markets more generally. Sincewomen’s rising labour force participation stands out as one of the major features of adjustment inurban areas in the past two decades, both in the ‘public’ sphere of the labour market, and in the‘private’ sphere of the home (González de la Rocha, 2000), the third section of the chapter considersthe gender dimensions of urban employment and the implications of women’s rising labour forceparticipation for household evolution and gender relations.

HOUSEHOLD LIVELIHOODSThe concept of ‘livelihoods’ originated in research on poverty in rural areas, but has increasingly beenused in relation to low-income groups in urban contexts. As Chapter 9 has outlined, the conceptencompasses the diverse ‘capabilities, assets (stores, resources, claims and access) and activitiesrequired for a means of living’ (Chambers and Conway, 1992: 7). In turn, the ways in which capabilities,assets and activities are mobilized and pursued are referred to as ‘livelihood strategies’ (Chambers,1995). While theoretical and policy approaches to livelihoods range from the ‘sustainable livelihoods’framework used by the UK Department for International Development (Carney, 1998), to the ‘assetvulnerability’ framework (Moser, 1998), to the ‘capital assets’ framework (Rakodi, 1999; Rakodi andLloyd-Jones, 2002), all share the aim of codifying the multiple resources on which householdlivelihoods depend. A focus on what the poor have and how they make use of it allows for a muchmore holistic appreciation of how survival is negotiated.

Carole Rakodi’s (1999) exposition of the ‘capital assets’ approach to livelihoods concentrates onassets, which constitute a stock of capital of varying types (human, social, natural, physical and financial)which can be stored, accumulated, exchanged or depleted and put to work to generate a flow ofincome or other benefits (see Box 11.1). Depending on the local environment, social and culturalcontext, power relations within households and so on, people may manage assets differently, althoughgenerally speaking ‘households aim at a livelihood which has high resilience and low sensitivity toshocks and stresses’ (Rakodi, 1999: 318).

11Urban livelihoods, employment andgender

Sylvia Chant

Household livelihood strategies and neoliberal economic restructuring

Accepting that disadvantaged groups have always had to be resourceful, in the past two decadesdemands on their ingenuity have risen massively in Latin America, along with other regions of theSouth, due to recession and neoliberal economic restructuring. Features that stand out as having hada major impact on the poor include:

• losses in income through reductions in wages and job availability;• rising costs of living;• mounting competition in the labour market;• increased occupational instability and precariousness in working conditions;• and reduced social sector spending (Arce, 2002).

Assessing how these changes have affected low-income people in Latin American cities is inevitablycomplicated by variations in contextual factors such as local labour market conditions, pre-existinglevels of national poverty, and the specific measures adopted by different countries to restructure theireconomies (Chant, 1996). None the less, the findings of case studies from different parts of the regionindicate that the urban poor have had to make considerable on-going efforts to protect livingstandards. The main strategies used, and which are identified in Rakodi’s (1999) general discussion ofthe capital assets framework for livelihoods, are summarized in Box 11.2.

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BOX 11.1 Capital assets of the poor (source: Rakodi, 1999)

• Human capital – vocational skills, knowledge, access to/command over labour, health.• Social capital – relationships of trust, reciprocity and exchanges that facilitate

cooperation, and may provide for informal safety nets among thepoor (NB: there can also be ‘negative’ social capital in the form ofviolence, mistrust and so on).

• Natural capital – natural resource stocks such as trees, land, biodiversity (particularlyrelevant to rural areas).

• Physical capital – basic infrastructure and producer goods such as transport, shelter,water supply and sanitation, energy, and communications.

• Financial capital – savings (whether in cash, livestock, jewellery), and inflows of money,including earned income, pensions, remittances, and state transfers.

BOX 11.2 Major strategies adopted to protect household livelihoods inthe context of recession and restructuring (source: Rakodi, 1999)

1 Strategies to increase resources by intensifying the use of natural, physical or human capital. Thisincludes diversification of economic activities, starting businesses, migrating, renting out rooms,and increasing subsistence production. A particularly common strategy has been to place morepeople into the workforce and for households to adopt multiple earning patterns and/orincrease ‘occupational density’, rather than rely on a single wage or ‘breadwinner’. Many newworkers deployed into the labour force are women who were hitherto economically inactive.

2 Strategies to change the quantity of human capital. These can take two main forms. First,household size might be increased through the retention or incorporation of members. A

While Rakodi divides households’ strategies into four groups, they are underpinned by two mainimperatives: to minimize consumption (‘expenditure-conserving’ or ‘negative’ strategies), or tomaximize income (‘income generating’ or ‘positive’ strategies) (Benería and Roldán, 1987; González dela Rocha, 1991). To a large extent it is agreed that the use of such strategies has enabled the poor inLatin America to cushion themselves from the worst ravages of post-1980 recession andrestructuring. In one low-income settlement in Guadalajara, Mexico, for example, increases in multiple-earning coupled with the expansion of household membership between 1982 and 1985, resulted ina fall of real per capita income of only 11 per cent despite a 30 per cent drop in the wages of (male)household heads (González de la Rocha, 1988). In urban Latin America as a whole, increases in theeconomically active population to working age population continued rising during the 1990s, from59.6 per cent to 61.2 per cent between the beginning and end of the decade (see Table 11.1). Fourout of every ten employed persons in Latin America is now a ‘secondary worker’ (defined as a personwhose earnings are less than that of the main breadwinner in the household), and the increase in so-called ‘occupational density’ within households has provided an important defensive function (ECLAC,2002b: 97).

Even if the majority of households have managed to fend off destitution in the crisis years, manyhave only done so at the cost of unprecedented self-exploitation and self-denial. Not only are adultsworking increasingly long days for lower returns, but poverty and the economic crisis have also beenassociated with a rising need for children to participate in income-generating activities (McIlwaine etal., 2002: 125). Moreover, there is considerable doubt that such efforts can continue in the face ofworsening macro-economic circumstances. At the start of the twenty-first century, incomepolarization is intensifying in Latin America, and for the majority of the poor, life remains extremelyarduous. Not only do the poor stand a disproportionate risk of being unemployed or engaged in low-productivity occupations, but many live in over-crowded conditions, lack access to drinking water, andhave high demographic dependency ratios through taking care of children and/or the elderly (ECLAC,2002b: 16). In relation to Mexico, Mercedes González de la Rocha (2001) warns that persistentpoverty over two decades has effectively brought the poor to their knees (Figure 11.1). While themobilization of household, family and community solidarity served as vital resources in the past, thereis a limit to how many favours people can call on from one another and how effective these exchanges

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major motivation might be for the relative(s) in question to take on domestic chores andchildcare in order to release wives and mothers into the labour force. Alternatively, householdsmay opt for cutting consumption costs by lowering fertility, by engaging in migration, or byshedding members who are not making an adequate contribution to household well-being.The latter applies in cases where women leave husbands who fail to provide financially, andwho set up on their own with their children.

3 Strategies which involve drawing on stocks of social capital. These include borrowing, seekingcharity, begging, and perhaps most importantly, strengthening people’s extra-domestic links withkin and friends beyond the household unit for the purposes of securing and/or exchangingmoney, food, labour, and so on.

4 Strategies to mitigate or limit a decline in consumption. These encompass the avoidance of ‘luxury’purchases or expenditure, the withdrawal of children from school, the scaling down of socialengagements and obligations, the buying of second-hand clothes, and reduced spending onfood and drink. Although people normally try to protect food consumption above all else,studies from several countries indicate that recession and restructuring have led to the pooreating fewer meals per day and also cutting down substantially on expensive items such asmeat, milk and fresh fruit juice.

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TABLE 11.1 Latin America: key labour market aggregates, 1990–1999

Persons (thousands) Average annual rate of change (%)1990 1994 1997 1999 1990–94 1994–97 1997–99 1990–99

Total population 429,775 460,791 484,133 499,872 1.8 1.7 1.6 1.7Urban 305,352 335,804 358,904 374,553 2.4 2.2 2.2 2.3Rural 124,524 124,987 125,229 125,319 0.1 0.1 0.0 0.1

Working-age population 274,619 302,852 324,685 339,680 2.5 2.3 2.3 2.4Urban 202,454 228,358 248,478 262,354 3.1 2.9 2.8 2.9Rural 72,165 74,494 76,208 77,327 0.8 0.8 0.7 0.8

15–64 years 254,569 280,102 299,741 313,203 2.4 2.3 2.2 2.3Urban 187,968 211,517 229,732 242,187 3.0 2.8 2.7 2.9Rural 66,601 68,586 70,009 71,016 0.7 0.7 0.7 0.7

Over 64 years 20,050 22,749 24,944 26,478 3.2 3.1 3.0 3.1Urban 14,486 16,841 18,745 20,167 3.8 3.6 3.7 3.7Rural 5,564 5,980 6,199 6,311 1.5 1.6 0.9 1.4

Economically active population 167,485 186,446 201,417 211,833 2.7 2.6 2.6 2.6(15 years and over)

Urban 120,688 138,097 151,968 161,648 3.4 3.2 3.1 3.3Rural 46,797 48,349 49,448 50,185 0.8 0.8 0.7 0.8

Employed persons 159,841 175,632 187,824 194,714 2.4 2.3 1.6 2.2Urban 114,087 127,987 139,094 144,190 2.9 2.8 1.8 2.6Rural 45,754 47,645 48,730 49,524 1.0 0.8 0.8 0.9

Source: ECLAC (2002b: 88, Table III.1).

Figure 11.1 Low-income settlement, Querétaro, Mexico. Photograph by Sylvia Chant

are in the face of huge structural impediments to well-being. In particular, there are worries that thedisproportionate burdens that have fallen on women have stretched their personal reserves to fullcapacity and there is no further ‘slack’ to be taken up (Moser, 1992).

Gender-differentiated impacts of structural adjustment

Ingrid Palmer (1992) argues that structural adjustment has worsened women’s position by intensifyingtwo gender-based misallocations in the market: (a) unequal terms of male and female participation inemployment; and (b) women’s subjection to a ‘reproduction tax’ which derives from theirresponsibility for a disproportionate share of unpaid labour in the home. The effects of restructuringon these misallocations among the urban poor are three-fold:

1 the informal sector becomes more crowded which, given women’s disproportionate concentrationin this sector, leads to a greater fall in female income;

2 reductions in social service expenditure mainly affect reproductive work within households andipso facto women who are primarily responsible for domestic labour and childcare;

3 the introduction or raising of user charges for health and education means that women are morelikely to be discriminated against in terms of access to schooling and medical care, which hassignificant knock-on effects on human capital accumulation and well-being.

While the implications of these gendered dimensions of restructuring are explored in more detaillater in the chapter, suffice it to say here that substantial numbers of women have become ‘burnt out’by their increasingly arduous, multiple roles and responsibilities (Elson, 1991; Moser, 1992). Although,as we shall see later, increased labour force participation can enhance women’s power and autonomy,in many respects it has merely compounded their exploitation, especially given the concentration ofwomen in the lowest tiers of the occupational hierarchy, both in formal and informal employment(Figure 11.2) (González de la Rocha, 1994; Chant with Craske, 2003).

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Figure 11.2 Home-based commerce, Puerto Vallarta, Mexico. This is often small-scale due to lack of resources.

Here, the owner minds her children while selling bars of soap, boxes of matches, sweets, single cigarettes and small

cupfuls of cooking oil from the side of her house in a low-income settlement. Photograph by Sylvia Chant

In the following section the changing contours of urban employment in Latin America are sketchedout more generally. This is important not only because employment has been identified as ‘the mainlink between economic growth and social development’, but because the utilization of labour providesthe main source of household income for the urban poor (ECLAC, 2002b: 99).

URBAN EMPLOYMENTIn the past two decades, employment in Latin America has undergone radical transformation througheconomic globalization (see Chapters 1 and 3). According to Ward and Pyle (1995: 38) this has beencharacterized by three main trends:

1 a shift to export-oriented economic growth strategies under the influence of IMF and WorldBank loan conditionalities;

2 the globalization of the production and marketing operations of transnational companies;3 debt crises and recessions.

Additional factors include shifts in terms of trade and technological change, and lessening interventionof the state in economic and labour matters (Berry, 1997: 3; Sheahan, 1997: 8). More recently, the riseof information and communication technologies has become significant, with fears that thetechnology-intensive modernization of tertiary as well as secondary activities may depress jobcreation in the formal sector (UNDP, 2001). While the multiplicity of macro-economic, political,institutional and technological trends makes the process of analysing the evolution of urban labourmarkets highly complex, a number of trajectories seem to be shared among different countries in LatinAmerica. These include rising levels of unemployment and underemployment, deteriorating wages andworking conditions, an increased supply of labour (especially that of women, and in large part due topressures on household incomes), and mounting numbers (and proportions) of informal sectorworkers.

Unemployment and underemployment

The most troubled time for employment in the majority of Latin American countries occurred duringthe initial stages of the debt crisis in the early 1980s. Between 1980 and 1985, underemployment inthe region grew by 48 per cent (Safa, 1995b: 33), and by 1984 open unemployment had escalated to14 per cent of the economically active population from around 6 per cent ten years previously(Cubitt, 1995: 164). Levels for some countries at this time were even higher. During Chile’s depressionof 1982–83, for example, unemployment reached 28 per cent, compared with 16 per cent in theperiod 1975–81 (Sheahan, 1997: 15).

Even if current rates of open unemployment are less than they were, and in some countries, suchas Mexico, they have been on a downward trend since the early 1990s, in general terms, the increasein labour supply has exceeded that of labour demand. Between 1990 and 1999, job supply in LatinAmerica increased by an average annual rate of 2.6 per cent, whereas demand for workers laggedbehind at 2.2 per cent (see Table 11.1).

The lack of buoyancy in Latin American labour markets in the past decade results from a numberof factors. One of the most significant is the reduction of state employment creation, not to mentionthe loss of pre-existing public sector jobs. This has arisen mainly as a result of pressure upon LatinAmerican governments from the IMF and the World Bank to trim down their ‘unwieldy bureaucracies’and to privatize parastatal enterprises. In Nicaragua, for example, a steep rise in unemployment (from4.5 per cent in 1986 to 23.5 per cent in 1994) occurred with the switch from the Sandinista to theUNO government and the opening-up of the economy to global financial institutions (Bulmer-Thomas, 1996a: 326). Within three years of Violeta Chamorro’s election to the presidency, as many as250,000 public sector employees had been fired (Green, 1995: 56–7). In Bolivia, three-quarters ofworkers in the state mining company, COMIBOL, were dismissed following implementation of the

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country’s ‘New Economic Policy’ in 1985 (Jenkins, 1997: 113). In Argentina, the privatization of fivemajor firms which were under government control until 1989 – Argentine Airlines, ENTEL (thetelephone company) and three other utility companies (gas, electricity and sanitation) – led to theslashing of the overall workforce in these companies of 100,000 to a mere 51,000 (Geldstein, 1994).In Latin America more generally, the overall share of public employment in the non-agricultural sectorfell from 15.3 to 13.2 per cent between 1990 and 1995 (Thomas, 1999: 279).

Formal jobs have also been lost in the private sector due to the fact that increased globalcompetition has either forced firms to close down altogether or to introduce and/or intensify the useof subcontracting arrangements as a means of cutting costs. Indeed, practically all the increase inunemployment in Latin America in the 1990s was attributable to job losses (see Table 11.2).L

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TABLE 11.2 Level and composition of unemployment in urban and rural areas of Latin America,

1990–99

Persons (thousands) Annual rate of change1990 1999 (%)

Unemployed persons 7,643 18,118 10.1Urban areas 6,600 17,457 11.4Rural areas 1,043 1,661 –4.9

Laid-off workers 5,932 15,391 11.2Urban areas 5,225 15,204 12.6Rural areas 1,708 1,186 –13.8

Seeking work for the first time 1,711 2,728 5.3Urban areas 1,376 2,253 5.6Rural areas 1,335 1,475 3.9

Source: ECLAC (2002b, p. 101, Table III.6).

Numbers of unemployed persons in Latin America increased at an annual rate of 10.1 per cent inthe 1990s, with the biggest rises occurring in the period 1997–99 (see Table 11.2). Unemploymentrates are particularly high among the poor, with the urban unemployment rate for the poorest 20 percent of households in the region being 22.3 per cent, as against 10.6 per cent for the population ingeneral (ECLAC, 2002b: 22). Unemployment is also mounting among young people aged 15 to 24years. Between 1994 and 1999, for example, youth unemployment rose from 14 per cent to 20 percent (ILO, 2000). Moreover, despite the generally upward trend in female labour force participation(see below), urban unemployment among women during the 1990s rose from 7.7 to 12.3 per cent,as against an increase from 6.7 to 9.4 per cent among their male counterparts (ECLAC, 2002b: 106).

The average duration of unemployment in Latin America has also shown signs of increase. Duringthe second half of the 1990s, the mean length of time unemployed rose from 4.4 to 5.3 months(ECLAC, 2002b: 23). On top of this, evidence suggests that wage levels have declined for peoplereturning to work after ‘time out’. In Uruguay, for example, which has experienced high levels ofunemployment for some time, and where there is an increasing incidence of temporary labourrecruitment, people who manage to return to work commonly face a 23 to 34 per cent reduction insalary. The main reasons for this are three-fold. First, difficulties in finding waged employment forcessome people to resort to own-account work in the informal sector, where average hourlyremuneration is lower. Second, returning to work is often accompanied by a reduction in hoursworked, which depresses monthly income. Third, even where people do find full-time wagedemployment, they tend to be paid less than in their previous jobs. As such, episodic (and increasingly

protracted) spells of unemployment, can seriously diminish the income and well-being of workers andtheir dependants. As asserted by ECLAC (2002b: 109), income reductions among people rejoining theworkforce ‘may be functioning as a secondary adjustment mechanism in labour markets, whereregulations and procedures regarding the hiring and firing of workers are increasingly being loosened’.

Wages and working conditions in the formal sector

In addition to job losses in the formal sector, the past two decades have been marked by substantialchanges in working conditions, particularly in the manufacturing sector. In general terms, this hascomprised a greater incidence of short-term and subcontracted labour, the restriction of trade unionactivities, and the introduction of policies geared to ease processes of hiring and firing. In many cases,these changes have resulted from the pressure exerted by international financial institutions to reduce‘structural rigidities’ in the workforce and to encourage greater labour ‘flexibility’ (Tironi and Lagos,1991; Green, 1996: 109–10). In Bolivian manufacturing, for example, there has been an increasingconcentration of production in small-scale factories and workshops, and a doubling of the percentageof workers working 49 hours per week or more (Jenkins, 1997: 119). In Mexico, shoe manufacturersin the city of León have farmed out increasing amounts of production to home-based workshopsand/or individual outworkers as a means of flexibilizing their operations and cutting labour costs(Chant, 1991; see Figure 11.3).

The paring-down of ‘structural rigidities’ has also been accompanied by labour law revisions. TheNew Economic Policy in Bolivia, for example, embodied reduced protection for workers and anelimination of wage indexation leaving wage levels to be bargained within individual firms (Jenkins,1997: 113). In Peru, legislation was introduced in 1991 which gave the right to employers to hirepeople on ‘probationary’ contracts, leaving them virtually no entitlement to fringe benefits or tocompensation for retrenchment (Thomas, 1996: 91). This has had far-reaching implications given thatthe proportion of the Peruvian workforce on temporary contracts rose from 41 per cent to morethan 50 per cent between the early and late 1990s (Thomas, 1999: 276). By the same token, it isimportant to note that such practices were by no means absent in large firms before the crisis. As

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Figure 11.3 Home-based footwear production, Léon, Mexico. Photograph by Sylvia Chant

Roberts (1991: 118) maintains, with reference to Mexico, ‘ “implicit deregulation” . . . antedates bymany years the present policy of explicit deregulation’. Explicit deregulation refers to the formalabandonment or erosion of legislation, whereas implicit deregulation relates to the ‘inadequateimplementation or systematic bypassing’ of regulations (Standing, 1989: 1077).

Wage restraints have also formed an important part of formal sector restructuring, which, coupledwith inflationary costs of living, have meant negative growth rates in average real earnings in manycountries in the last twenty years. The average industrial wage in Latin America, for example, fell by 17.5per cent between 1980 and 1991, and the average minimum wage by 35 per cent (Moghadam, 1995:122). Thomas (1996: 90–1) further notes that between 1985 and 1992, urban real minimum wagesdeclined in all countries in Latin America except Colombia, Costa Rica, Chile, Panama and Paraguay.

Wages have often been held down with the agreement of trade unions, whose bargaining strengthhas tended to decline with crisis and the scaling down of formal sector activity (Epstein, 2000; Gwynneand Kay, 2000: 145, 148). According to Frundt (2002: 8) two major aspects of globalization have beenresponsible for transforming worker rights and union viability. These are first, corporate strategies topromote flexibility and subcontracting, and second, the privatization of public sector enterprises. Ontop of this, Koonings et al. (1995: 123) assert that ‘endemic poverty’ poses ‘a major threat to the capacityof trade unions to organize and defend the working population’ (see also Méndez-Rivero, 1995: 158).

Although the consolidation of democracy in many Latin American nations in recent years has beenachieved with the active participation of unions, the same process has tended to de-link them fromthe state, which in some cases has deprived them of an important source of support. Chile is oneexception here, where Frías and Ruiz-Tagle (1995: 141) argue that the institutional strength andstability of trade unions increased following Aylwin’s election to the presidency in 1990 and the endof 17 years of military rule. In Brazil too, the strong links of unions with powerful political factions arealso observed to have provided some protection (Thomas, 1996: 91). In other contexts such asGuatemala and El Salvador, union membership may have risen following the Peace Accords, but thishas not been in traditionally militant industrial unions. Instead, the bulk of new recruitment hasoccurred in ‘ “enterprise unions” and independent unions unaffiliated with any national labourorganization’ (Frundt, 2002: 10). Another area of increase in union activity is among informalentrepreneurs (Koonings et al., 1995: 119), possibly as a means of guarding their interests as the sectorabsorbs increasing numbers of formal sector refugees and new entrants to the labour market.

The urban informal sector

Alongside the ‘informalization’ of labour occurring in large-scale industry and services, Latin America’s‘informal sector’ of employment has undergone considerable expansion during crisis and neoliberalreform. A wide variety of criteria has been used to define this ‘unclear’ but ‘popular shorthand’, firstcoined back in the 1970s (Gilbert, 1998: 65). These include the size of enterprises, the level oftechnology used in the production process, legality as a business activity, social security coverage ofworkers, self- versus waged employment, and labour arrangements (Scott, 1994: 16–24; Thomas,1995). While it is true that informal enterprises are often small in scale, use rudimentary technologyand are characterized by self-employment or family labour, Roberts (1994: 6) asserts that the mostgenerally accepted definition of the informal sector ‘is income-generating activities unregulated by thestate in contexts where similar activities are so regulated’. Further noting that a number of labourarrangements in the ‘formal sector’ fit this bill and that the informal sector comprises a huge range ofjobs and incomes, Roberts argues that ‘the persisting interest in the idea of an informal economy liesnot in its analytic precision, but because it is a useful tool in analysing the changing basis of economicregulation’. Indeed, while 75 per cent of people in micro-enterprises in Mexico in 1989 were notcovered by social security, this also applied to 17 per cent of workers in formal sector firms (Roberts,1994: 16). The micro-enterprises referred to by Roberts were legally registered with the federal andlocal authorities, but since social security contributions are by far the most costly aspect of legality, thenthere is greater likelihood that employers will not pay.

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While regulation implies legality, legality itself is a multidimensional concept. Thomas (1997: 6) pointsout that ‘being legal usually involves complying with a number of regulations often imposed by a varietyof different authorities’. More specifically, Tokman (1991: 143) identifies three types of legality withwhich informal sector enterprises may not comply:

1 legal recognition as a business activity, which involves registration, and possible subjection to healthand security inspections;

2 legality in respect of payment of taxes;3 legality in respect of labour matters such as compliance with official guidelines on working hours,

social security contributions and fringe benefits.

Only 2 to 5 per cent of self-employed people (the single largest group of the informally employed) inLatin America have access to social security. This is mainly a consequence of high costs, administrativedifficulties, lack of incentives due to the eroding value of pensions, and uncertainty in occupationalprospects (ibid.: 152–3).

Growth and dynamics of the informal sector

Referring to a wide and heterogeneous range of activities such as shoe-shining, street-selling, small-scale food production, and refuse-collecting and recycling, the informal sector is primarily an employerof low-income people. While the bulk of the sector comprises low-productivity, low-profit commercialand service activities, about one-quarter of informal occupations are in manufacturing (Bromley, 1997;Grabowski and Shields, 1996: 170-1). Although trends in informal employment need to be treatedwith caution given shifting categorizations of activity by different governments and regionalorganizations, between 1970 and 1980 the informal sector increased its share of the region’sworkforce from 16.9 to 19.3 per cent (Tokman, 1989: 1067). Growth in the pre-crisis years is usuallyattributed to rural-urban migration and the consequent creation of a labour surplus in cities (Portesand Schauffler, 1993). From 1980 onwards, however, when increases in informal employment appearto have been even higher, labour surpluses have been less attributed to demographic dynamics thanto economic and labour market transformations (Chant, 2001).

In Cuba, for example, liberalization of the economy during its ‘Special Period’ dating from the collapseof communism in the former USSR and Eastern Bloc, resulted in job losses and the cessation of fullemployment policies (Molyneux, 1996; see also Chapter 4). By January 1996, there were over 160,000people registered as self-employed and the proliferation of small-scale economic activities was much inevidence. While traditionally suspicious of informal sector work, the informal sector is now recognizedand accepted by the state as an important part of Cuban people’s survival. In Nicaragua, too, the effectsof economic embargo during the Sandinista administration combined with a war-ravaged countrysideand weak industrial base meant that many people had to create their own sources of employment. By1990, the informal sector occupied nearly half the labour force in Managua, excluding domestic servants(Roberts, 1995: 124). Such tendencies have contributed to an overall increase in informal employmentin Latin American cities from 25.6 per cent to 30 per cent between 1980 and 1990 (Gilbert, 1995b),and to 48 per cent by 1999 (ECLAC, 2002b: 95). Indeed, during the 1990s, it is estimated that sevenout of every ten new jobs in urban areas were in the informal sector (ibid.: 87).

The main reasons underpinning the general upsurge in informal employment in Latin America in thepast 20 years have been cutbacks in public sector employment, the closure of formal sector firms in thewake of increased competition provoked by lowered tariff barriers, declining labour demand inthe formal sector, and increased growth of the labour force, both as a result of demographic growth perse, and pressure on household incomes (Alba, 1989: 18–21; Pelling, 2002: 235). Many family firms have alsobeen pushed into informality due to declining ability to pay registration, tax and labour overheads, bearingout the argument that ‘informality for the self-employed is basically a household survival strategy in theface of unemployment and declining real wages’ (Roberts, 1995: 124; see also Escobar Latapí, 1988). AsThomas (1996: 99) summarizes, the ‘top-down’ informalization promoted by governments and

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employers has been paralleled from the bottom up, stemming from the need for retrenched formalsector workers and newcomers to the labour market to create their own sources of earnings.

Activities and working conditions in the informal sector

In light of the above, it is hardly surprising that the informal sector has become increasingly competitiveduring recent years. As Miraftab (1994: 468) argues: ‘Poor people have had to concentrate their dailyactivities with much greater intensity around the issue of survival.’ This has implied not only longerhours of work, but also the need to be extremely innovative in order to earn a living at the edges ofthe urban economy (Escobar Latapí and González de la Rocha, 1995). Yet although ever more creativestrategies to generate income can be witnessed both in the streets and houses of Latin Americancities, competition is such that, according to ILO figures, there was a 42 per cent drop in informalsector earnings between 1980 and 1989 (Moghadam, 1995: 122–3).

Constraints on the health (and further expansion) of informal sector employment, are presented bylower purchasing power among the population in general and greater numbers of people needing towork (Roberts, 1991: 135). The latter is in part the legacy of high fertility in the 1960s and 1970s, andin part due to the increased participation of women in the workforce. Indeed, although there has beenincreased informalization of men’s work (Arias, 2000; Elson, 1999), the growth of informal activity isoften argued to have hit women the hardest given their disproportionate concentration in the sectorand the fact that their limited resource base confines them to the lowest productivity ventures withinit (Bromley, 1997: 135; León, 2000; see Table 11.3). In towns in Guanacaste, Costa Rica, for example,where low-income women constitute around 40 per cent of informal workers, many complain thatdue to extremely limited resources the only way they can generate revenue is by selling smallquantities of snacks such as home-made sweets, flavoured ices and pastries outside local schools oron the streets (Chant with Craske, 2003: 219; see Figure 11.2). Yet since most of their neighbours areforced to do the same, some feel it is not worth the effort, thereby contributing to the so-called‘discouraged worker’ effect (Baden, 1993: 13). In order to get around the problems of making endsmeet, many low-income women here and in Mexico are forced to engage in a variety of economicventures, such as combining part-time domestic service with home- or community-based activitiessuch as tortilla-making and selling, or personal services such as hairdressing (see Figure 11.4).

Beyond this, it should also be noted that the informal sector is unlikely to thrive as long as the formalsector remains fragile. Detailed empirical studies in Latin America have revealed that the informal

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TABLE 11.3 Percentage of male and female labour force in the informal sector : selected Latin American countries

Percentage of non-agricultural Women’s percentage sharelabour force in the informal of the informal sector in the

sector, 1991/1997 non-agricultural labour forceWomen Men 1991/1997

Bolivia 74 55 51Brazil 67 55 47Chile 44 31 46Colombia 44 42 50Costa Rica 48 46 40El Salvador 69 47 58Honduras 65 51 56Mexico 55 44 44Panama 41 35 44Venezuela 47 47 38

Source: United Nations (2000: 122, Chart 5.13).

sector is linked to the formal sector in numerous (and often exploitative) ways, that enterprises withthe fewest direct links with the formal sector are likely to be the least dynamic economically, and thatover time, the informal sector is increasingly likely to lose its independent basis for subsistence(Roberts, 1991: 132; Thomas, 1996: 56–9). It should also be borne in mind that the formal sector hasdepended very much on the informal sector for its own dynamism (Gilbert, 1998: 67–9). In times ofcrisis, declining fortunes in the formal sector cuts off valuable sources of contracts and supplies to theinformal sector. Thus, although informal activity has continued to expand during the years of crisis andrestructuring (and recovery in some countries in the early 1990s), it has not been able to absorb allthe job losses in the formal sector. This undoubtedly accounts for the fact that open unemploymenthas not only grown, but in most places has remained high, during the last two decades.

GENDER AND THE URBAN LABOUR MARKETAs indicated earlier, late twentieth-century transformations in Latin American urban labour marketshave been characterized by significant shifts in their gender dimensions. Not only has there been anon-going rise in women’s workforce participation, but in their overall share of employment. This partlyrepresents the continuation of a trend which commenced early in the post-war period. Bearing inmind that women’s economic activities often fail to be captured in official enumeration due to theirinformal and part-time nature, between 1950 and 1980, the size of the female labour force tripled inLatin America, with an increase in women’s share of the overall workforce (including agriculture) from18 per cent to 26 per cent (Safa, 1995b: 32). During the period 1990 to 1999, women’s labour forceparticipation rate increased from 37.9 per cent to 42 per cent, and for the first time in the history ofthe region, the increase in female employment exceeded that of men (León, 2000: 9). By the turn ofthe century, women’s share of employment stood at an unprecedented 34.4 per cent, and in urbanareas, at 35.8 per cent. (see Table 11.4).

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Figure 11.4 Home-based services – hairdressing, Puerto Vallarta, Mexico. The sign advertises haircuts, colouring

(highlights) and perms. Photograph by Sylvia Chant


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TABLE 11.4 Women’s share of labour force, and key occupational and sectoral characteristics

Female share of Women as percentage of: Women’s employmentlabour force (%) legislators, professional by sector 1995–2001**

senior officials and technicaland managers workers

1980 1994 1999 1991–2000* 1991–2000 Agriculture Industry Services

Argentina 28 30 33 – – – 10 89Bolivia 33 37 38 36 40 2 16 82Brazil 28 34 35 – 62 19 10 71Chile 26 31 33 26 52 5 14 82Colombia 25 35 38 38 49 0 20 80Costa Rica 21 29 31 33 46 4 17 79Cuba – – – – – – – –Dominican Republic 25 29 30 31 49 3 20 77Ecuador 20 26 28 28 47 2 14 84El Salvador 27 33 36 33 47 6 25 69Guatemala 22 25 28 – – 14 18 68Honduras 25 28 31 36 51 9 25 66Mexico 27 32 33 24 41 7 22 71Nicaragua 28 36 35 – – – – –Panama 30 33 35 33 46 2 10 88Paraguay 26 28 30 23 54 3 10 87Peru 24 28 31 28 39 3 11 86Uruguay 31 40 42 36 54 1 14 85Venezuela 27 33 34 24 58 2 13 85

– no data* data given for latest available year 1991–2000** data given for latest available year 1995–2001Sources: UNDP (1995, Table A2.7), UNDP (2002, Tables 23 & 25), World Bank (1996, Table 4), World Bank (2000, Table 3).

In a long-term perspective, the rise in female employment in the post-war period owes tonumerous factors (see Box 11.3). Despite the growth of seasonal export agricultural production,especially of temperate fruits, which has led to pockets of feminized rural employment in somecountries (Barrientos et al., 1999; see Chapter 12), a major reason for the relative increase in women’sshare of the workforce is the general fall in demand for agricultural labour which has traditionally beena male domain (Table 11.4). In the Dominican Republic and Puerto Rico, for example, Safa (1995b)notes that the disintegration of the sugar economy has led to employment losses for men, with theshift to urban-based labour-intensive manufacturing and services having favoured female workers.Indeed, in Puerto Rico, unemployment rates have actually been higher for men since the 1950s.

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BOX 11.3 Factors accounting for women’s rising labour forceparticipation in Latin America 1950–2000 (source: Chant with Craske,2003, p.207, Box 8.1).

• Individual rising literacy ratesrising levels of educationlater age of marriage and/or first birthdeclining fertilityrural-urban migration

• Household changes in household structure, especially rising proportions offemale-headed households

increases in household poverty and the need for multiple household incomes

changing ideologies of motherhood in which financial inputs tohousehold budgets are increasingly regarded as integral tomaternal obligations

• Labour Market declining share of agriculture in overall employmentgrowth of tertiary sector

expansion of feminized occupational niches, e.g. as operatives inmultinational export manufacturing firms

increased competition due to neoliberal restructuringderegulation and informalization

• Institutional/Legal increases in anti-discriminatory employment legislationintroduction of employment and training programmes for female-

headed households in some countriessome increase in childcare provision for working mothers

Women’s share of the labour force was already growing before the recession due, inter alia, to rural-urban migration, rising education and lower fertility (Safa, 1995a: 16; Cerrutti, 2000b: 888), That thisgrowth has continued in the wake of tightening labour market conditions suggests that post-1980economic restructuring has played an important part in the process (see Box 11.3). Indeed,Humphrey (1997: 171) notes that even during the ‘lost decade’ of the 1980s in Brazil, women’s shareof employment in the São Paulo Metropolitan Area grew from 33 to 38 per cent. A number of factorspertaining to both the demand and supply side of the labour market are relevant to these tendencies.

Women’s employment and economic restructuringOn the supply side of the labour market, numerous studies of poor urban communities indicate thatpressures on household income have been the main impetus behind women’s increased involvementin remunerated work (Benería, 1991; Chant, 1994; 1996; González de la Rocha, 1988; 2000). In manycases, this is due to the declining purchasing power of male breadwinners’ wages, and in others,because men have lost their jobs altogether (see Cerrutti, 2000b, on Argentina; Moser, 1997, onEcuador ; Nash, 1995, on Uruguay). Indeed, between 1990 and 1999, the female employment rate(measured as a percentage of the female population of working age), increased by 1.3 percentagepoints, whereas that of men fell by 3.6 percentage points (ECLAC, 2002b: 97). In respect of therecorded ratio of the economically active to working-age population during the same period, that forwomen in urban areas increased from 39.5 per cent to 43.7 per cent, but for men declined (albeitmarginally) from 81.4 per cent to 81 per cent. Yet, although men’s share of employment has fallen, it isimportant to stress that this is not because women have taken men’s jobs. Given that women havemoved into expanding yet specific gender-typed segments of the labour force not previously occupiedby men, ‘male and female workers remain relatively uncompetitive’ (Ríos, 1995: 143; Pearson, 1998). Asfurther noted by Standing (1999: 600), signs of greater convergence in women’s and men’semployment (and particularly the conditions of their employment), seem to be more to do with theprogressive informalization and casualization of men’s work than improvements in women’semployment. Whether or not this is perceived to be the case, however, is another matter (Chant withCraske, 2003: 217).

Much of the increase in female labour force participation has occurred among wives and mothers(González de la Rocha, 1988: 214–15; Selby et al., 1990: 174). A study of Mexico based on officialnational statistics, for example, indicated that women aged 20–49 years, increased their labour forceparticipation rate from 31 to 37 per cent between 1981 and 1987 (cited in González de la Rocha,1991: 117). Over one-quarter of married women in Mexico were recorded as working in 1991compared with only 10 per cent in 1970 (CEPAL, 1994: 15), and the highest levels of economic activityare now in the 35–39 year age cohort (43 per cent). In Costa Rica, there was only one female workerfor every three men in the 20–39 year age cohort in 1980, yet by 1990, the gap had narrowed to onein two (Dierckxsens, 1992: 22). More generally in Latin America, the highest levels of female labourforce participation are now among women aged between 25 and 44 years (León, 2000: 31). Thismeans that in only two decades, the ‘early peak’ pattern of women’s employment has shifted to onewhere the highest part of the curve is in the middle stage of the life course. This coincides in mostcases with what is conventionally thought to be the average age of marriage (or establishment of aconsensual union), and the end of the reproductive cycle (Chant with Craske, 2003: 213–14).

On the demand side of the labour market, the recruitment of female workers has persisted duringthe past two decades as Latin American countries have placed greater emphasis on strategies ofexport promotion (Safa, 1995b: 33; Willis, 2002: 144). This has intensified competition among firms,which have often resorted to increasing their female workforce, either directly by recruitment inindustrial plants (especially common in Mexico, Brazil, Venezuela, Puerto Rico and the DominicanRepublic), or on a sub-contracted piecework basis. Although, on the one hand, this may have increasedincome-generating opportunities for women, there are decidedly more benefits for employers.Capitalizing upon the low ‘aspiration wages’ and ‘voluntary’ labour turnover of married women, theseinclude the cutting of production costs, saving on social security contributions and fragmentation ofthe workforce (Benería and Roldan, 1987; Miraftab, 1994: 469; Peña Saint Martin, 1996). In addition, itis argued that sectors and occupations which were already marked by a high degree of feminization(for example, the labour-intensive maquiladora [assembly] industry, domestic service and other low-skilled tertiary occupations) were less hard-hit by recession than sectors in which men were prevalentsuch as heavy industry and construction (de Barbieri and de Oliveira, 1989: 23).

Upward trends in women’s employment are not confined to Latin America, and it is significant thatworld-wide increases in female labour force participation have occurred during a time in which

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conditions of employment in general have deteriorated considerably. As Moghadam (1995: 115–16)notes: ‘The global spread of flexible labour practices and the supply-side structural adjustmenteconomic package coincide with a decline in labour standards, employment insecurity, increasedjoblessness, and a rise in atypical or precarious forms of employment.’ Moreover, as Acero (1997: 72)observes, the casualization of work in the formal sector and the growth of informal activity haveaffected women to a greater extent than men. Indeed, despite the fact that unemployed women aremore likely to be classified as economically inactive ‘housewives’, it is interesting that in general termsfemale unemployment has continued to be higher than men’s (Mehra and Gammage, 1999: 51;Monteón, 1995: 51; Radcliffe, 1999: 201).

Although the numbers and proportion of economically active women have grown steadily, this hasnot been matched by an equivalent rise in female employment opportunities. During the 1990s, forexample, women classified as ‘economically active’ in Latin America grew by 3.6 per cent per annum,but women’s employment rose at an annual rate of only 2.8 per cent. This helps to account for thegeneral increase of female unemployment in Latin America from 5.1 per cent to 11.2 per cent in the1990s, and widening gaps between levels of male and female unemployment (ECLAC, 2002b: 97).

While women still tend to be restricted to a narrower range of jobs than men, and to bedisproportionately concentrated in tertiary employment (see Table 11.4), Safa’s research on PuertoRico, Cuba and the Dominican Republic reveals some diminution of occupational segregation aswomen’s participation increases in the professions, clerical work and the public sector (Safa, 1995b: 39;see also Cerrutti, 2000a, on Argentina; Willis, 2000, on Mexico). Another interesting development inthe years of crisis and restructuring, which has gone some way towards blurring the boundariesbetween men’s and women’s activities in lower income sectors, is the increased use of the home as asite of production (see Bastos, 1999, on Guatemala; Miraftab, 1994; 1996, on Mexico; Pineda, 2000, onColombia). Yet in Brazil, Humphrey (1997: 171) argues with reference to industrial employment that‘the continuing entry of women into the labour force has not in any way undermined the genderdivision of labour. Gender segregation and gender inequalities remain as great as ever.’ Part of thispattern is attributed not only to the way that labour market divisions mirror gender divisions in widersociety, but because ‘gendered occupations and work structures are constructed within the factoryand then institutionalized and legitimated through segmented labour markets’. Indeed, for Brazil, moregenerally, women’s employment is still skewed to low-productivity occupations such as domesticservice (Pitanguy and Mello E. Souza, 1997: 73).

While gendered wage differentials in most parts of Latin America are less pronounced amongyounger age groups, which suggests a possible tendency towards closure of these gaps over time (seeTable 11.5), there is no certainty that such a trajectory will become established in the long term.Acknowledging that there is some evidence of a ‘harmonizing down’ of male wages to more closelyapproximate those of women in certain areas of the labour market (Elson, 1999), the fact is that withina number of leading sectors, such as textiles and electronics, women remain locked into the leastskilled jobs, and are often pushed out when levels of automation increase and give rise to greater‘masculinization’ in export-manufacturing employment (Acero, 1997; Pearson, 2000; Ríos, 1995). In thislight it is entirely possible that more women than men will end up in the informal sector, which maywell exacerbate wage gaps. Evidence from Colombia points to earning differentials being greater in theinformal than the formal sector, with women’s average incomes being 86 per cent of men’s in the lattercompared with 74 per cent in the former (Tokman, 1989: 1071). Across Latin America more generally,the gap between men’s and women’s earnings in informal activity averages 25 per cent, compared with10 per cent in the formal sector (Funkhouser, 1996: 1746).

Leading on from this, worrying implications for pension entitlements (the bulk of which arecontributory) flow from women’s disproportionate concentration in the informal sector, their lowerearnings, and their general lack of employment continuity (Bertranou, 2001). In Argentina, research inlow-income settlements indicates that while over half the male population have made sufficientcontributions to qualify for pensions, this applies to only 15 per cent of women (Lloyd-Sherlock, 1997:

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180). In El Salvador, up to three-quarters of economically active women are not covered by socialbenefits (Gutiérrez Castillo, 1997: 151). Women’s disadvantage in pensions coverage is exacerbated bythe fact that they tend to use more of their earnings for basic household expenditure than men, whichleaves little surplus for contributions (Chant with Craske, 2003: 93, 221–2).

Women’s work, gender relations and urban households

While women are clearly still a very vulnerable group in the labour force, Safa (1995b: 33) argues thatthe crisis has heightened the ‘importance and visibility of women’s contribution to the householdeconomy as additional women enter the labour force to meet the rising cost of living and thedecreased wage-earning capacity of men’. As echoed by Radcliffe (1999: 197) for Latin America moregenerally: ‘the avocation of neoliberal development policies by most governments has significantlyinfluenced the ways in which the nexus of labour–household–economy is organized, withconsequences in turn for the nature of gender relations’.

Some research suggests that rising levels of employment have provided an important source ofprestige and power for women and have exerted democratizing influences on intra-householddecision-making. In my own studies of low-income households in the Mexican cities of León,Querétaro and Puerto Vallarta, for example, there seems to be greater collective negotiation andscrutiny over financial affairs where households have moved from a single wage earner to a dual ormultiple income-earning strategy, especially where women themselves figure among these workers(Chant, 1991). This echoes Safa’s research in Puerto Rico, Cuba and the Dominican Republic, wherealthough the cultural norm of the male breadwinner remains firmly embedded in the workplace andthe state, the large-scale incorporation of women into the labour force is asserted to have hadpositive effects on their consciousness and household bargaining power (Safa, 1995a: 58; see alsoCerrutti and Zenteno, 1999, on Mexico). In turn, the ‘myth of the male breadwinner’ seems to have

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TABLE 11.5 Wage differentials in paid employment by gender and age cohort, selected Latin American countries

Country Year Gender wage differentials by age cohort (years)*15–24 25–34 35–44 45–54 55 plus

Argentina** 1997 98 92 77 63 66Bolivia 1997 65 74 85 64 39Brazil 1996 80 72 65 56 60Chile 1996 93 82 67 62 67Colombia 1997 92 85 73 64 60Costa Rica 1997 102 87 79 87 55Dominican Republic 1997 97 87 90 84 67Ecuador 1997 94 90 77 75 62El Salvador 1997 100 85 85 91 73Honduras 1997 86 78 74 70 72Mexico 1996 90 73 66 72 84Nicaragua 1997 74 76 62 43 57Panama 1997 81 87 73 73 50Paraguay 1996 76 74 82 72 93Uruguay 1997 79 71 64 60 55Venezuela 1997 92 87 77 73 65

* figures for wage differentials expressed in terms of female earnings as a percentage of male earnings** data for Gran Buenos Aires onlySource: León (2000: 26, Table 4).

been challenged through women’s declining dependence on male incomes and growing economicparticipation in their own right (Safa, 1995b: 33). These tendencies also appear to have been importantin accounting for growing numbers of female-headed households in recent decades (Chant, 1997),with many case studies indicating that levels of female household headship tend to be greater in areaswhere women’s rates of employment are high (Fernández-Kelly, 1983; Bradshaw, 1995a; Safa, 1995a).This is not to say that female-headed households have been absent from Latin American societies inprevious historical periods (see Chant, 1997).

While acknowledging these apparent manifestations of an increase in women’s ‘autonomy’, theremay also be negative connotations, with discussions on these issues highlighting not only that womenmay be reluctant to leave their spouses (ibid.), but that within male-headed households, where mostof them remain, changes in gender relations may be negligible. As observed by McClenaghan (1997:29), for the Dominican Republic, even in households where women are the principal providers, menstill tend to be regarded as ‘el jefe’ (the head). In turn, women’s roles as wives and mothers continueto be emphasized, if not reinforced. As Tiano (2001: 202) summarizes: ‘the contradictions betweentraditional gender norms and women’s actual behaviour creates conflicts that many women reconcileby privileging their domestic roles and viewing wage work as a means by which to perform their rolesas wives and mothers more effectively’ (see also García and de Oliveira, 1997; González de la Rocha,2000; Chant, 2002b). In a context in which men’s unemployment or forced migration tends to beassociated with rising rates of conjugal instability, the fact is that even greater responsibility falls onwomen’s shoulders for the care and welfare of dependants (Nash, 1995: 162). Additional factorsaccounting for the limited impact of women’s employment on gendered power relations, as noted byGonzález de la Rocha (1994: 141-2) in relation to Guadalajara, Mexico, are:

• that women’s earnings are usually so much lower than men’s;• that women cannot necessarily control their own earnings;• women are still very much tied to childcare and domestic responsibilities.

Given that there has been such little movement by men into reproductive tasks, it is not surprising thatwomen’s labour burdens in Latin America have tended to grow in the past 20 years – as outlined bya wide variety of studies (Langer et al., 1991: 197; Chant, 1996: 298; Pearson, 1997: 677; UNICEF, 1997:19; Safa, 1999: 16). Women’s continued (and frequently rising) burdens of reproductive labour may bepartly explained by what Gates (2002) calls the ‘strategic use of gender in household negotiations’. Onthe basis of her research among women workers in Agua Prieta, Sonora, on Mexico’s northern border,Gates observes that women frequently negotiate their entry into waged work by making ‘offers’ (forexample, of housework, or earnings) to their menfolk. In so doing, women affirm their gender identityand thereby sustain gender norms ‘even as they pursue interests that challenge gender norms’ (ibid.,p.522). In light of this, Gates (2002: 523) suggests that we might be best advised to ‘reinterpret anincreased burden of household labour as a calculated trade-off made in order to win practicalchanges’. This gender bias in household livelihood organization not only impacts upon mothers, but canalso extend to daughters. In order to accommodate the labour force participation of adult women,older female children may take care of younger siblings and/or perform vital domestic tasks. As aconsequence, they neglect their own education or have to leave school altogether (Moser, 1989; 1992;Dierckxsens, 1992; Rodríguez, 1993). This obviously undermines the socio-economic prospects ofwomen in younger generations and may exacerbate future gaps between male and female education,training and employment.

An additional downside of rising levels of female labour force participation is that men have notalways reacted positively to sharing responsibilities for financial provision with their womenfolk.Coupled with the general insecurity and exhaustion associated with increased poverty, and unequalburdens of labour, this is commonly linked with rising levels of intra-household conflict (Benería,1991; Geldstein, 1994: 57; Gledhill, 1995: 137; Townsend et al., 1999: 29). As Selby et al. (1990: 176)argue:

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Male dignity has been so assaulted by unemployment and the necessity of relying on women for thesubsistence that men formerly provided, that men have taken it out on their wives and domesticviolence has increased . . . the families which have been riven by fighting and brutality can easily besaid to be the true victims of economic crisis.

Certainly, loss of employment and dependence on women’s earnings can strike an extremelydiscordant note at the core of masculine identities (Kaztman, 1992; Gutmann, 1996; Escobar Latapí,1998; Chant, 2000, 2002a, b; Fuller, 2000). This, in turn, may have destabilizing effects on families, as wellas play a part in provoking increased levels of community violence (see Moser and McIlwaine, 2000,2001a, b). By the same token, men who have reacted violently towards women, can and do change,often as a result of women’s instigation (Gutmann, 1997)

CONCLUSIONReflecting on trends in employment and livelihoods in Latin America in the past 20 years, it is clear thattrajectories in a number of areas have been less than positive. How some of the more negative trends– increased poverty, mounting occupational instability, and rising levels of self-exploitation among thepoor – may be redressed remains problematic, not least because of diminished scope on the part ofgovernments to intervene in labour markets and to provide social assistance (Batley, 1997; Arce,2002). Indeed, part of the reason for current levels of vulnerability and privation among the urbanpoor is precisely because the progressive erosion of state services and subsidies has forced greaterprivatization of livelihood struggles within low-income households (Benería, 1991: 171, 176). Yet whilepoor households have traditionally been able to manage some self-defence by mobilizing their own(albeit limited) resources, González de la Rocha (2001) argues that persistent poverty over twodecades has massively sapped people’s reserves and made such mobilization considerably less viable,not to mention less desirable (see also Molyneux, 2002). This is particularly pertinent to women,where the cumulative depletion of time, energy and income has led to a situation in which they arecarrying burdens within their households that are close to unsustainable and which are seriouslyaffecting their physical and psychological health. There is a clear need for interventions to ensure thatthe poor are prevented from engaging in protracted self-exploitation that jeopardizes their ownchances of survival, and those of their children.

In order to better guarantee the access of the poor to livelihood possibilities that do not furthererode their assets and well-being, it is vital that attempts are made to ensure that adequateemployment is created to absorb Latin America’s growing labour force, and that this can providereasonable financial support for workers and their ‘dependants’, be these children, elderly relatives andso on. Here public and international pressure to encourage employers to subscribe to the ILO’srecently launched initiative to ‘Reduce the Decent Work Deficit’ may help to provoke some advances.The ‘Decent Work’ agenda has the goal of obtaining productive work for all in conditions of freedom,equity, security and human dignity. It is a goal both for individuals and for nations and is built aroundfour strategic objectives, all of which are cross-cut by gender (see Box 11.4). While recognizing thatcompetition in the global economy may make enterprises less willing to countenance workers’ rights,or to pay for social protection, the ILO argues that there are major economic dividends from decentwork. Better paid workers tend to have higher levels of job satisfaction and productivity, and alsorespond positively when they are entitled to good quality jobs, profit-sharing and a decision-makingvoice in the workplace (ILO, 2001).

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Some measures could be taken to improve standards and efficiency in the informal sector which hasclearly become a long-standing feature not only of labour markets in Latin America but elsewhere inthe world (Pearson, 2000: 16). Moreover, the time is arguably ripe to do so. Hernando de Soto’s(1989) widely publicized arguments for championing the informal sector as an ‘engine of growth’ and‘sector of entrepreneurship’ seem to have captured the hearts and minds of policy makers, and placedmore proactive informal sector initiatives firmly on the agenda at national and international levels(Cubitt, 1995: 175; Szirmai, 1997: 208). One popular idea, for example, is the repeal of regulations andpolicies which obstruct entrepreneurship without serving any legitimate public regulatory purpose.Another is the scaling down or cessation of assistance to ‘favoured’ sectors such as large enterpriseswhich has hitherto discriminated against the informal sector (Chickering and Salahdine,1991: 6;Grabowski and Shields, 1996: 172).

On the supply side of the labour market, policies geared towards education and training to promotediversification, to enhance access to credit, to improve management and marketing, and to promotegreater health and safety, would undoubtedly improve conditions in informal employment (Rodgers,1989). Such initiatives are particularly relevant for groups such as ambulant traders and food vendorswhere women often form a large percentage of operatives (Leach, 1999; Tinker, 1997). These might beimplemented along with the decentralization of policies to accord with needs and skills in differentlocalities (Portes and Schauffler, 1993: 56), as well as the re-orientation of policies from individual firmsto groups of workers as a means of utilizing the social networks and social capital which are often sovital to the successful operation of informal activity (Portes and Itzigsohn,1997: 244–5; Portes andLandolt, 2000).

Aside from steps to improve the rate and quality of job creation in conventional formal and informalemployment, increased facilities for vocational education in expanding spheres such as informationtechnology could bolster income and employment prospects at both national levels and at thegrassroots. On the one hand, indigenous economic activity may be enhanced insofar as the moreskilled and educated the labour force, the greater its likely productivity, which, in turn, could provide animportant market for goods and services (Szirmai, 1997: 90–1). On the other hand, and in view of thelikely powerlessness of Latin America to resist the forces of globalization, this could attract greaterforeign investment into the region. As Mitter (1997: 26–7) points out, the youth of developing countrypopulations set against demands for new technological skills are likely to motivate Northern

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BOX 11.4 Strategic objectives of the ILO’s ‘decent work’ agenda (source:ILO, 2001)

1 Employment: This refers to job creation through sound and sustainable investment and growth,access to the benefits of the global economy, supportive public policies and an enablingenvironment for entrepreneurship.

2 Standards and fundamental principles and rights at work: Following on from the ILO Declarationon Fundamental Principles and Rights at Work of 1998, this objective calls for the creation ofwork that does not involve forced labour, exploitation, discrimination and denial of association(e.g. prohibition on the formation of trade unions).

3 Social protection: This principle is concerned with ensuring that workers have formal protectionfor old age, invalidity, sickness and health care, and with creating safe and dignified workingconditions

4 Social dialogue: This advocates the opening of channels of communication between differentstakeholders in the economy, and particularly about giving workers in the informal economymore of a voice and greater representation

companies to spread information-intensive aspects of production to the South in the next fewdecades (see also UNDP, 2001). Acknowledging these trends, some governments in the region havealready started making dedicated moves to expand technical and professional training (see, forexample, MINDESP, 2001 on Bolivia).

Alongside interventions in the labour market and in education and training, household livelihoodsamong the poor could be bolstered by other (relatively modest) investments in human capital such asprimary health care, and housing and neighbourhood improvements. The latter would be especiallyrelevant given the tendency for greater numbers of people to resort to domestic-based economicactivity and flexible working. In order to arrest existing trends in women’s exploitation, attempts couldbe made to alleviate their household and parenting responsibilities via the introduction or extensionof publicly subsidized childcare programmes, as well as by concerted efforts to encourage men toengage in parenting, housework and/or financial support, whether as resident or non-residenthousehold members (UNICEF, 1997; Chant, 2002b; Chant with Craske, 2003). While recognizing thatLatin American governments are restricted in their range of economic and social options by anincreasingly competitive global economy and by international financial institutions, without dueattention to the individuals and households who make up their societies, attempts to shape a morepositive and equitable future for the continent are likely to be doomed to failure. While the livelihoodsmodel represents a useful analytical framework to understand how the poor ‘get by’, care must betaken that its positive conceptualizations of people’s resources and resourcefulness do not translateinto neglect of their fundamental societal needs by politicians and policy-makers. In an unequal world,the store and efficacy of grassroots ‘assets’ are by no means limitless, and for the urban poor in LatinAmerica, especially women, this fact requires immediate recognition.

ACKNOWLEDGEMENTSMy thanks go to Cathy McIlwaine for her helpful comments on an earlier draft of this chapter.

FURTHER READINGChant, S. with Craske, N. 2003 Gender in Latin America. Latin America Bureau/Rutgers UniversityPress, London/New Brunswick, NJ. This book provides an overview of changing patterns of genderin Latin America in the past three decades, with dedicated reviews of themes that are directlyrelevant to this chapter. These include Chapter 3 on gender, poverty and social movements, Chapter7 on gender, families and households, and Chapter 8 on gender and employment.

Economic Commission for Latin America and the Caribbean (ECLAC) 2002 Socialpanorama of Latin America 2000–2001. Comisión Económica para América Latina y el Caribe,Santiago de Chile. An accessible and comprehensive overview of economic and social trends inLatin America in the last decade of the twentieth century, particularly as they relate to poverty,income inequality, employment and unemployment, social expenditure and shifts in family life andorganization. The analysis is complemented by several tables, boxes, figures and appendices and isdownloadable in PDF format from www.cepal.org.

Portes, A., Dore-Cabral, C. and Landolt, P. (eds) 1997 The urban Caribbean: transition to a newglobal economy. John Hopkins University Press, Baltimore, MD. An interesting collection of casestudies on a wide range of countries in Central America and the Caribbean, including Costa Rica,Haiti, Guatemala and the Dominican Republic. These are bound together by the underlying questionof whether the urban informal sector is an arena of growth and entrepreneurship, or one of survival.

Rakodi, C. with Lloyd-Jones, T. (eds) 2002 Urban livelihoods: a people-centred approach toreducing poverty. Earthscan, London. This book consists of a series of interdisciplinary contributionson key issues in current livelihoods debates. Examination is made of the value of a focus on

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livelihoods in analysing urban poverty and in guiding policy and programme formulation in relationto development challenges such as employment, education and people’s living environments.

Roberts, B. 1995 The making of citizens: cities of peasants revisited. Edward Arnold, London. Thisbook is a substantially revised version of Roberts’ classic text Cities of peasants, published by EdwardArnold in 1978. The main focus is Latin America, but the analysis is strongly informed by a widerglobal perspective. Of particular relevance to the present chapter are Roberts’ discussions inChapter 5, which looks at employment in cities, and Chapter 7, which covers various aspects ofhousehold livelihoods.

Thomas, J. 1995 Surviving in the city: the urban informal sector in Latin America. Pluto, London. This ispossibly the most thorough account of the nature and behaviour of the informal sector ofemployment in Latin American cities in recent years. It traces the history of conceptualizations ofinformal sector activity and its wide-ranging characteristics. Particular attention is paid to theevolution of informal employment in the wake of urban growth, the debt crisis and economicrestructuring in the late twentieth century. There is also discussion of the longer-term prospects forthe urban informal sector in Latin America, and of the implications of different policy interventions.

WEBSITES

Department for International Development, www.livelihoods.org, UK government websiteon the livelihoods approach to reducing poverty.

Economic Commission for Latin America and the Caribbean, www.cepal.org

International Labour Organization, www.ilo.org

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The main argument in this chapter is that the neoliberal policies followed by almost all Latin Americancountries since the 1980s are further deepening the exclusionary character of the region’s ruralmodernization and jeopardizing the livelihoods of the peasantry. The chapter begins by discussing thelegacy of Latin America’s agrarian reforms. It then examines the changes in the countryside ushered inby government policies supportive of the modernization of capitalist farms within the context ofglobalization. The influence of these transformations on rural livelihoods and the peasantry’s futureprospects under neoliberalism are subsequently analysed. A new rurality is being shaped which ischaracterized by a more heterogeneous agrarian structure, more complex and fluid social relations,greater significance of non-agricultural and off-farm activities, and the emergence of new social actors,especially women and indigenous people. Finally, the character of the new peasant movement, whichis challenging the imposition of neoliberal policies in the countryside, is highlighted.

THE LOST PROMISE OF AGRARIAN REFORMLatin America has one of the most polarized agrarian structures in the world. By 1960 latifundiosconstituted roughly 5 per cent of farm units and about 80 per cent of the land; minifundios constituted80 per cent of farm units but had only 5 per cent of the land (Barraclough, 1973: 16). The medium-sized farm sector was relatively insignificant. In explaining Latin America’s poor agriculturalperformance structuralists emphasized the high degree of land concentration (Barraclough andDomike, 1966) while neoliberal interpretations stressed government policy, in particular price andtrade policy which allegedly discriminated against agriculture (Valdés and Siamwalla, 1988). The factthat counter-vailing policies often compensated large agricultural producers is generally ignored by theneoliberal interpretations (Kay, 2000a). For example, landlords received highly subsidized credits andbenefited from cheap imports of agricultural machinery and inputs. Thus government policy wasbiased not so much against agriculture but against peasants and rural workers. Rural labour was largelyunorganized due to legal obstacles as well as coercion. Working conditions throughout rural LatinAmerica were exploitative and repressive (Feder, 1971; Duncan and Rutledge, 1977).

Most Latin American countries implemented some sort of agrarian reform mainly in the period1960 to 1970. But they largely failed to fulfil expectations for a variety of reasons (Kay, 2001a). Mistakesin their design and implementation contributed to their eventual unravelling. Often they wereimplemented in a half-hearted fashion; in other instances fierce political opposition from landlordsrestricted the reforms. Historical experience, as in South Korea and Taiwan, clearly shows that acomprehensive agrarian reform is a key ingredient for a successful economic development process(Kay, 2002a). Furthermore, the root causes of social and political instability will remain as long aspeasants continue to be marginalized and rural poverty persists (Kay, 2001b).

The neoliberal unravelling of the agrarian reform

The increasing shift to neoliberal policies by governments led to counter-reforms, the privatizationof the reform sector and the ending of agrarian reforms. Neoliberal land policies have changed

12Rural livelihoods and peasant futures

Cristóbal Kay

priorities away from expropriation of estates, which typified the populist agrarian reform period,towards decollectivization and privatization, land registration and titling and land tax issues.Legislation has also been introduced in some countries facilitating the privatization of land inindigenous communities and the sale of their land. Chile was the first to initiate this process in themid-1970s, Peru followed in a more gradual manner since 1980, Nicaragua since 1990 and Mexicoand El Salvador since 1992. Some expropriated land was returned to former owners (as in Chileand Nicaragua), but most was subdivided into family farms known as parcelas and sold to membersof the reformed sector who henceforth were referred to as parceleros (Jarvis, 1992). In someinstances a sizeable proportion of them were unable to secure a parcel, often for political reasonsand sometimes due to financial circumstances, generally joining the ranks of the rural proletariat.Nevertheless, this process of parcellization significantly increased the land area under the individualcontrol of the peasant farm sector, especially in Peru. However, after some years many parceleroswere unable to keep up their land payments or finance their farm operations and had to relinquishtheir land.

Agrarian reform and the subsequent neoliberal unravelling of the reformed sector have thus givenrise to a more complex and heterogeneous agrarian structure. It has reduced and transformed thelatifundia system and has enlarged the peasant sector and the commercial middle-to-large-farm sector.Parcelization also increased differentiation among the peasantry (Murray, 2002b). Capitalist farmershave been the ones to benefit from the liberalization of land, labour and financial markets, the newdrive to exports, and the withdrawal of supportive measures for the peasant sector. Their greater land,capital and technical resources, their superior links with national and especially international marketsand their greater influence on agricultural policy explain why they have been more able to exploit thenew market opportunities than have peasant farmers.

The continuing search for agrarian reform

Poverty, exclusion and landlessness or near landlessness are still far too common in Latin America. Theland issue has not yet been resolved and the need for agrarian reform remains in much of LatinAmerica (Barraclough, 1994). The contemporary struggle for a piece of land by the mass of landlesspeasants in Brazil, spearheaded by the Movimento (dos Trabalhadores Rurais) Sem Terra (MST or theLandless Rural Workers Movement), is a clear illustration of the continuing need for agrarian reform.

There has been a shift from state-led and interventionist agrarian reform programmes to market-oriented land policies. Paradoxically, such land policies have turned out to be much driven from aboveby the state and international agencies. Thus, future state interventions in the land tenure system arelikely to be confined to a land policy which focuses not on expropriation but on progressive landtaxes, land colonization, land markets, registration, titling and secure property rights. A variety ofstudies are indicating that such land policies have not turned out to be the promised panacea(Zoomers and van der Haar, 2000; Zoomers, 2001). However, some land titling programmes haveenhanced the property rights of women (Deere and León, 2001b).

While the potential benefits of clearly defined property rights may be substantial given that abouthalf of rural households lack land titles (Vogelgesang, 1996) the economic and socio-political contextunder which small farmers are operating conspire against them. Peasants in the end turn out to be thelosers from these land-titling projects because of their weak position in the market as well as in thepolitical system, which is unable to protect their land rights (Carter and Mesbah, 1993; Jansen andRoquas, 1998; Carter and Salgado, 2001). The ‘market-led’ or ‘negotiated’ agrarian reform proposals ofthe World Bank (Deininger, 1999), resting on the principle of ‘willing seller’ and ‘willing buyer’, have sofar failed to have any significant impact (Borras, 2003).

The main legacy of agrarian reform is that it has hastened the demise of the landed oligarchy andcleared away the institutional debris which prevented the development of markets and the fullcommercialization of agriculture, albeit after the unravelling of the reformed sector. Thus the mainwinners have been the capitalist farmers. Although a minority of campesinos (peasants and landless

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rural labourers) gained some benefits, for the majority the promise of agrarian reform remainsunfulfilled (Thiesenhusen, 1995; Bretón, 1997).

GLOBALIZATION, NEOLIBERALISM AND AGRICULTUREThe major force shaping the rural economy and society in Latin America in the post-agrarian reformera has been the process of neoliberal globalization. There has been a shift in the past two decadesfrom a state-led inward-directed development strategy, spearheaded by a process of import-substitution-industrialization, to an outward-oriented development strategy largely relying on primary-commodity exports (see Chapters 3 and 4). According to the neoliberal policy-makers LatinAmerica’s agricultural sector was to be one of the main beneficiaries of this opening to world marketsdue to the region’s comparative advantages in this sector as well as the elimination of thediscriminatory policy measures against it. Thus it was expected that agricultural exports, in particular,would thrive (Krueger et al., 1990). The neoliberal policy shift has certainly had major consequencesfor agriculture but not always in the way neoliberals expected.

The neoliberal turn has had a major impact on rural livelihoods (see Chapter 9). It has modified theagricultural production pattern as well as the rural social structure in Latin America. It has largely beenthe capitalist farmers and particularly transnational agro-industrial capitalists who have been able totake advantage of, and benefit from, the new opportunities opened up by the liberalization of marketsand globalization. The financial, organizational and technological requirements for agriculturalintensification and export production have been largely beyond the reach of the peasant economy(David et al., 2000; Rubio, 2001). Nevertheless, through agribusiness contract farming, somesmallholders have been able to participate in the production of agro-industrial commodities forexport or for high-income domestic urban consumers (Schejtman, 1996). Although the neoliberaldiscourse promised the creation of a level playing field through its market reforms, the situation so farhas revealed that the ‘real markets’, in contrast to the ‘abstract markets’ of the neoliberal literature,have continued to favour capitalist farmers and disadvantaged peasants (Ruben and Bastiaensen,2000).

The neoliberal integration of some peasants into the global agro-food complex has accentuated thesocio-economic differentiation process (Teubal, 1995). Some peasants have been able to prosperthrough capital accumulation and expanded reproduction thereby evolving into ‘capitalized familyfarmers’ (Lehmann, 1982) or ‘capitalist peasant farmers’ (Llambí, 1988). Others have become‘proletarians in disguise’ – formal owners of a smallholding but tied to, and dependent on, agribusinessand earning an income similar to the average rural wage. Another category is that of ‘semi-proletarians’ whose principal source of income is no longer derived from farming the household plotbut the sale of their labour power for a wage. Furthermore, a significant proportion of peasants havebeen ‘openly’ and fully proletarianized by depending completely on the sale of their labour power fora wage (Kay, 2000b).

Agriculture’s loss of competitiveness, non-traditional exports and heterogeneity

While agriculture’s share in the total Gross Domestic Product (GDP) in Latin America had beendeclining in the decades before the neoliberal turn, it has remained relatively stable at about 8 per centduring the 1980–2000 period. Agriculture’s average yearly growth rate was 2.0 per cent in the 1980sand 2.6 per cent in the 1990s, which compares unfavourably with the 3.5 per cent achieved by thesector in the 1950–80 period (ECLAC/IICA 2002: 27). Thus the neoliberals’ promise of a newagricultural dynamism has so far remained unfulfilled (Spoor, 2002). However, agricultural exportsperformed better, growing at an average yearly rate of 3.3 per cent in the 1980s and 6.4 per cent inthe 1990s (ECLAC/IICA 2002: 115). Non-traditional agricultural exports (NTAEs) such as soybeansand fresh and processed fruits were particularly dynamic, while most of the traditional exportproducts like coffee, sugar, bananas and cotton recorded below average rates of export growth.

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Subsistence crops, especially those produced by peasant farmers, performed poorly due to unfairinternational competition (markets distorted as a result of subsidies to farmers in the EU and theUSA), the withdrawal of government support (such as cheap credit) and changes in urbanconsumption patterns. But the shift to, and rapid expansion of NTAEs, were unable to compensate forthe sluggish growth, or even decline, of the traditional agricultural commodities, largely destined for thedomestic market.

Although agriculture continues to provide a major share of Latin American foreign exchangeearnings, its contribution has been declining. Agricultural exports accounted for about 51 per cent oftotal exports in the 1970s but only 35 per cent and 26 per cent in the 1980s and 1990s respectively(Spoor, 2001: 146). In only exceptional cases, such as Chile, has the share of agriculture in total exportearnings risen. Latin America has also lost competitiveness within the international market despite thegreater dynamism of agricultural export commodities as compared to agricultural crops for the homemarket. While in 1990 Latin America’s agricultural exports contributed 12 per cent of total agriculturalimports by developed countries, this declined to 6 per cent by the end of the decade (ECLAC/IICA2002: 193).

This loss of competitiveness of Latin America’s agriculture can also be gauged by the sharp rise inagricultural imports. While during the ‘lost decade’ of the 1980s agricultural imports declined by anaverage yearly rate of 0.9 per cent, due to the downturn in the economy, they rose sharply during the1990s growing by an average 8.6 per cent annually (ibid.: 117). As a consequence the proportion ofagricultural imports to exports has risen from about 40 per cent in 1980 to over 60 per cent in 2000,thereby reducing agriculture’s net contribution to Latin America’s foreign exchange earnings (GarcíaPascual, 2003: 13). In some countries the increasing reliance on food imports might endanger foodsecurity, especially in periods of foreign exchange crisis.

Neoliberal policy has widened the technological gap between capitalist and peasant farmers(Ocampo, 2001), thereby further accentuating rural heterogeneity (David et al., 2001). It is difficult, ifnot impossible, for peasant farmers to adopt new technology that is largely capital-intensive, such asmechanization. Such technology is not only beyond the financial reach of peasants, but often it is alsoinappropriate for small-scale agriculture and the inferior soils of peasant farms. Furthermore, chemicalfertilizers, pesticides and herbicides are too expensive for peasant farmers, especially since thegovernment’s withdrawal of subsidized credit and technical assistance programmes. In addition, theharmful environmental consequences of fossil fuel-based technology are increasingly being called intoquestion. The capital-intensive (and often import-intensive) nature of this technology is alsoinappropriate for Latin American economies, as it requires too many scarce capital resources (such asforeign exchange) and displaces labour.

Changes in rural labour and livelihoods

Agriculture’s neoliberal transformation has led to significant changes in rural labour and livelihoods.The percentage of the agricultural economically active population within the total economically activepopulation declined from 35 per cent to 21 per cent in the 1980–2000 period (ECLAC/IICA, 2002:49). The modernization of the latifundio and their transformation into capitalist farms have led to asignificant reduction in their labour force as well as to new forms of labour exploitation andsubordination. The main tendency has been towards a greater flexibilization of rural labour (LaraFlores, 1998; Garriacca, 2001) and greater diversification of rural livelihoods (Bebbington, 1999;Reardon et al., 2001). For an analysis of similar transformations of urban labour and the rise of theinformal sector, see Chapter 11.

The following five major changes in rural labour and employment, which had a major impact onrural livelihoods, can be highlighted:

• replacement of tenant labour by wage labour ;• growth of temporary and seasonal wage labour ;

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• increasing feminization of rural wage labour ;• ‘urbanization’ of rural workers;• growing importance of non-farm employment and incomes.

The decline of tenant labour and rise of wage labourTenant labour used to supply most of the latifundios’ labour needs. With modernization of thelatifundios, tenant labour became increasingly more expensive than wage labour for landlords, as therent income received from tenants (sharecroppers, labour-service tenants, or others) became lowerthan the profits landlords could earn by working the land directly with wage labour. Mechanization,which was attractive because of the availability of government-subsidized credits, turned directcultivation by landlords into a more profitable activity than tenancy. Tenant labourers thus becamewaged labourers and many migrated to urban areas (Chase, 1999). Landlords also employed fewertenants for political reasons so as to reduce the internal pressure for land reform.

The growth of temporary and seasonal wage labourWithin the shift to wage labour, there has been a marked increase in the proportion of temporary,often seasonal, wage employment. In many countries permanent wage labour has declined, even inabsolute terms, while in almost all countries temporary labour has greatly increased. In Brazil, it isestimated that permanent wage labour has fallen to a third of rural wage labourers; the remainingtwo-thirds are being employed on a temporary basis (Grzybowsky, 1990: 21). In Chile, the shift frompermanent to temporary labour has also been dramatic. While in the early 1970s, approximately two-thirds of wage labour were permanent and a third temporary, by the late 1980s these proportionshad been reversed (Falabella: 1991).

This growth of temporary labour is partly connected to the expansion of agro-industries thatexport seasonal fruit and vegetables and is particularly evident in those Latin American countries thatexport these products. This has led to the increasingly ‘casualization’ or precarious nature of rural wagelabour. Temporary workers are generally paid by piece rates, are not usually entitled to social securitybenefits and have no employment protection (see Figure 12.1). These changes in employmentpractices towards more casual and flexible labour enable employers to increase their control overlabour by reducing workers’ rights and bargaining power (Newman and Jarvis, 2000). Theirintroduction has been facilitated by regressive changes in labour legislation, introduced often by themilitary governments but continued by their neoliberal civilian successors. The expansion oftemporary wage labour therefore represents a deterioration in the conditions of employment.

This casualization of rural labour has contributed to the fracturing of the peasant movement.Although seasonal labourers can be highly militant, they are notoriously difficult to organize due totheir diverse composition and shifting residence. Thus, the shift from permanent to seasonal labour inthe countryside has generally weakened peasant organizations, making it difficult for them to negotiateimprovements in their working conditions either directly with their employers or indirectly bypressurizing the state.

The feminization of rural wage labourAssociated with the expansion of temporary and/or seasonal wage labour is the marked increase inthe participation of women in the labour force. In the past, rural women worked as day labourers,milkmaids, cooks or domestic servants on the landlord’s estate. They also found seasonal wageemployment during the labour-intensive harvests on coffee, cotton and tobacco farms. With the risingcommercialization of agriculture and the crisis of peasant agriculture, an increasing proportion of ruralwomen have joined the labour market (Lara Flores, 1995). This has resulted in a renegotiation ofgender relations within the household (Barrientos et al., 1999: 124).

The rapid expansion of new export crops such as fruits, vegetables, and flowers, however, hasopened up new employment opportunities for women (Figure 12.2; Collins, 2003). Agro-industrieslargely employ female labour since women are held to be more readily available, more willing to work

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on a seasonal basis, accept lower wages, and are less organized and, according to employers, are betterworkers for activities which require careful handling. Any permanent employment, however, tends tobe the preserve of men. Although they are employed in generally low-skilled and low-paid jobs, asidefrom being temporary, for many young women these jobs provide an opportunity to earn anindependent income and to escape (at least partially and temporarily) from the constraints of apatriarchal, peasant family household. Even though the terms of their incorporation are unfavourable,this does not necessarily imply that gender relations have remained unchanged. Furthermore, with therural women’s rising incorporation into the formal labour market they have begun to exerciseincreasing influence in the affairs of peasant organizations and, in some instances, have even establishedtheir own organizations (Stephen, 1993).

In Mexico, about 25 per cent of the economically active rural population are employed in fruit andvegetable production and half of them are women. In Colombia, over 70 per cent of the labouremployed in the cultivation of flowers for exports and about 40 per cent of coffee harvesters arewomen (ECLAC 1992: 103). In Chile, about 70 per cent of temporary workers in the fruiticultureexport sector are women being employed mainly in the fruit packing plants. In Ecuador, in 1991, anestimated 69 per cent of workers in NTAE production were women (Thrupp, 1996: 125) and

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Figure 12.1 Man and machete, Liberia, Costa Rica. Casual agricultural labourers are expected to provide their own

tools. The machete is used in a wide range of tasks including cane cutting and pasture clearance. Photograph by

Sylvia Chant

currently about half of those working in the flower industry are women (Korovkin, 2003: 27). The rapidexpansion of NTAEs, in which female labour is a key ingredient, has occasionally extracted highenvironmental and health costs, as these activities are accompanied by an intensive use of chemicalfertilizers, pesticides and herbicides which pollute the environment and create dangerous healthhazards (Stewart, 1996: 132).

The ‘urbanization’ of rural workersAn additional dimension to the growth of temporary wage labour concerns the geographical originsof the workers so employed. An increasing number of rural workers come from urban areas due tothe lack of urban employment opportunities and improved transport facilities between urban andrural areas (see Figure 12.3). In many Latin American countries over a quarter of the economicallyactive agricultural population currently reside in urban areas. In Brazil about half of temporary workersemployed in agricultural activities are of urban origin. They are known as ‘bóias frias’ (‘cold luncheons’),as they go to work with their lunch box containing cold food, and ‘volantes’ (‘fliers’ or floating workers)who reside on the periphery of cities or towns and fluctuate between rural and urban employment.About three-quarters of female volantes are employed in the coffee-growing industry and when thereis no agricultural work, they tend to look for employment in the urban areas largely as domestics(ECLAC, 1992: 98). The growing presence of labour contractors, who hire gangs of labourers fromsmall towns and cities for work in the fields, means that the direct employer is not always even thefarm owner or manager. Increasingly, rural residents have to compete with urban labourers foragricultural work, and vice versa, leading to more flexible labour markets and reducing the rural–urbandivide, at least in the labour market.

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Figure 12.2 Seasonal female labour in one of Chile’s fruit-packing plants. The boom in fruit exports in Chile has

created a large market for temporary labour, employed mainly during the harvest season (March to May in apple-

growing regions). The gender division of labour is marked: men pick the produce in the fields; women work in the

packing plants. Photograph by W. Murray

Rising importance of rural non-farm employment and incomesRural non-farm employment (RNFE), or rural non-agricultural employment (RNAE), refers toemployment by rural household members in the non-farm or non-agricultural sector, i.e. inmanufactures (such as rural industry and agro-industrial processing plants) and services (such as ruraltourism and commerce). Employment can be self-employment or wage employment for an employer.Rural non-farm income (RNFI) or rural non-agricultural income (RNAI) is the income derived fromthe RNFE or RNAE such as non-farm rural wage income and non-farm rural self-employment,sometimes called business income. RNFI/RNAI can also include urban-to-rural and internationalremittances as well as pension payments to retirees (Ellis, 2000: 11-12). It is relatively recently that theincreasing significance of RNFE in rural livelihoods has become evident. While in 1970 in Latin America17 per cent of the rural population had their principal occupation in non-farm activities, this rose to24 per cent in 1981 (Klein, 1992). Agricultural employment stagnated or declined during this period,while RNAE increased significantly. This shows that secondary and tertiary activities in the rural sectorhave been more dynamic than primary activities, at least in terms of employment. Many of thesesecondary and tertiary activities are derived from agriculture such as food processing, packaging, andmarketing of agricultural produce. Thus dynamic agriculture is likely to lead also to a dynamic ruralnon-farm sector.

Subsequent studies have shown that this shift to RNFE and RNFI has even accelerated further inrecent decades. While in the early 1980s RNAI accounted for 25 per cent to 30 per cent of total ruralincome by the second half of the 1990s this proportion rose to above 40 per cent (Berdegué et al.,2000: 2). A far higher proportion of rural women are engaged in non-farm jobs than men. While inmost countries this share varied between 20 per cent and 55 per cent for employed men, in the caseof employed women it varied between 65 per cent and 90 per cent (Reardon et al., 2001: 400).

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Figure 12.3 Truck bringing cane workers home from a day in the fields, Liberia, Costa Rica. Large-scale farming

enterprises send trucks to low-income settlements or to known roadside locations where recruitment of labour is

done on the spot. Generally speaking, pick-up is in the early morning (around 5 a.m.), and drop off between 3 and

4 p.m. Labourers are often paid on a piece rate basis, e.g. for the metreage of cane cut. Photograph by Sylvia

Chant

It is important to stress that non-farm employment has a different meaning for rural householdsaccording to their income level. For poor peasant households RNFE is a key mechanism to retainaccess to their small plot of land and to maintain a subsistence income. Meanwhile, for rich peasanthouseholds, it is a way to accumulate more capital. This capital can be used for expanding the farmenterprise by buying more land or to increase its productivity by investing in machinery, fertilizers,upgrading their labour and management skills through further education, and so on. Poor peasantsdepend to a greater degree on non-agricultural income than rich peasants but in absolute terms thisamount is much lower in the poor households than in the rich households (Berdegué et al., 2000: 3).

PEASANT FUTURES: A PERMANENT SEMI-PROLETARIAT?The increasing globalization of Latin America’s rural sector is having a profound impact on thepeasantry. How are these major transformations affecting the development of the peasant economy,especially in the wake of the increasingly widespread and entrenched neoliberal policies? Can thepeasant economy provide adequate productive employment and rising incomes? Will peasants be ableto continue farming by increasing their competitiveness or will they become a mere supplier of wagelabour to the capitalist farm sector? Or, will they become fully proletarianized by having to sell theirland, give up farming and depend on wage employment and income for their subsistence?

Challenges facing the peasantry: diversification of rural livelihoods

The peasant household farm sector is still a significant sector within Latin America’s rural economyand society. Indeed, some authors have celebrated the persistence of the peasantry contrary to thosewho predicted their disappearance (Edelman, 2000; Barkin, 2002). The peasant economy has certainlynot faced a unilinear decline and has shown a remarkable capacity for survival in the face of thechallenges of neoliberal globalization. Peasants have had to change their livelihood strategies in orderto survive (Bebbington, 2000), as well as engage in new forms of social mobilization and politics(Otero, 1999; Bernstein, 2000). Nevertheless, their future is uncertain (Bryceson et al., 2000).

It is estimated that peasant agriculture in the 1980s in Latin America comprised four-fifths of farmunits, possessed a fifth of total agricultural land, over a third of the cultivated land, and over two-fifthsof the harvested area (López Cordovez, 1982: 26). The peasant economy accounted for almost two-thirds of the total agricultural labour force, the remaining third being employed by capitalist farms.Furthermore, peasant agriculture supplied two-fifths of production for the domestic market and athird of the production for export. Their contribution to food products for mass consumption isparticularly important. At the beginning of the 1980s, the peasant economy provided an estimated 77per cent of the total production of beans, 61 per cent of potatoes and 51 per cent of maize. Inaddition, the peasant economy owned an estimated 24 per cent of the total number of cattle and 78per cent of pigs (ibid.: 28).

While the peasantry is far from disappearing, it is not thriving either, since their relative importanceas agricultural producers continues to decline. According to de Janvry et al. (1989b), the LatinAmerican peasantry is experiencing a double squeeze. First, they face a land squeeze. By failing toacquire additional land to match their increased numbers, the average size of peasant farms hasdecreased. This decline of the peasant sector mainly concerns the small-scale peasantry (minifundistas)which accounts for about two-thirds of peasant farm households. Their average farm size decreasedfrom 2.1 hectares in 1950 to 1.9 hectares in 1980. The remainder of the peasant sector retained anaverage farm size of 17 hectares, partly through the implementation of redistributive land reforms (deJanvry et al., 1989a: 74). Second, peasants face an employment squeeze as employment opportunitieshave not kept pace with the growth of the peasant population and as they face increased competitionfrom urban-based workers for rural employment.

Peasants have responded to this double squeeze on their livelihoods by seeking off-farm sources ofincome, meaning incomes generated within agriculture other than own-account farming such as

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seasonal agricultural wage labour on capitalist farms agriculture, and/or non-farm sources of income.Furthermore, the proportion of the economically active rural population that is engaged in non-agricultural activities, largely as wage labourers, is rising faster than those engaged in farm employmentas discussed earlier. These trends mean that an increasing proportion of total peasant householdincome originates from wages, whereas income from their own-farm activities often comes to lessthan half the total (de Janvry et al., 1989a: 141).

These processes mean that peasants have had to increasingly diversity their assets and livelihoodactivities in order to survive and to improve their living standards (Zoomers, 1999; see Chapter 9).These assets, as described by Bebbington (1999: 2029) and Ellis (2000: 8), include natural capital (land,water, trees), physical or produced capital (tools, machines and land improvements such as irrigationcanals), human capital (education and health), financial capital (cash or money), and social capital(social networks and associations). Only the richer peasants, who are a minority, have been able to usethis process of rural livelihood diversification as an accumulation strategy, thereby increasing theirwealth.

For the majority of the Latin American peasantry, this livelihood diversification has entailed seekinga variety of wage labour activities as a survival strategy (Rubio et al., 2002; Korovkin, 2003). This is thecase for the small-scale peasantry who can be characterized as semi-proletarian as over half of theirhousehold income is derived from off-farm sources, principally from seasonal agricultural wageemployment on commercial farms or from non-farm wage work. As the small-scale peasantry is themost numerous, it can be argued that this process of semi-proletarianization is the main tendencyunfolding among the Latin American peasantry. It is less marked in those few Latin American countrieswhere land reforms significantly increased peasant access to land. For the richer peasantry rural non-farm income is far more important than farm wage-employment income. Furthermore, the poorerpeasantry due to their lesser human capital engages principally in casual farm wage employment, asentry requirements are lower (Reardon et al., 2001: 402).

This double squeeze on the peasant economy has forced many peasants to migrate, feeding thecontinuing and high rate of rural out-migration (Salman and Zoomers, 2002; see Chapter 5). Somepeasants migrate only temporarily as part of their livelihood strategy to ensure the survival of theirhousehold through the remittances. But this migration can vary from some months to a few years, andeven become permanent. Increasingly migration has become transnational. The most notorious caseis the migration of Mexican rural labour to the USA. But transnational migration within Latin Americahas also become more common over the last couple of decades, as in the case of Bolivian peasantsworking as rural labourers in Argentina (Aparicio and Benencia, 1999). In a few cases this migrationresults in significant remittances which allow some investment on the peasant farm and expansion offarm income. However, as Reardon et al. (2001: 402) argue, the importance of migration income forrural households is far less than has been assumed, even in the case of Mexico.

In short, Latin America’s peasantry appears to be trapped in a continuing process of semi-proletarianization and structural poverty. Their access to off-farm sources of income, generallyseasonal wage labour, enables them to cling to the land, thereby blocking their full proletarianization.This process favours rural capitalists as it eliminates small peasants as competitors in agriculturalproduction and transforms them into cheap wage labour. Semi-proletarianization is the only livelihoodstrategy open to those peasants who wish to retain access to land for reasons of security and survivalor because they cannot find alternative employment, either in the rural or urban sector, which securesthem a minimum standard of living.

Persistence of rural poverty

Agricultural modernization in Latin America, with its emphasis on capital intensive farming and thesqueeze on the peasant economy, means that rural poverty remains a persistent and intractableproblem. Structural adjustment programmes and stabilization policies of the 1980s had a detrimentalimpact on poverty, although more in the urban than rural sector (see Chapter 5). But the proportion

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of people in poverty still remains higher in rural as compared to urban areas. Adjustment policiesexacerbated poverty as government expenditure on social welfare, subsidies for basic foods and otheressential commodities and services were cut back (Altimir, 1994). Some governments reduced thisnegative impact by subsequently targeting welfare payments more closely and by introducing povertyalleviation programmes. In the 1990s, rural poverty started to decline but only very slowly. While 65.4per cent of rural households in Latin America were below the poverty line in 1990, this had fallen to63.7 per cent in 1999 (ECLAC, 2002c: 212). The corresponding data for extreme poverty or indigenceare 40.4 per cent and 38.3 per cent, respectively. Only in a few countries did rural poverty declinesignificantly, like in Chile from 39.5 per cent in 1990 to 23.8 per cent in 2000, and rural indigence fellfrom 15.2 per cent to 8.3 per cent, respectively (ibid.: 211).

The main cause of rural poverty is structural, being related to the unequal land distribution and theincreasing proportion of semi-proletarian and landless peasants. Contributory factors for thepersistence of rural poverty are the neoliberal policies that further an exclusionary pattern of ruraldevelopment marginalizing the peasantry. Tackling the root causes of poverty will require major landredistribution and rural investments, raised employment opportunities and improved agriculturalproductivity, particularly of smallholders. Particularly promising for reducing rural poverty are alsopolicies that promote rural non-farm activities, but this should not be done at the expense of policiespromoting agricultural development (López and Valdés, 2000). With the right mix of policies, farm andnon-farm activities should reinforce each other by developing their linkages (Reardon et al., 2001).Only by such an assault on various fronts will it be possible to alleviate rural poverty significantly. LatinAmerica’s poverty is directly related to the unresolved agrarian question. Governments can no longerafford to neglect the rural poor.

State, market and civil organizations: what future for the peasantry?

Neither the state-driven ISI development strategy (1950s to 1970s) nor the neoliberal market-drivenpolicies since the 1980s have been able to resolve the peasant question. Rural poverty, inequality andexclusionary rural development still persist. It was only during the brief land reform interlude thatsections of the peasantry began to emerge from their marginalized situation only to see their hopesfor a better future vanish with the counter-reform and neoliberal project. However, these pastupheavals have created new opportunities as well as constraints. Calls for new thinking for newpolicies for rural development practices are multiplying. Such voices are seeking to find new ways ofcombining state action with market forces and civil organizations so as to make a fresh attempt toresolve the agrarian question (de Janvry et al., 1995). More radical voices seek to create a new ruralitywhich puts at the centre of rural development the peasantry and the rural proletariat (Giarracca,2001; Pérez and Farah, 2001; Barkin, 2002).

What, then, are the prospects for a peasant path to rural development? It is well known that accessto capital, technology, and domestic and foreign markets, as well as knowledge and informationsystems, are becoming increasingly important relative to access to land in determining the success ofan agricultural enterprise. Even though in recent decades some peasants managed to gain access toland through agrarian reforms, this by no means secures their future survival. The wideningtechnological gap between the capitalist and peasant farm sectors have prompted those involved withthe peasants’ well-being to urge international agencies, governments and non-governmentalorganizations (NGOs) to create more ‘peasant-friendly’, appropriate and sustainable technologies.Such a policy, however, runs the danger of relying exclusively on a technological fix, while thesustainability of peasant agriculture depends on wider social and political issues and particularly afavourable macro-economic context. In short, a viable peasant road to rural development raisesquestions about development strategy and ultimately about the political power of the peasantry.

In the 1990s, concerned scholars and institutions have become increasingly vociferous in pointingout the adverse impact of Latin America’s neoliberal agricultural modernization on the peasantry. Asopposed to the ‘concentrating and exclusionary’ character of this process, they call for a strategy that

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includes the peasantry in the modernization process (Murmis, 1994). This would be part of thedemocratization of rural society and some authors speak of ‘democratic modernization’ to highlightthis link (Chiriboga, 1992). Currently, suggestions are being made with a view to ‘changing productionpatterns with social equity’ in Latin America and for the ‘productive reconversion’ of agriculturalproducers so as to meet the challenges of an increasingly global world economy in the newmillennium (ECLAC, 1990). To forward these aims, special government policies in favour of thepeasantry are proposed to reverse the past bias in favour of landlords and rural capitalists. Theachievement of broad-based growth requires proactive state policies so as to overcome marketfailures and biases against the peasantry.

Reconversion and non-traditional agricultural exports (NTAEs)The key to the development of peasant farmers and their transition to ‘capitalized peasant farms’,especially in these days of privatization, liberalization and globalization is to enhance their marketcompetitiveness. For this purpose some governments in Latin America are beginning to design policiesfor the ‘reconversion’ of peasant farming. In a broad sense, reconversion aims at enabling andimproving peasant agriculture’s ability to adapt to its increasing exposure to global competition and toenter into the more dynamic world market. This is to be achieved through a series of specific peasantprogrammes with the aim of raising productivity, enhancing efficiency and shifting traditionalproduction and land-use patterns to new and more profitable products thereby increasing thepeasants’ competitiveness (Figure 12.4) (Kay, 2002b).

Governments and NGOs concerned with promoting the development of peasant farmersproposed a series of measures to facilitate their participation in the lucrative agricultural exportboom. It was almost exclusively capitalist farmers who initially reaped the benefits of the thrivingNTAE business as they had the resources to respond relatively quickly to the new outward-looking

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Figure 12.4 Inside a smallholder’s greenhouse, Peumo, Chile, 1996. Smallholders in Chile are becoming more

specialized and technical: here carnations are grown for national markets but only family labour is used. The

smallholder benefits from being a member of a local cooperative both for technical and marketing assistance.

Photograph by C. Kay

development strategy of the neoliberal trade and macro-economic policy reforms. In view of thedynamism of NTAE sector, it was thought that a shift in the production pattern of peasant farmers tothese products would spread the benefits of NTAE growth more widely and ensure their survival.However, experience has been rather mixed.

To analyse the impact of NTAE growth on smallholders and rural labourers, Carter et al. (1996:37–8) argue that this depends on three factors:

1 whether small-scale units participate directly in producing the export crop and enjoy the higherincomes generated from it (the ‘small-farm adoption effect’);

2 whether the export crop induces a pattern of structural change that systematically improves orworsens the access of the rural poor to land (the ‘land access effect’);

3 whether agricultural exports absorb more or less of the labour of landless and part-time farminghouseholds (the ‘labour-absorption effect’).

They examine the cases of agro-export growth in Paraguay (based on soybeans and wheat), in Chile(based on fruit), and in Guatemala (based on vegetables). Their findings reveal that only in the case ofGuatemala was there a broadly based growth as both the land access and net employment effectswere positive, while the opposite happened in Paraguay, resulting in exclusionary growth. The Chileancase had elements of both as the net employment effect was positive but the land access effect wasnegative. Thus, in Chile, the fruit-export boom has been partly exclusionary, as many parcelero peasantfarmers have sold part or all of their land as they were squeezed by the export boom (Murray, 1999),and partly inclusive, as the shift from traditional crops to fruit-growing increased labour demand(Schurman, 2001).

Even if a larger proportion of peasant farmers were to adopt the new export crops, it is far fromcertain that this would ensure their survival. Thus, the much-fancied NTAE rural development policyof many Latin American governments cannot be considered as a panacea, especially if nocomplementary measures are taken to create ‘level playing fields’ (Carter and Barham, 1996). TheChilean experience is illustrative in this regard (see Chapter 6). First, there has been a low adoptionrate of NTAEs by small-scale farmers due to financial, technical, risk, and other factors. Second, eventhose who did switch to NTAEs were far more likely to fail as compared to capitalist farmers, as theywere less able to withstand competitive pressures due to their disadvantaged position in marketing,credit, technology, and other markets. As a consequence of rising debts, many are forced to sell theirland often to larger farmers or transnational fruit companies (Murray, 2002c). Such an on-goingprocess of land concentration is also happening in other Latin American areas in which NTAEs aretaking hold.

Food import substitution (FIS), diversification and sustainable developmentAn almost forgotten alternative or additional possibility to NTAEs for peasant farmers is to enhancetheir comparative advantage in staple food production and potentially in some import-competingcommodities. This can be achieved through a programme of ‘food import substitution’ (FIS) assuggested by de Janvry (1994). More radical proposals call for the redevelopment of the peasanteconomy through an ‘autonomous development’ strategy that is seen as the key for sustainabledevelopment in rural areas (Barkin, 2002). For an autonomous development strategy to succeed,major supportive policies by the state are required, such as specifically targeted protectionistmeasures to counteract the distortions in the world food market arising from subsidies to farmers indeveloped countries (Valdés, 2002).

Import-substitution in staple foods has the advantage of not only saving valuable foreign exchangebut of enhancing food security, employment, and possibly a more equitable income distribution,especially if it is peasant farmers who undertake this FIS (Teubal and Rodríguez, 2002). The expansionof peasant food output has also the advantage of being more ecologically friendly as they use lesschemical inputs as compared to capitalist farmers and also relative to NTAEs. Instead of viewing

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NTAEs and food production as being in conflict or as alternatives, they can be seen as complementary.In Schejtman’s (1994) view, it is possible to envisage a positive correlation as those peasants who areable to go into lucrative agro-export production can use their increased incomes, knowledge andmarket experience derived from NTAEs to invest in raising productivity of their traditional food crops.

Similarly, the search by peasant farm households for incomes derived from non-agricultural activitiescan, under certain circumstances, enhance the productive capacity of the farm’s agricultural activities.However, if such a search for additional incomes arises out of distress (where the peasant householdis fighting for its survival), it is unlikely that such a positive interaction between farm and non-farmactivities can be achieved. In such a case, the peasant household might remain in a state of semi-proletarianization or become fully proletarianized – landless labourers relying on wage labour.

Nongovernmental organizations (NGOs)A new relationship has to develop between the state and civil society. The state should devolve someof its powers, initiatives, financial resources and activities to local governments and civil organizationssuch as NGOs, producer and consumer organizations, trade unions, women and ecologicalassociations and political parties. These should play an increasing role in policy formulation andimplementation. NGOs are known to be particularly able to establish close working relationships withgrass-roots organizations and their constituency. Such increased participation of individuals and civilorganizations in economic, social and political affairs is likely to strengthen the democratic processes.By creating a more participatory framework, it might be possible to establish mechanisms forregulating and governing the market for the benefit of the majority in society.

In some instances, governments in Latin America have already began to subcontract certainactivities, such as technical assistance for peasant farmers to NGOs, as well as giving greater powersand resources to local administrative agencies (see Chapters 9 and 10). It is too early yet to assess thesignificance and impact of such initiatives. However, NGOs face a dilemma when they come to dependtoo closely on government resources and appear to be implementing government policy, especially ifthis of a neoliberal kind. They might lose grassroots support and thus their legitimacy (Bretón 2002).But if NGOs are in turn able to influence government policy by making it more sensitive and friendlytowards peasant, gender, indigenous and ecological issues, then this closer relationship is only to bewelcomed. Generally, NGOs have limited resources and this constrains the coverage of their activitiesto a limited number of beneficiaries (North and Cameron, 2003). In those countries where the statehas been drastically downsized, NGOs have often been used as a palliative to overcome theabdication of social responsibility by the state. Thus, the closer links between state and NGOs can bea mixed blessing (Bebbington and Thiele, 1993).

The key agrarian question: assets and power

The increasing competitive gap between peasant and capitalist farming due to agriculture’s unequalmodernization limits the survival of the peasant producers and perpetuates rural poverty. Theneoliberal slogan of ‘getting prices right’ is certainly not a panacea for rural development (Binswangeret al., 1995). A major step in tackling the agrarian question requires a redistribution of assets as well asthe empowerment of peasants and rural workers. Although agrarian reforms are no longer on thepolitical agenda, except in Brazil, the problem of land concentration and landlessness remains. Landpolicy reforms are far from dead as a broadly based and sustainable development strategy requires afairer distribution of land assets.

However, access to finance and knowledge are increasingly important assets in today’s globalizedworld. This calls for government policies that facilitate peasant access to these other two crucial assetsthrough market reforms, human resource development, and special credit and technical assistanceprogrammes. NGOs and the private sector can implement some of these projects. Governments haveto give greater priority to rural diversification, education and infrastructure that are targetedparticularly at smallholder communities.

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Such policy reforms have little chance of succeeding unless peasants and rural workers develop theirown organizations such as producer and community associations, cooperatives and trade unions. It isonly through the creation of a counter-vailing power by peasants and rural workers that they will beable to shape the future to their advantage rather than having to continually accept the disadvantagesof the past and present. While undoubtedly the state, political parties and NGOs can provide thenecessary supportive role; the development of such organizations depends on the determination ofpeasants and workers themselves. Whether or not these proposals will be adopted is an open question,but there are grounds for some optimism as new indigenous, ecological and peasant movements haveemerged which are contesting neoliberal policies. This will be discussed in the next section.

THE NEW PEASANT MOVEMENT: INDIGENOUS ANDENVIRONMENTAL DIMENSIONSThe neoliberal project has certainly not gone unchallenged by peasants in most of Latin America. Oneof the most significant events which symbolizes the new character of the peasant movement has beenthe 1994 rebellion in Chiapas, the most southern and indigenous region of Mexico (Burbach, 1994).The uprising was led by the Zapatista National Liberation Army (EZLN) and was fuelled by a varietyof factors (Harvey, 1994). Some of the major causes were the exclusionary impact of Mexico’sagricultural modernization, the government’s repeal of the land reform legislation in 1992 and thedesire of the insurgents for greater control over their livelihoods and for a certain degree of autonomy(Collier, 2000; Rus et al., 2001; Stavenhagen, 2003). Also fears that Mexico’s neoliberal integration intothe North American Free Trade Agreement (NAFTA) would marginalize them further influencedevents (de Janvry et al., 1997). Mexico’s peasant farmers cannot compete with the large-scalemechanized maize and cereal farmers from North America unless special protective anddevelopmental measures are adopted in their favour (Barkin, 1994; Collier, 1999).

Since the neoliberal free-market onslaught in the 1980s the peasantry has re-emerged as asignificant force for social change not only in Mexico but also in Bolivia, Brazil, Colombia, Costa Rica,Ecuador, El Salvador and Paraguay, among other Latin American countries. The peasantry is strikingback and it would be a serious mistake to dismiss these new peasant and indigenous movements inLatin America as the last gasp of rebellion (Petras, 1997; Veltmeyer et al., 1997). These new movementsare shaping new class and ethnic identities in which the protagonists are affirming their own historyand capacity to make history. The confident assertions, from opposite political spectrums, on ‘the endof history’ (Fukuyama, 1992) and the death of the peasantry (Hobsbawm, 1994: 289) are proving tobe premature (Edelman, 1999).

In Brazil, the principal protagonist in the countryside has been the MST, which is the largest peasantmovement in Latin America with a membership of more than 500,000 peasant families (Robles, 2001:147). It has spearheaded over 1,500 land invasions of large estates demanding their expropriation(Meszaros, 2000). Some 350,000 families were involved in these mobilizations under the leadership ofabout 20,000 MST activists (Stedile, 2002: 85). The land occupations come as no surprise as inequalityis particularly acute in Brazil where only 4 per cent of farm owners control 79 per cent of thecountry’s arable land (Veltmeyer et al., 1997: 181). Through direct actions, which also involve blockinghighways and sit-ins at local offices of the state’s agrarian reform institute (INCRA), the MST hasmanaged to force the government’s pace on expropriations. The MST has been instrumental inestablishing over 1,300 rural land-reform settlements, largely organized as cooperatives, throughoutBrazil since its foundation in 1984 (Navarro, 2000: 37). An estimated 350,000 families have beensettled on these cooperative farms and more than 100,000 additional families not in the MST havereceived land from the government as part of the land reform programme that arguably would notexist without the MST (Wright, 2003: 1).

The MST has greatly contributed to the democratization of rural life, especially in the settlementareas. In this struggle there have been many casualties as fazendeiros (landlords) and their hired

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gunmen took the law into their own hands, generally with impunity. Many peasants also died or werewounded in clashes with the military police. By 2000, over 1600 persons had been killed in landconflicts since 1984 but only about 250 of these were MST members (Cadji, 2000: 30; Branford andRocha, 2002: 251). Nevertheless, as land settlements have increased, murders in the countryside havedeclined sharply (Margolis, 2002: 26). To what extent the left-of-centre government of President LuisInácio ‘Lula’ da Silva, which took office in 2003, will be able to give a new impetus to land reformremains to be seen.

In the past couple of decades there has been a resurgence of Indian ethnic identity movementswhich has revitalized and changed the character of social movements in the countryside (see Chapter10). The new strength of indigenous movements is reshaping state–society relations and enhancingindigenous rights, cultural diversity, decentralization and democracy (Assies et al. 2001; Bengoa, 2000;Korovkin, 2001; Sieder, 2002; Wilson et al., 2003).

Ethnic and environmental issues have become also increasingly important political concerns as thefate of the tropical rainforest and the fate of the indigenous peoples have become more intertwined.Environmental movements have become struggles for social justice as native groups were beingdisplaced and their livelihoods threatened through the actions of companies exploiting the naturalresources through logging, mining, oil extraction, building of dams and deforestation for pasturelandand cattle raising. The ensuing conflicts between these companies, cattle ranchers and the localpopulation, which often led to casualties, activated human rights groups in defence of the victims. Thiscoalition of indigenous, peasant, environmental and human rights organizations became one of themajor forces in the fight for social justice (Kaimovitz, 1996).

In the case of Chiapas, with its large Mayan population, the linkage of the indigenous question toenvironmental concerns also gave the uprising wider support and strength. In Brazil, the building of theTransamazon Highway in the 1970s led to large-scale deforestation and expansion of pastureland asbig capital was lured by tax rebates, subsidies and cheap credit to Amazonia. This led to a majormigration of settlers, largely from impoverished north-eastern Brazil, to the tropical forest areas thatcontributed to the environmental deterioration. This expansion of grazing and mining encroached onlands used by indigenous groups and rubber tappers in what Dore (1995: 262) has called the mostextensive enclosure movement in history. This sparked off the rubber tappers movement as well asthe actions of indigenous groups in defence of their livelihoods, which brought the Amazonenvironmental issue to world attention. The assassination in 1988 of ‘Chico’ Mendes, the leader of theAmazon rubber tappers movement, provoked an international outcry. His murder led to strongnational and international pressure that prompted the government into action by acceding to someof the rubber tappers’ demands with the establishment of extractive reserves and other ‘productiveconservation’ schemes (Hall, 1997). These projects attempted to reconcile the conservation of theforest with its sustainable use in supporting local livelihoods (Hall, 1996).

In Ecuador, major social mobilization took place in the 1990s and was organized by theConfederation of Indigenous Nationalities of Ecuador (CONAIE). During an entire week in 1990, tensof thousands of Indian peasants blocked highways, organized marches in various capitals and seizedgovernment offices (Zamosc, 1994). Their protest was brought about by the economic recessionresulting from the structural adjustment package. In a second major mobilization in 1994 the protestwas directed specifically against the introduction of neoliberal policies, especially the new so-called‘Agrarian Development Law’. This law threatened the communal lands of indigenous groups, facilitatingtheir privatization and ultimately favouring their transfer to capitalist farmers through the marketmechanism. Thousands of indigenous communities, representing all of the country’s ethnicnationalities, small farmers, trade unions, and popular organizations joined this protest andinternational environmental and human rights organizations offered their support (Picari, 1996).Ecuador’s indigenous movement took centre stage in January 2000 when a thousand protestors,mostly indigenous people from the highlands, under the leadership of CONAIE occupied the NationalCongress building demanding a change of government and policy (Collins, 2000). Although the

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occupation lasted only one day, it, together with subsequent uprisings, paved the way for the electionof Army Colonel Lucio Gutiérrez, who had been one of the key figures in the protest movements, asPresident in 2002. Although Gutiérrez’s government might not be able to satisfy all the demands ofthe indigenous people, it is the most pro-indigenous government yet in Ecuador’s history.

In Bolivia, an historic ‘march for dignity and territory’ took place in 1990. Hundreds of people fromlowland indigenous groups ‘trekked from the Amazon rainforest through the snow-capped Andes onroute to the capital city to protest about logging on indigenous lands and to demand legal rights tothese lands’ (Albó, 1996: 15). They framed their demands not just in terms of rights to resources butalso in terms of indigenous rights, thereby broadening its support from civil society. This historic marchand subsequent mobilizations resulted in reforms of the Constitution in 1995 declaring Bolivia to bea multiethnic state. It also led to the enactment of a series of new laws such as: the Law of PopularParticipation (1994), which gives legal recognition to community associations and facilitatesadministrative decentralization; the Forestry Law (1996), which allows indigenous groups to logcommercially on collectively held land; and the Agrarian Reform Law (1996), which enhances theterritorial rights of indigenous peoples (Roper, 2003).

This new peasant movement in Latin America differs from past social movements in the countrysidefor various reasons and the following four can be highlighted:

1 Ethnic groups have a far greater presence than in the past. There is also a greater degree of ethnicconsciousness and, in some cases, even demands for national autonomy, expressed in self-government and territorial sovereignty (Ross, 1997b: 35). While governments have not yielded tothe claim for national autonomy, countries like Bolivia, Ecuador, Colombia and Brazil have changedtheir respective Constitutions recognizing the multi-ethnic character of the nation and includingprovisions which recognize the linguistic, cultural, social and territorial rights of the variousindigenous groups.

2 Owing to the social transformation of the peasantry the movement has acquired a more urbaneand international dimension. This has been helped by the more fluid relationships between urbanand rural sectors, the greater mobility of rural populations, the improvements in rural educationand the more pervasive influence of the media. Leaders have become more adept at promotingthe movement’s objectives by making skilful use of the media and internet thereby reaching awider audience both nationally and internationally. To the ‘globalization from above’ they havebeen able to generate a ‘globalization from below’, bypassing national governments and creatinginternational pressure on them as well as on other international organizations by appealing to theforeign constituency (Kearney and Varese, 1995).

3 The peasant movement has achieved a greater degree of autonomy from political parties and thegovernment. While this is partly a result of the greater maturity achieved by the movementthrough past struggles, it has also been made possible by the political vacuum resulting from thecrisis of the left-wing parties. The world crisis of socialism could not fail to weaken socialistorganizations and often led to left-wing parties adopting elements of the neoliberal agenda. Theweakening of the landlords’ former dominance over the peasantry in countries with radical agrarianreforms has also opened up new political spaces for the peasantry as well as new social actors.

4 Peasant movements have developed a variety of links with NGOs that have made importantcontributions in creating and strengthening grassroots organizations in the countryside.International NGOs have also provided a useful vehicle for raising world-wide support for thenew movement’s causes, especially if these concern ecological, gender, social justice and humanrights issues. Women have also achieved a far greater presence in these new peasant movements,although still less than their relative importance would warrant. Women have figured especiallyprominently in some of the indigenous and human rights movements.

This new character of the social movement in the countryside does not mean that traditionalconcerns have vanished with the transformation of the peasant movement. Thus, demands for better

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wages and working conditions, land, improved prices for peasant products and greater and cheaperaccess to credit and technical assistance continue to be made. But new organizational forms and waysof mobilization have emerged. Also new issues have arisen, such as the environment, and some issueshave become either less prominent or have acquired a different meaning. The land question hasacquired a new connotation with the conflicting territorial claims made by capitalists, small settlers andindigenous groups as well as by the new ecological concerns.

The new peasant and indigenous movements are not struggling for a mythical past and utopia. Theydo, however, reject contemporary modernity with its current neoliberal and globalization processes asthis is exclusionary and often threatens their survival, whether physically, socially or culturally (Edelman,1999; Wise et al., 2003). Such modernity is regarded as reckless, hypocritical and bigoted (Zamosc,1994). Instead they are struggling for a different modernity which rests on their own emancipatoryproject that includes greater control over their lives, more security and a better standard of living(Petras and Veltmeyer, 2001b). Thus, the challenge for the new movements is to use the currentprocesses of modernization for their own interests and, where possible, to develop their ownalternatives. Peasants have to increase their ability to master their own environment as well as toparticipate on more favourable terms in the global environment (Bebbington, 1996). This requiresweaving new alliances and strengthening old alliances with other social groups as well as reshapingrelations with the state, which still principally serves the interests of capitalists and is still a major actordespite neoliberal globalization (Petras and Veltmeyer, 2002). The agrarian question has yet to beresolved in Latin America (Brass, 2003).

CONCLUSIONLatin America’s rural economy and society have been transformed in recent decades as aconsequence of neoliberal reforms and globalization. Latin America’s agriculture is now furtherenmeshed with the new world-food regime. Transnational agribusiness has further consolidated itsdominance. This form of modernization has benefited only a minority of the rural population andexcluded the vast majority of the peasantry. The beneficiaries are a heterogeneous group, includingagro-industrial firms, capitalist farmers, and some capitalized peasant households. The losers are thesemi- and fully proletarianized peasantry, the majority of rural labourers whose employmentconditions have become temporary, precarious and ‘flexible’.

The boundaries between rural and urban have become ambiguous. The massive rural out-migrationhas partly ‘ruralized’ the urban areas (especially the shantytowns), and the countryside is becomingincreasingly urbanized. Urban and rural labour markets have become more closely interlinked. Theland market has become more open and competitive enabling urban investors and internationalcapital to gain greater access to agricultural land. Competition among agricultural producers hasintensified due to a more fluid situation in the commodity, land, capital and labour markets.

While the rural economy is less important today than in the past, it still retains critical significancein most Latin American countries. To ignore the agrarian question of unequal access to land, ruralpoverty, and exclusionary modernization, is ill advised. Rural poverty remains widespread, anddiscrimination against the peasantry and indigenous communities is still pervasive. The continuingpromotion of agricultural, forestry and fishery exports further depletes natural resources contributingto ecological deterioration.

Although the shift from a state-centred inward-directed development process to a neoliberalmarket-oriented and export-oriented model has weakened the power of traditional peasantorganizations through the fragmentation of rural labour, new social conflicts have erupted in thecountryside. A new peasant and indigenous movement has emerged in the countryside which iscontesting the neoliberal globalization policies. Thus, it will be politically difficult for governments tocontinue to impose the neoliberal model regardless of the consequences for rural people. A radicalshift to a post-liberal development strategy is required. This change has to be shaped by the creative

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interaction between civil society and an activist but democratic state, in which the new peasant andindigenous movement must have a crucial role so as to ensure that market forces are harnessed for aparticipatory, inclusive and egalitarian development process.

FURTHER READING

Bebbington, A. and Thiele, G. 1993 Non-governmental organizations and the state in LatinAmerica: rethinking roles in sustainable agricultural development. Routledge, London and New York. Asympathetic, yet critical analysis, of NGOs active in the rural sector in Latin America.

Brass, T. (ed.) 2003 Latin American peasants. Frank Cass, London. The most up-to-date analysiscurrently available on the impact of globalization and neoliberalism on the Latin American peasantryand their struggles.

Deere, C. D. and León, M. (eds) 2001 Empowering women: land and property rights in LatinAmerica. University of Pittsburgh Press, Pittsburgh, PA. A pioneering and comprehensive study ongender and land issues in rural Latin America.

de Janvry, A. 1981 The agrarian question and reformism in Latin America. The Johns HopkinsUniversity Press, Baltimore, MD. Although written a quarter of a century ago this is still a classic texton Latin American agrarian development.

Giarracca, N. (ed.) 2001 ¿Una nueva ruralidad en América Latina? Consejo Latinoamericano deCiencias Sociales (CLACSO), Buenos Aires. Top Latin American rural specialists examine LatinAmerica’s rural transformations in the neoliberal period and discuss whether they can becharacterized as a ‘new rurality’.

WEBSITES

Consejo Latinoamericano de Ciencias Sociales, www.clacso.org/wwwclacso/espanol/html/publicaciones/catalogo.html, for downloading the text by Giarracca mentioned above andother useful publications.

Food and Agriculture Organization of the United Nations, www.fao.org/regional/LAmerica, the regional office for Latin America and the Caribbean. It has many documents on ruraldevelopment, food security, natural resources and agricultural trade and is a rich source for statisticaldata. From the website of the FAO’s sustainable development unit www.fao.org/sd/ it is possible todownload the articles published in the journal Land Reform, Land Settlements and Cooperatives(www.fao.org/sd/Ltdirect/landrf.htm).

Inter-American Development Bank, www.iadb.org/sds, website of the SustainableDevelopment Department has a link to the Environment and Natural Resources Unit which hasinformation on agriculture, rural development, the environment, forestry, water and so on.

Inter-American Institute for Cooperation on Agriculture, www.iica.int, has muchinformation on Latin America’s agriculture.

LANIC, http://info.lanic.utexas.edu/la/region/indigenous, this website specializes in indigenouspeoples in Latin America. The LANIC website in general has useful search facilities for ruraldevelopment issues.

World Bank, www.worldbank.org/landpolicy, this particular site has many documents on landpolicy issues.

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www.clacso.org/wwwclacso/espanol/html/publicaciones/catalogo.html

www.clacso.org/wwwclacso/espanol/html/publicaciones/catalogo.html

www.fao.org/regional/

www.fao.org/sd/

www.fao.org/sd/Ltdirect/landrf.htm

www.iadb.org/sds

www.iica.int

http://info.lanic.utexas.edu/la/region/indigenous

www.worldbank.org/landpolicy

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The neoliberal policies introduced throughout most of Latin America in the past two decades openeda new development era which could be referred to as the globalization phase succeeding the earlierimport-substitution phase. There is nothing inevitable about this phase, as it is the outcome ofpowerful struggles between different social forces in the world system, in general, and within LatinAmerica, in particular. This globalization reveals the defeat of the socialist project and the triumph ofcapitalism in Latin America, which had been challenged in a variety of ways by the Cuban revolutionof 1959, Allende’s Chilean road to socialism in the early 1970s and by the Sandinista revolution in the1980s. While Chile’s and Nicaragua’s attempts at socialist transformation failed, Cuba’s is barelysurviving and no longer inspires those forces seeking a progressive alternative to the neoliberalproject. While neoliberalism can point to some successes, especially in its ability to become thedominant ideological force among economic policy-makers, it has so far been unable to resolve LatinAmerica’s endemic problems of vulnerability to external forces, social exclusion and poverty and haseven aggravated them. This chapter first intends to evaluate the current political economy of LatinAmerica, including how individuals and groups are contesting elements in terms of their livelihoodstrategies. Finally, it will discuss the possibilities for political economy alternatives for the twenty-firstcentury.

THE NEOLIBERAL MODEL EVALUATED

Macro-economic reform

The neoliberal model has maintained a certain influence largely due to the macro-economic stabilitythat it has provided. Most Latin American countries are now characterized by single digit inflation. Onlythose countries that have avoided adopting the neoliberal model (such as Venezuela) are still doggedby high inflation. In addition, the technocracies of most Latin American governments have organizedsome incentives for entrepreneurship. As a result, there has been a growth in the significance of theprivate sector and not only large but also medium-sized enterprises

The outward-oriented model achieved growth in direct foreign investment in most countries, atleast until the peak years of 1999 and 2000. Through the decade of the 1990s there was a newimpetus for exports, although these were largely based on primary resources and their processingrather than based on manufacturing exports (Figure 13.1). Manufacturing exports have only grownsubstantially in Mexico and Brazil.

The model still suffers from low savings rates; this problem has been a factor in explaining thevarious financial crises over the last decade. In terms of the public sector, the tax base is relatively lowand tax evasion high. As regards the private sector, sweeping reform to private pension funds has beenassociated with a significant rise in the savings rate in Chile (Barrientos, 1996). Other countries havenot followed the example and the Chilean pension funds have suffered heavily from declining stockvalues since the mid-1990s. High interest rates on their own do not seem to have changed savingshabits in most of Latin America. Indeed, greater access to credit in the wake of financial liberalizationhas appeared to fuel consumerism and high indebtedness (Sklair, 1994). As a result, Latin American

13The alternatives to neoliberalism

Robert N. Gwynne, Cristóbal Kay

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Figure 13.1 The results of foreign direct investment in Chilean agriculture. Italian investment (through Masterplant)

has created this highly mechanized nursery between Curico and Talca in the Central Valley. Trays of seeds are

prepared mechanically (see Figure 13.1a), spend five days in very humid conditions and then are carefully prepared

for market (in this case for large numbers of Chilean tomato farmers) in state-of-the-art greenhouses where growing

conditions are rigorously controlled (Figure 13.1b). Photographs by Robert N. Gwynne

(b)

(a)

economies still depend heavily on external finance, either in the form of private capital flows orforeign investment.

By making Latin American economies more closely integrated into the global economy, theneoliberal model has also made them more dependent on, and hence vulnerable to, global economicshifts. As with the structuralist arguments of the 1950s, Latin American economies are still concernedabout the wide fluctuations in world prices for primary commodities. With the volume of resourceexports growing rapidly since the end of the twentieth century, particularly in small countries, theirpotential vulnerability is being accentuated.

Furthermore, although neoliberal economic policies have provided reasonable rates of economicgrowth once they have become firmly established, this has been associated with increasing inequality.Within the framework of market-oriented economics, benefits have been concentrated within themore successful entrepreneurs and executives of the private sector. Entrepreneurs specializing inexports and finance and large national companies that have been able to successfully restructure havebeen some of the main beneficiaries of the reforms.

Labour markets transformed

The neoliberal model argued that stability would produce rapid growth in production and employment.Contrary to these predictions, the generation of employment has fallen short of expectations. Labourhas suffered much more heavily than holders of capital during economic restructuring.

The adoption of an outward-oriented economic policy was normally associated with large increasesin unemployment in key industrial sectors. The privatization of state firms was also characterized by asignificant loss of labour. Growth in export-oriented sectors took much longer to generate adequateemployment opportunities. This created the need to radically restructure labour markets in order tolower wage costs, to have a more flexible hiring and firing system for employers and to loweremployers’ non-wage costs (as in employers’ insurance contributions). Employers were further able toreduce costs by adopting short-term contracts and by subcontracting more of their supply of partsand services (Thomas, 1996). This increased the importance of informal arrangements in productiveactivities as discussed particularly in Chapter 11.

The state has also tried to reduce the power of trade unions in order to reduce worker protectionand lower labour costs (as in Chile and Peru). Increased employment of female labour (particularly inareas of agricultural exports and assembly industries) has been another feature (see Chapters 11 and12). Labour has increasingly suffered reduced bargaining power with the acquiescence or indeed activesupport of the state. These processes have often been perceived as the necessary prerequisites toproduce a more flexible labour market and to create more competitive labour conditions foremployers in the international market place. Overall, labour has become more vulnerable andinsecure due to the growth of short-term contracts, the shift to more competitive labour markets andthe decline of social security. Unless workers are skilled and/or possess a marketable knowledge, theyare destined for either low wages or even worse underemployment and periods of unemployment.

Social impacts of reform

The transformations of labour markets introduce the wider theme that neoliberal reform has beenassociated with negative effects in such social areas as income distribution and poverty. These negativeeffects can be seen in the impact of neoliberal reforms in at least five areas of the labour market(Bulmer-Thomas, 1996b):

1 Unemployment rate: trade liberalization, fiscal and labour market reform have combined tosubstantially increase unemployment during the economic crisis and the process of economicrestructuring. Those companies unable to compete with foreign firms in the domestic market layoff workers, governments drastically reduce the numbers of civil servants and short-termcontracts make temporary unemployment more common.

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2 Real minimum wage: labour market and fiscal reforms have normally operated to reduce theminimum wage in real terms – both to save government spending on social provision and tomaximize employment during economic restructuring. Although the real minimum wage declinesduring the economic crisis, it can subsequently increase once economic growth becomes moresustained (as in Chile since the late 1980s).

3 Real wages: trade liberalization, fiscal and labour market reform have all tended to exertdownward pressure on real wages – as companies face more competition from overseas firms, asgovernments increase wages and salaries at lower rates than inflation and as greater flexibilityenters the labour market. Again, a distinct sequencing can be found with real wages decliningduring the first phase of economic restructuring but with slight increases occurring once thelabour market subsequently tightens.

4 Wealth effects: the impact of fiscal reform, the liberalization of trade and domestic capital marketsand increased inflow of foreign capital has been to substantially increase the wealth of the toptwo deciles of income earners – the capitalist class in general and entrepreneurs in particular.

5 The urban informal sector. This corresponds to that part of the urban economy that is small-scale,avoids regulation and covers a wide variety of activities (see Chapter 11). During the phase ofeconomic restructuring, the informal sector tends to expand as more enterprises wish to enterthe unregulated sector (Figure 13.2). However, subsequently, it can decline as it becomes easierfor small-scale enterprises to comply with the more limited regulations required of a deregulatedformal sector. It has been argued (de Soto, 1989) that the urban market does offer opportunitiesfor many (as in petty commerce). However, as Thomas (1996) and Roberts (1995) point out,these are basically survival strategies and enterprises will normally remain with low levels ofcapital accumulation and therefore income. Increased subcontracting from larger firms to small-scale informal enterprises would be one example of such trickle-down mechanisms operating.

Thus, the social impacts of neoliberal reform are both considerable and substantial, although it isimportant to indicate a certain sequencing – normally a period of drastic change (increasedunemployment, declining wages) followed once economic growth picks up by a period of gradualimprovement. Does this period of gradual improvement reduce inequalities as well? It is difficult to

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Figure 13.2 The informal sector in action. Selling coca leaves on the street for local consumption in Cuzco.

Weighing, packaging and retailing functions combined. Photograph by Laura Maynard

judge at present. In the longest historical surveys of the relationship between neoliberal reform andinequality (Altimir, 1994; Scott, 1996), there is a tendency for improvement after the crisis of economicrestructuring – during which income distribution becomes considerably worse. Even so, it is the uppertwo deciles that have performed consistently well during economic reform, due to the greatadvantages enjoyed by those owning capital and earning high salaries due to business skills. The middlefour deciles tend to be relatively static or even declining, while the lower four deciles remain with lowand declining percentage proportions of national income. In short, given the limited evidence availableall that can be concluded at present is that the neoliberal reforms have not significantly changed thehigh levels of income inequality and may well have aggravated it. This is particularly the case in thosecountries that have failed to implement major social expenditure programmes as these have shownto have a positive impact on income distribution (Stallings and Peres, 2000: 129–52).

In states that have shifted from authoritarian to democratic governance, there is greater evidenceof integrating social policies into neoliberal reform packages with the objective of achieving greatersocial equity – or neoliberalism with a human face as it has been called. The democratic transition inChile after 1990 saw a significant shift in social priorities, as tax increases were directed to pay forgreater spending on social welfare, education and health. However, there seems to be lesscommitment to social policies in other countries experiencing neoliberal reform.

Poverty and the changing social provision of the state

One of the strongest criticisms against the neoliberal model has been its inability to tackle poverty(Figure 13.3). Indeed, there has normally been a substantial increase in poverty as structuraladjustment policies (the shock treatment) have been enforced. After the debt crisis of the 1980s, therewas discussion of a social debt, society’s debt to the poor and underemployed (between 30 and 50per cent of the population of most countries). There was the idea that this debt had to be paidalongside that of the foreign debt. However, whereas many countries have arranged the latter debt,the social debt continues. The poor are characterized by poor health and high infant mortality rates.When epidemics break out, as with cholera in Peru in the 1980s, it is the poor with their low levels ofsanitary infrastructure that most suffer. The social debt remains high and even the Inter-American

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Figure 13.3 Elderly beggars, Quinché, Ecuador. Photograph by Sylvia Chant

Development Bank (DB, 1996) emphasized the need to rebuild the continent’s social infrastructureand social services.

In general, the state has tried to reduce its long-term commitment to social provision and to createmore market-driven forms of social support. Notable here is the case of pension reform in which theprivate sector takes control of workers’ contributions, the investment of those contributions and thedelivery of social and pension benefits (Barrientos, 1998). This reduces the fiscal burden and shiftsresources from the state to the private sector, giving greater opportunities for the private sector toinvest. The private sector has also been encouraged to invest in the health and education sectors.However, this has normally been associated with two-tier systems of social welfare with only theupper and wealthier middle classes able to afford the high costs of private schools and healthprovision. The poorer majority is left to fend for itself within an under-funded and low-quality publicservice. With the reduction of social welfare provision from the state, there is an increased role fornon-governmental organizations (NGOs) in helping with skills and livelihoods for the poor both inrural and urban areas. However, overall, inequality of access to social welfare has become acharacteristic of the new economic model.

Are there contradictions to the neoliberal model?

The operation of neoliberal reforms can be seen as a contradictory process. It is achieving economicgrowth in certain countries but with increasing income inequality, more exclusion and less socialprotection. This is taking place within a Latin American continent that has shifted to democraticframeworks. However, as Gills and Rocamora (1992) argue, in the transition from authoritarian todemocratic regimes in Latin America institutions have failed to broaden popular political participationin a meaningful way. In these elite democracies, social reform agendas that could have established thebasis for broader popular participation and greater social equity have been abandoned (Veltmeyer andO’Malley, 2001). Indeed, Green (1995: 164) argues that the application of the new economic model‘has ripped the heart out of democratization, turning what could have been a flowering of political andsocial participation into a brand of “low-intensity democracy”.’

Many question how the economic model can be orchestrated within democracies in which largenumbers of the electorate are not enjoying the benefits of economic growth. Is democracy sustainableunder such conditions? Or does the continuation of the economic model rely on technocraticgovernments? Does the model rely on the necessity for economic growth and the increasingintegration within global consumerism? Has neoliberalism become responsive to local needs?

Some neoliberal policies have tried to become closer to local needs by decentralising powers andfunctions from the central state. Reforms to local government (Nickson, 1995) have tried to provideservices more responsive to local needs and with clearer local targeting. These reforms haveattempted to increase efficiency while legitimating the reduced state at the local level. NGOs have inthe past helped in this process. However, NGOs have tended to be captured by the state during thedemocratic transition. Although there are some positive factors in this (qualified personnel movinginto democratic local government), there are also substantial negative factors. These include: muchreduced budgets and staff; lack of alternative perspectives; losing a certain degree of autonomy due toreliance on public funding (as opposed to international organizations); being not that closely linked tolocal needs.

However, the realities of decentralization in many countries that have attempted it (such as Chileand Bolivia) are more akin to deconcentration – the shifting of functions down to the local scale butnot many powers of decision-making (Angell et al., 2001). In this way, deconcentration has been moreclosely linked to the idea of maintaining a small state but being able to provide cheaper and moreefficient social services at the local scale without any increased resources.

Despite the earlier social consensus surrounding it, largely due to its success in controlling inflation,the neoliberal model has increasingly been contested, particularly in the social area. Peasantmovements in Southern Mexico and Ecuador, movements representing the urban poor in squatter

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settlements and ecological movements taking up environmental issues at the local scale provideexamples of this.

ALTERNATIVES TO NEOLIBERALISMDemocratization and neoliberalism

In the past two decades in Latin America, globalization has been intimately linked with the shift toneoliberal policies. During this period, the governments of most of the countries of mainland LatinAmerica have integrated their national economies more closely with the global economy. Theneoliberal model has restructured Latin America’s political and economic system, creating newinterest groups, particularly in finance capital and exporting firms. In addition, it has become apparentthat a closer relationship with the global restricts the internal room for manoeuvre of Latin Americanstates. Opening up to the global economy has been a disciplining force for both capital and labour inLatin America. Mistaken policies, or those policies perceived as mistaken by international capital, arepenalized, such as through a rapid withdrawal of finance capital.

The more global framework for Latin American economies coincided with a shift from authoritariangovernments (still significant in the 1980s) to democratic governance so that at present virtually allLatin American countries have governments elected through the ballot box. Thus, the Latin Americanstate has transformed itself into a democratic system at the same time as reducing its direct influenceover the economy (through privatization and deregulation) and cutting the size of the public sectorthrough fiscal reform. To a certain extent the shift to a more representative and participatory politicalsystem may have obscured the negative social impacts of neoliberal reform (Haggard and Kaufman,1995). Increased unemployment and poverty, an even more unequal distribution of income and afurther rise in the informal sector have resulted.

The technocratic components of democratic governments have attempted to explain or justify thisin two ways. First, there is the argument that the negative social impacts reflect a short-termadjustment to new conditions and will be soon turned around. Unemployment and poverty willincrease as the economy adjusts to new external realities and as the country forges a morecompetitive economy. The main problem with this argument is that adverse social impacts have notbeen restricted to the short term. As Sylvia Chant emphasizes in Chapter 11, the decreasing access toresources by the huge numbers of urban poor has become a long-term trend. It must be rememberedthat extreme inequality has long been a feature of virtually all Latin American countries. In two suchapparently very different countries as Brazil and Guatemala ‘the top 10 per cent of the populationamass almost 50 per cent of national income, while the bottom 50 per cent scrape up little more than10 per cent’ (IDB, 1998: 1).

The second justification concerns the ‘lack of alternatives’ argument. Latin American governmentspoint to the political economy of neoliberalism becoming the basis for policy in other areas of theworld that are identified as ‘competitor’ regions in the world economy – Eastern Europe and East Asia,in particular. It becomes paramount, according to Latin American Treasury ministers, to ‘modernize’their economies in order to make them more competitive in world markets, so that they can bettertake advantage of global forces (Foxley, 1996). More recently, the need to modernize the LatinAmerican state (Bresser Pereira and Spink, 1999) has been emphasized, particularly in terms ofimproving the technical competence of civil servants and improving the policy-making capability of thestate.

This leads one to consider the need for institutional reform in Latin America. In order to makeLatin American countries more competitive in a globalizing world, neoliberal reform cannot simplybe about making economies more market-oriented. The Chilean case shows that substantial andcritical institutional reforms have to take place over a long period of time for a country to becomemore competitive and less prone to international crises. Institutional reform in Chile has stretchedover a period dating from 1964 and has emerged from a wide variety of political ideologies.

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Reforms to landholding, to the ownership of national mineral wealth (notably copper), to health andpersonal pensions, to financial institutions and to taxation have been notable examples that haveoccurred under governments of widely different ideologies. Chile is also regarded as having a muchlower level of corruption than any other Latin American country (The Economist, 2003c). Martínezand Díaz (1996) argue that it is the combination of these profound institutional reforms withmarket-oriented neoliberal policies that lie behind Chile’s sustained economic success since themid-1980s.

The future relationship of the state with the process of economic change is thus a key issue. Theideological shift to limited government involvement in the economy may not produce themodernized, competitive economy that is anticipated from neoliberal reform. If this is the case,sustained economic growth will not occur – which is seen as the prerequisite for governments toaddress the social debt and begin to rectify the highly unequal patterns of income distribution.

There is also the question of the relationship between economic integration, neoliberalism andglobalization. For year 2005, it is planned that the Americas will be one large free-trade zone. This willinvolve integrating the USA, the dominant economy of the early twenty-first century, with a largenumber of much smaller and highly diverse countries in Latin America and the Caribbean. Ingeopolitical terms, it will be necessary to resolve the problems inherent in a strong centre–peripherypattern that will characterize economic integration of all the Americas (in contrast to other schemeswhich have dealt with parts of the Americas, see Chapters 3 and 4).

The need for Latin American theories

In view of the crisis of socialism and neoliberalism’s failure to address the social question, it isimperative to develop an alternative development paradigm that is able to tackle the problemsmentioned. While it is beyond the scope of this book to develop this alternative paradigm, it is ourview that a useful starting point is to build upon Latin America’s contribution to development theorywhile considering other contributions as well. These are principally the structuralist and dependencytheories. Latin America’s structuralist theory, sometimes referred to as the centre–peripheryparadigm, was mainly developed by staff working in the United Nations Economic Commission forLatin America (ECLA) during the 1950s and 1960s under the inspired leadership of Raúl Prebisch.Some time ago ECLA changed its name to Economic Commission for Latin America and theCaribbean, hence ECLAC . In Spanish, the acronym remained CEPAL – Comisión Económica paraAmérica Latina y el Caribe.

Meanwhile, Latin America’s dependency theorists, writing mainly in the late 1960s and 1970s, weremore widely dispersed throughout a variety of institutions all over the region. Both theories grew outof a critique of existing development paradigms, which these authors saw as being unable to uncover,let alone deal with, Latin America’s problems of underdevelopment and development. Whilestructuralism argued in favour of an inward-directed development policy largely through import-substituting industrialization, dependency theory proposed a new international economic order and,in one of its strands, a transition to socialism as a way out of underdevelopment.

Structuralism might provide more relevant ideas for thinking about alternative developmentstrategies for those with a more pragmatic bent while for those with a more radical mind and longterm (and possibly utopian) vision might find the ideas of dependency theorists more appealing.Structuralism and the structuralist strand within dependency sought to reform capitalism bothinternationally and nationally while the neo-Marxist version of dependency strived to overthrowcapitalism as socialism was seen as the only system able to resolve the problems ofunderdevelopment. Given the collapse of the East European socialist system and China’s transitionfrom a planned to a market economy, the dependency’s socialist alternative is unable to commandmuch support in the less developed world, while the structuralist view of reforming the capitalistsystem is seen as a more feasible option for those searching for an alternative to the existing neoliberalmodel.

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Neostructuralism and Cardoso

It is important to emphasize that the neoliberal model has evolved – from an often narrow andeconomistic interpretation to the so-called ‘Washington Consensus’ (Williamson, 1990) and on to amore social democratic interpretation in Chile (Ffrench-Davis, 2002) and Brazil (Bresser Pereira, 1996;Cunningham, 1999). Indeed, some form of convergence between neoliberalism and structuralismseems to have occurred in some parts of Latin America. There is a reappraisal of the structuralisttheories of the 1950s and 1960s and an emergence of a neostructuralist position since the late 1980s.For some key writings on neostructuralism, see Rosales (1988), Ffrench-Davis (1988, 2000), Sunkeland Zuleta (1990), Fajnzylber (1990a), ECLAC (1990, 1992a, 2002a), Lustig (1991) and Ramos andSunkel (1993). For a comparison between neoliberalism and neostructuralism, see Sunkel (1994), Bitar(1988) and Muñoz (2001). For a critical assessment of neostructuralism, see van der Borgh (1995) andHarris (2000). It could be argued that neostructuralism has gained some influence on governmentpolicy in Latin America, such as with the Concertación regimes of Chile since 1990 and during thepresidency of F. H. Cardoso in Brazil (1995–2002).

Given that Fernando Henrique Cardoso is considered as one of the key figures of dependencytheory, it is useful to evaluate his own record when in government. As a dependency writer, Cardosopreferred to speak of ‘analysis of concrete situations of dependency’, rather than of a theory ofdependency, as he was sensitive to the differences between dependent countries as well as beingsceptical of grand theories. He also coined the term ‘dependent development’ as in his viewdependent countries could develop and were not condemned to a process of ‘development ofunderdevelopment’ as argued by André Gunder Frank, who was seen by some, especially in theEnglish-speaking world, as the key figure in the dependency movement. While Frank continued his lifeas an engaged academic, Cardoso, as has been noted, moved into politics, becoming president of Brazilfrom 1995 to 2002.

While Frank has remained a fierce critic of capitalism and globalization, Cardoso is viewed by someanalysts as having embraced both neoliberalism and globalization. As Birdsall and Lozada (1996: 17,emphasis in original) forcefully put it: ‘Far from wanting to get out of the international economic system,Latin America is taking all the steps necessary so as not to be left out. Brazil’s Fernando HenriqueCardoso, once a leading proponent of dependency theory and now a champion of market reform,exemplifies this shift.’ Cammack (1997: 242), ironically observes, that ‘Cardoso the sociologist remainsthe most acute critic of Cardoso the president’ and once in power he ‘has stripped the socialdemocratic promise from his project, and reduced it to a recipe for the consolidation of neoliberalismin practice’. Indeed, for Petras and Morley (1990: 145–56, 1992: 159), this metamorphosis issymptomatic for most Latin American left-wing intellectuals who, in their view, have retreated fromMarxism to liberal/social-democratic views. ‘Cardoso even said, in front of the television cameras,“Forget everything I have ever written.” ’ (Branford, 2003: 75).

Nevertheless, Cardoso has insisted several times that he is not a neoliberal. In his view, globalizationrequires that the state be reformed by intervening less but more effectively and by privatizing thosestate enterprises that can be run more efficiently by private capital. In Cardoso’s (2001: 246) view, thisdoes not conflict with the traditional ideals of the left, although it seems paradoxical. He (2001: 257)defends himself against these charges by arguing that ‘the timing and motivation of the politician areessentially different from those of the social scientist. The politician cannot wait for the sedimentationof knowledge in order to act. Should he do so he will be overcome by events.’ He argues thatglobalization cannot be avoided, offers opportunities, and although it conditions government actionthere is room for manoeuvre. Most left-wing critics agree with Branford’s (2003: 76) view that ‘by 1990Cardoso had been completely converted to neoliberalism’. But in the view of another Brazilian analyst:‘It becomes abundantly clear that policy developments in Brazil during Cardoso’s administration arehome-grown, the product of the country’s unique situation and modus operandi, having little incommon with neoliberalism per se or its ideology’ (Cunningham, 1999: 82).

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However, Cardoso (2001: 248) does admit that his views have changed:

When I wrote my books on dependency theory, the underlying hypothesis was that the internationalprocess of capitalism adversely affected conditions for development. It did not prevent development,but made it unbalanced and unjust. Many considered economic inward-orientation was a possibleform of defence against the alternative of an international integration regarded as risky anddangerous. This view has changed. We have to admit that participation in the global economy can bepositive, that the international system is not necessarily hostile. But we should work carefully to seizethe opportunities. Successful integration into the global economy depends, on the one hand, ondiplomatic articulation and adequate trade partnerships, and, on the other, on the individualhomework of each developing country based on a democratically built consensus.

Thus, Cardoso maintains that it is possible to make globalization work for national development.Whether he successfully accomplished such a challenging task during his presidency is doubtful. Forcritics like Cammack, Petras and Morley, Rocha, and Theotonio dos Santos (1998; 2002b) Cardosocertainly has not succeeded. Indeed, many analysts conclude that previous state-led economicperformance was clearly superior to Cardoso’s market-led record. By forgoing his earlier dependencyanalysis, he under-estimated the global as well as the domestic political realities that greatly limited andundermined his development project. Paradoxically during his two-term presidency, having been re-elected in 1998, Brazil’s dependency has deepened while economic growth remained disappointinglylow. According to Branford (2003: 76):

By the time Cardoso ended his eight years in government, international capital had taken over hugeareas of the Brazilian economy and the country was caught in a foreign debt trap of unprecedentedproportions. Unemployment – and crime – had reached record levels.

Indeed, the country had become more dependent than ever on international financial capital leavingthe country at the mercy of speculators, and more vulnerable to external shocks, thereby furthereroding Brazil’s capacity for independent and sovereign decisions.

It is ironic that the foremost theoretician and critic of dependent development should have broughtabout as president of Latin America’s biggest economy a profound denationalization and its highestdependence ever on transnational corporations and international financial institutions. As a theoreticianhe should have foreseen the contradictions of his project, which were to scupper his desired goal ofenhancing Brazil’s autonomy as a key regional power in the global scene. ‘Thus, once Cardoso was inpower, the question of dependency and development was turned on its head’ (Rocha, 2002: 10).

Neostructuralism as an alternative

Thus, to characterize the policies pursued by the Cardoso government as neostructuralist would begoing too far, even though this might have been their intention (Petras and Leiva, 1994; Cammack,1997). Subsequently, with the election of President Lagos in 2000 in Chile the neostructuralistdimension of Chile’s Concertación government has gained more prominence. Then, with the electionof Luiz Inácio ‘Lula’ da Silva, to the presidency of Brazil in 2002 a shift to neostructuralist policies mighthappen in view of his priority to fight poverty and his land reform programme.

Some authors have dismissed neostructuralism as being merely the human face of neoliberalismand its second phase (Green, 1995: 189) or a variant of neoliberalism (Harris, 2000; Petras andVeltmeyer, 2001a), which can be characterized as ‘neoliberal populism’ (Demmers et al., 2001). Leiva(1998: 35) argued that neostructuralism can be seen as a logical continuation of the neoliberal model:

neostructuralism’s historical opportunity appears once it is necessary to consolidate and legitimise thenew regime of accumulation originally put in place by neoliberal policies. Neoliberalism andneostructuralism, therefore, are not antagonistic strategies, but rather, due to their differences, playcomplementary roles ensuring the continuity and consolidation of the restructuring process.

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Neostructuralism, despite recognizing the asymmetries in the world system, sees the need to keep onbeing part of that system. It is certainly true that there has been a shift of structuralism towardsneoliberalism as it has taken on board some elements of neoliberalism but at the same time it hasretained some of the core structuralist ideas – hence, the label neostructuralism. Furthermore, thereare differences, some of which have already been mentioned when discussing the contemporaryrelevance of structuralism and dependency theories in Chapter 1. These differences concern mainlytheir respective views on the relationship between developed and developing countries as well asbetween state, civil society and the market. To what extent these differences are significant enough forarguing that neostructuralism constitutes a distinctive enough alternative to neoliberalism is open todebate.

The neoliberal view is that further liberalization of the world economy is required and that this willbenefit the developing countries considerably. In contrast, neostructuralists, as well as dependencywriters, view the world economy as a hierarchical and asymmetric power system which favours thecentre countries and the TNCs in particular. They are thus more sceptical about further liberalization,believing that it will act to enhance the inequalities between and within countries; powerful globalgroups located in developed countries ensure that the benefits of global liberalization will bechannelled in their favour.

As for the relationship between state, civil society and the market, neostructuralists give a moreimportant role to the state in the process of social transformation and are eager to involve thedisadvantaged groups of society in this process, particularly as it has tended to exclude them.Meanwhile, neoliberals desire a minimalist state, putting the market at centre stage as they believe itto be the most effective transformative force; the less constraints that are put on the free operationof the market, the better for the national economy, society and polity.

Neostructuralism should not be interpreted as the structuralists’ surrendering to neoliberalism butrather as an attempt to come to terms with the new reality of globalization and to learn from thesuccessful development experience of the East Asian NICs. In this sense, structuralism is showing anability to adapt to changing historical circumstances rather than remain frozen in the past. Despite theshortcomings of neostructuralism, it appears as the only feasible and credible alternative toneoliberalism in present historical circumstances.

The neostructuralists’ interpretation of the East Asian NICs experience also differs from that of theneoliberals. While neoliberals hail it as a model of free-market economics, neostructuralists emphasizethe key role that the state played in their development process. The main lesson neostructuralists takefrom the East Asian NICs is the need to selectively integrate into the world economy and createcompetitive advantages through well-designed and flexible industrial policies (Fajnzylber, 1990c). Suchindustrial and export policies try to continually exploit niches in the world market and shift upstreamto more skill-intensive, technologically advanced and higher value added products (see Figure 13.1).Policies to improve the knowledge base of the economy and above all the national technologicalcapability are seen as crucial for achieving sustainable long-term growth. Thus, the importance ofeducation is stressed, as well as improving state capacity and income distribution, and reforming theunequal land tenure system as these factors were key ingredients in the success of the East Asian NICs(see Kay, 2002a).

Neostructuralism gives more importance to market forces, private enterprise and foreign directinvestment as compared to structuralism but argues that the state should govern the market throughstrong regulatory bodies. In neostructuralist thinking the state plays a less pivotal role in developmentthan it did under import substitution industrialization, as the state no longer undertakes directproductive activities through public ownership of industrial or other enterprises. The ability of the stateto direct the economy is limited as protectionism and subsidies are used only in a restricted andsporadic fashion. The imperative of achieving and maintaining a macro-economic balance isrecognized, as now price stability and fiscal stability are seen as conditions for growth, which was notnecessarily the case in the past. Another key element of neostructuralism is its greater concern for

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equity and poverty reduction, requiring special action by the state and involving collaboration withNGOs.

The position with regards to the world market is much changed as export orientation rather thanimport substitution is now the strategic direction that the economy has to take. But this shift towardsworld markets by the neostructuralists is framed within a strategy of ‘development from within’ asargued by Sunkel (1993: 8–9):

It is not demand and markets that are critical. The heart of development lies in the supply side:quality, flexibility, the efficient combination and utilization of productive resources, the adoption oftechnological developments, an innovative spirit, creativity, the capacity for organization and socialdiscipline, private and public austerity, an emphasis on savings, and the development of skills tocompete internationally. In short, independent efforts from within to achieve self-sustaineddevelopment. [emphasis in original]

The world market is not seen as a panacea. But domestic transformations in the country’s productivestructure and institutions are seen as essential for self-sustained development. These transformationsshould be driven internally according to national priorities. The greater the internal capacity for change,the greater the likelihood that the country will be able to take advantage of the possibilities offered byglobalization and improve its ability to limit any possible negative effects of globalization.

Another key element in neostructuralism is the achievement of competitive advantages in certainkey productive areas in the world market by selective liberalization, integration into the worldeconomy and an export-oriented industrial and growth policy. Neostructuralists are keen advocatesof ‘open regionalism’ which they hope will enhance Latin America’s position in the world economywhile at the same time reducing its vulnerability and dependence, see ECLAC (1994; 1995). Previousattempts at regional integration in Latin America, such as the Latin American Free Trade Association(LAFTA) and the Andean Pact were more inward-looking as they were an extension of a domestic ISIstrategy to a regional level (see Chapter 3). Instead, commercial integration through ‘open regionalism’is seen as complementing the outward-orientation by increasing international competitiveness andexports (Sideri, 1997).

Neostructuralist writings in recent years from the ECLAC stable have attempted to deal withglobalization phenomena (ECLAC, 2002a). It is argued that globalization in the current neoliberalphase, far from leading to convergence as asserted by neoliberals, reproduces and sometimesexacerbates four major asymmetries:

1 in technical progress with the extreme concentration of innovation and technological capability inthe centre or core economies and largely under the control of TNCs;

2 in financial vulnerability as peripheral or developing countries are far more exposed to externalshocks than in the past due to greater financial dependence with its associated volatility;

3 trade vulnerability has intensified as a result of fluctuations in demand levels and terms of trade,partly due to the continued deterioration in commodity prices;

4 in the economic mobility of factors of production. While the neoliberal reforms have greatlyenhanced the mobility of capital, the mobility of labour continues to be restricted. This asymmetryskews the distribution of income in favour of capital, and places labour at a disadvantage,especially in the periphery or developing countries due to their surplus of labour.

To overcome these asymmetries, the neostructuralists (ECLAC, 2002a) propose a global agenda thatincludes measures to do the following:

• enhance the transfer of technical progress from the centre to periphery countries;• promote the development of institutional, social, human and knowledge capital so as to

strengthen endogenous growth in countries of the periphery;• ensure adequate participation in decision-making at the international level;

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• gradually lower the barriers to labour migration, particularly from countries of the periphery tothose of the core;

• decrease financial volatility;• reduce the sizeable production and export subsidies of agricultural commodities in the centre or

core economies.

The neostructuralists have renewed their equity commitment and added a new focus to their analysiswith their emphasis on citizenship (ECLAC, 2001). In this study the neostructuralists lament thatglobalization and neoliberalism have eroded social cohesion and solidarity as well as collective actionfor the common good. The neoliberals’ emphasis on market relations has fragmented andindividualized society. Neostructuralists thus propose to reconnect the individual to society bydeveloping citizenship that implies a reciprocal commitment between public institutions and theindividual. For this purpose the state should promote education, employment, health and socialsecurity among the citizenry. The enhancement of social cohesion implies the individual’s participationin public life and in the decision-making processes which affect livelihoods and the country’s future. Theincreasing alienation of the people from politics has to be reversed. It also calls for the abolition ofdiscrimination due to sex and race and reduction of the gap between the included and excludedindividuals or groups. It is only by strengthening citizenship that it is possible to gain sufficient socialcohesion and political legitimacy to undertake the major transformations required for achievingequitable and sustainable development.

Chile: from neoliberalism to neostructuralism?

Chile is the first and most aggressive neoliberal reformer in Latin America and probably in the world.It had the best economic performance over the last quarter century in Latin America (UNDP, 2002:190–3). In the year 2000 Chile was ranked 38th out of a total of 173 countries in the humandevelopment index which measures not just economic performance but also life expectancy andeducational achievements (ibid., p. 149). Within Latin America only Argentina was ranked higher (34th)but since the deep crisis of 2001–2 it has fallen well below Chile’s ranking. But is Chile’s relativeeconomic success the result of the neoliberal reforms?

This is indeed an issue for debate. Readers will find throughout the text many references to theChilean case (for example, in Chapter 3) allowing them to form their own opinion. The initial set ofreforms, from the military coup on Chile’s 11th of September in 1973 until the economic crisis of1982–83, was indeed cast within a highly doctrinaire and authoritarian neoliberal mould. Thereafter,the government shifted to a more pragmatic set of neoliberal policies that introduced some economiccontrols and social policies. With the democratic transition since 1990 the ‘Concertación’governments have attempted to shift to a ‘growth with equity’ or neostructuralist set of policies. TheConcertación governments continued to build upon the economic success of the Pinochetdictatorship, achieving even higher rates of economic growth while at the same time halving poverty,largely as a result of substantial increases in social expenditure (Stallings, 2001: 46–53). In 2001 onlyUruguay had a lower level of poverty than Chile in Latin America (ECLAC, 2002c: 39). However, theConcertación governments have so far failed to deliver on equity. Chile still has one of the worstincome inequalities in Latin America (ibid., 227–8). Thus, the achievement of greater equity continuesto be Chile’s main challenge.

Despite Chile’s economic success there exists a high degree of insecurity among the population asrevealed by the pioneering studies of the Chilean office of the United Nations DevelopmentProgramme (UNDP, or PNUD in Spanish). Human security refers to objective conditions as well as tothe subjective experiences of people. The survey found widespread feelings of concern in all the sixdimensions of human security it measured: delinquency, employment, social provision, health,information and sociability. Also ‘fear of the other, fear of social exclusion and fear of meaninglessnesswere expressed’ (Kirby, 2003: 121). A surprising finding of a subsequent UNDP survey is that over half

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of the people interviewed felt insecure economically and three-quarters expressed negativesentiments about the current economic system. What is less surprising is that mainly individuals of alower socio-economic level and rural people expressed such views (PNUD, 2002: 257–8). Perceptionsdo matter. For example, Chile has the lowest rate of homicide and one of the lowest levels of crimein Latin America and yet Chileans express a great fear of crime (Dammert and Malone, 2003: 85). Thisreveals that the fear of crime is an expression of the economic and social insecurities felt by manyChileans, especially by those left behind by the rapid process of modernization.

The 1998 UNDP Chile report (PNUD, 1998) provoked a debate among some members of the‘Concertación’ coalition of political parties. One group, labelled the ‘autoflagelantes’ (‘self-flagellators’ or‘self-chastisers’), argued that the people’s feelings of unease, anxiety and insecurity could not bebrushed aside as an inevitable but transitory outcome or byproduct of the country’s rapid process ofmodernization as had been done by the other group, the ‘autocomplacientes’ (the ‘self-satisfied’ or ‘self-congratulatory’). The autoflagelantes were far more self-critical and demanded that the governmentpay greater attention to economic inequality, vulnerability and social justice (see Chapter 8). Bothgroups continued to stress the need for growth (Van der Ree, 2003). Is it possible to achieve growthwith equity in today’s globalizing world? The Chilean case has so far shown how difficult it is to attainboth goals, especially without shifting more decisively towards a new national and internationalpolitical economy.

Outstanding problems to be addressed

In our view, there are four major issues that need to be addressed by policy-makers and society atlarge in contemporary Latin America:

• Inequality in its various dimensions, such as income, and access to resources such as land, finance,technology, education and social services. Also inequality arising from discrimination on thegrounds of ethnicity, gender and class. By addressing these inequalities, a major source of povertywill be removed.

• Vulnerability and insecurity that have been exacerbated by the neoliberal transformation andglobalization. The economy and individuals are more vulnerable to changes in the world marketconditions due to the increased exposure of the region to international trade and the volatility ofinternational capital. The power of TNCs and international financial institutions over policy-makingand the domestic economy has greatly increased. Similarly, social groups (such as industrial andrural workers), households and individuals have to deal with far greater insecurities than in thepast as the state has dismantled many of the protective social regulations and provisions.

• Lack of an alternative development project to tackle inequalities, vulnerabilities and insecurities.For this reason, it becomes necessary to develop ideas as widely as possible for an alternativeproject that begins to deal with these deeply embedded problems. This implies deepeningdemocracy, as this project cannot be constructed from above but needs to build upon demandsand proposals emanating from below. It implies a political system that is able to forge a consensusand to implement a transformative project that requires good governance and state capacity.These problems cannot be resolved in the short term and thus a long-term vision has to beforged, but one which clearly sets out a sequence and a timeframe for dealing with theseproblems. Lula’s ‘Campaign against Hunger’ may be seen as one step in this direction.

• The exclusionary globalization process in which a minority are the winners but the majority arethe losers. The paradoxical character of neoliberal globalization is that while it incorporates a fewgroups, regions and economic sectors to the benefits of globalization, it at the same time excludesmany groups, regions and productive sectors, thereby worsening their situation. To change thisstate of affairs requires a radical reform of the global system. The restructuring of the relationshipsof Latin America to the global system will require reforming various international institutions, suchas the WTO, the IMF and the WB. It will also require creating new institutions so as to forge a

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more egalitarian international system in which the developing countries have as much a voice asthe developed countries in designing the reformed international system. The construction of sucha new inclusionary globalization will be greatly facilitated if the various Latin American countriesare able to forge a common project. This might at first be a minimalist project and achieved in thefirst instance by building upon existing regional associations like Mercosur, the Andean Community,and the Central American Common Market as well as developing linkages between the sub-regional groupings of countries.

It is thus not surprising that the neoliberal model is being contested, at the theoretical level butparticularly by social movements. The indigenous movements in Chiapas in Southern Mexico, inEcuador and in Bolivia, the landless peasant movement in Brazil, movements representing the urbanpoor in squatter settlements and ecological movements taking up environmental issues at the localscale provide examples of this socio-political contestation.

The neoliberal model is also being contested at the theoretical level with increasing force. One ofthe most influential critics has been Joseph Stiglitz (2002), given that he was Chief Economist at theWorld Bank until his resignation in 2000 and is a Nobel Laureate in Economics. In Latin America theneoliberal paradigm has increasingly been criticized from a variety of perspectives but the maintheoretical challenge continues to be from a neostructuralist perspective. Charles Gore (2000)detects the emergence of a latent ‘Southern Consensus’ which he views as the convergence betweenneostructuralism and the distinctive analysis of the United Nations Conference on Trade andDevelopment (UNCTAD) of the East Asian development experience and the world economy in itsannual Trade and Development Reports since 1994.

Alternative paradigms have not yet managed to gain hegemony, although it is possible that if the‘Lula’ government succeeds in its transformative project, this may further their influence. What is nolonger in doubt though is that the neoliberal paradigm no longer commands the influence it once had.It has already been reshaped in recent years, with a shift in emphasis to social policies and a gradualappreciation that the neoliberal recipe needs to be adapted to different national contexts – one sizedoes not fit all. Latin America’s outstanding problems call with increasing urgency for an alternativepolitical economy to contemporary neoliberal globalism. It remains to be seen if a possible SouthernConsensus can emerge and begin to tackle the key outstanding problems of poverty, social exclusionand equity.

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Lat

in A

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Tra

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310

311

actorscivil 193, 194, 195, 196–8, 202, 203,

204–5, 207, 208external 149foreign 189institutional 193local 197–8social 193, 194, 196–7, 200, 202,

203, 207, 232state 142, 146, 152, 155

Africa-Caribbean-Pacific (ACP)countries 75, 76

agriculture 51, 58, 60, 73, 75–6, 77, 78,83, 84, 97, 100, 105, 109, 110,117, 120–9, 146, 178, 179, 182,186, 203, 223

assets 245–6competitiveness 83, 234–5, 243,

246, 249exports 74, 75–6, 77, 83, 122,

124–8, 234–5, 236–8, 243–5and globalization 122, 126, 232,

234–40non-traditional agricultural exports

(NTAEs) 83, 122, 124–8, 234–5,236–8, 243–5

power 245–6reforms 232–3, 234–40, 242, 244,

245, 246subsidization 265

agroindustry 51, 58Allende, Salvador 147, 253Alliance for Progress 145–6Amazon 120, 129, 130, 131, 133, 197,

204, 247amnesty laws 160–1Andean Community 39, 40, 41, 267Andean Group 67Andean Pact 264Andean region 9, 11, 90, 98, 99, 140,

185–8, 189, 203, 207anti-globalization movements 5Argentina 8, 12–18, 27, 28, 32, 37, 39,

40, 45, 48, 55, 57, 58, 63, 95, 96,97, 98, 100, 101, 103, 115, 144,146–50, 152–5, 158–60, 163, 164,168, 169, 190, 198, 201, 202, 216,225, 241, 265

aristocracy 147Asia 9, 10, 11–12, 16, 19, 32, 44, 51, 52,

111, 253, 267assembly plants 82

see also maquilasassets 176–8, 181, 183, 184–5, 186,

210–12, 241, 245–6Association of Caribbean States (ACS)

67, 88asymmetries 6, 7–9, 10–13, 41, 56, 78,

79, 89, 146, 263, 264authoritarian regimes 34, 141–55,

158–63, 167–8, 193–6, 198, 202,259

autocomplacientes 266autoflagelantes 158, 266Aylwin, Patricio 218Aztecs 94

Bahamas 84, 88banana exports 74, 75–6, 77, 234Barbados 39, 77barrel children 87Belize 87biodiversity 118–20, 128, 129Bishop, Maurice 74black Latin Americans 200black market 85, 86Bogotá, Colombia 95, 100, 111, 112,

113, 115Bolivia 8, 12, 27, 39, 42, 50, 51, 57, 117,

122, 124, 166, 178, 198, 203–5,215–17, 241, 246, 248, 267,1857–91

boom and bust economies 45, 86, 123bracero programme 1942 106Brady Plan 47Brazil 8, 10, 12–14, 17–19, 27, 28, 31,

32, 35, 37, 39, 44, 50, 51, 57, 58,60, 61, 63, 69, 95, 97, 98, 121,128–31, 133, 134, 136, 144,146–8, 150–3, 155, 157, 160–2,164, 167, 168, 180, 183, 194, 199,201, 205, 208, 218, 223, 225, 233,236, 238, 246–8, 253, 259, 261–2,267

Britain 43, 76, 84see also United Kingdom

British Virgin Islands 84Brundtland Commission 129Bucaram, Abdalá 167, 168Buenos Aires, Brazil 93, 94, 95, 101,

199, 201bureaucratic-authoritarianism 147–9Bush Administration 90business confidence 45, 46

campesinos 233–4Canada 39, 86, 87, 108capital 146, 167, 240, 255, 259

cultural 176, 183financial 187, 210, 211, 241flight 45foreign 46, 84, 146, 262formation 51human 176, 181, 182, 183, 184, 186,

187, 210, 211–12, 230, 241, 264institutional 264knowledge 264mobility 12–13, 14, 20, 84, 264natural 176, 183, 210, 211, 241produced/physical 176, 181, 183,

210, 211, 241social 176, 181, 182, 183, 186, 187,

210, 211, 212, 229, 241, 264switching 178

capitalism 23, 24, 84–6, 142–5, 148,260, 262

consolidated 150dependent 73–4, 91failure in Latin America 26and globalization 5, 6political crisis of 25triumph 253

capitalist farms 232, 233, 234, 235, 240,241, 243–4

capitalists 19, 20, 142, 143, 152, 256Caracas 95Carajás 130Cardoso, Fernando Henrique 16, 164,

261–2Caribbean 3, 8, 9, 10, 11, 39, 41, 173,

190, 260see also Central America and the

CaribbeanCaribbean Basin Initiative (CBI) 67, 74,

83Caricom (Caribbean Community) 39,

40, 75, 87–8, 89–90Carifta 39Castro, Fidel 85Cayman Islands 10, 84Central America 9, 11, 37, 39, 41, 95,

98, 99, 100, 144, 150, 157, 167,181, 185, 197, 198, 200–1

Central America and the Caribbean(CA/C) 67–91

Central American Common Market(CACM) 39, 40, 87, 88–90, 267

Index

centre-periphery 7–9, 11, 13, 26, 63,78, 260, 264, 265

centre/core 123, 263, 264, 265Chamorro, Violeta 215Chávez, Hugo 37, 142, 157, 167Chiapas, Mexico 107, 108, 124, 267Chicago Boys 125childcare 227, 230Chile 8, 10, 13, 15, 16, 19, 27, 28, 31–4,

36–7, 39, 41–3, 49–52, 55, 57–60,63, 69, 96, 97, 102, 104–6,109–11, 115, 120, 122–8, 130,131, 144–8, 150, 152, 155,157–66, 168, 179, 184, 190, 199,202, 205, 215, 218, 233, 235, 236,242, 244, 253, 257, 259–62, 265–6

China 10, 44, 86, 260Christian base communities (CEB)

200, 205Christianity 149

see also Protestantism; RomanCatholic Church

Cisne Dos, Ecuador 181, 183citizenship 194–5, 196, 199, 203, 206–7civil society 149, 150, 159, 161, 162,

163, 164–5, 174, 178, 193–208,242–5

definition 194and globalization 190, 193, 194,

206–7, 208and neoliberalism 193, 194, 197–8,

203, 205–6, 208neostructuralist view of 263weak 33–4

civilization 24–5class 90, 142–4, 145, 146–7

see also aristocracy; elites; peasantsalliances 147, 152–4capitalist 19, 20, 142, 143, 152, 256middle 19, 20, 25, 142, 143, 144,

145, 146, 147, 152, 153, 162tensions 142–3, 146–7, 148, 151, 152upper 148, 152, 153, 162working 19, 20, 25, 81, 146

clientelism 33, 207, 208cocaine/coca 90, 111, 122coffee 179, 234, 236, 238collective land rights 203, 206–7Collor de Mello, Fernando 162, 167Colombia 28, 32, 37, 39, 49, 50, 51, 57,

58, 73, 87, 88, 89, 95, 97, 99, 100,104–6, 111–14, 115, 122, 144,146–7, 149, 150, 154, 155, 181,184, 187, 190, 203, 206, 218, 225,237, 246, 248

colonialism 24, 34communications technology 79, 100,

207, 215comparative advantage 19, 126, 136,

244competitive advantage 264competitiveness 6, 61, 83, 91, 234–5,

243, 246, 249, 259, 260Concertación regime 15, 158, 167,

261, 262, 265, 266Confederation of Indigenous

Nationalities of Ecuador(CONAIE) 184, 247

conflict 124, 134, 142–3, 151, 227–8,246–7

see also land struggles

conservation 128, 180, 206constitutions 203–4, 248consumerism 9, 13–14, 27, 32, 120,

162–4consumption, minimization 212contagion 12control 124copper 51, 58, 120, 123, 124, 126, 147corporatism 195, 207, 208corruption 162, 166–7, 169, 203Costa Rica 37, 39, 51, 60, 80, 87, 89,

117, 121, 132, 144, 155, 166, 167,175, 178, 181–2, 185, 218, 220,224, 246

cotton 234, 236Council for Mutual Economic

Assistance (CMEA) 84Counter-Reformation 29, 31criminality 167, 266Cuba 73, 74, 84–6, 87, 90, 96, 97, 146,

219, 225, 226, 253cultural change 22–38cultural difference 194, 198–202cultural institutions 28cultural resistance 31culture 78–9

da Silva, Luiz Inácio 13, 18–19, 37, 157,164, 247, 262, 266, 267

debt 187crisis (1980s) 12–13, 18, 27, 45–7,

48, 49, 67, 76–7, 89, 97, 102, 103,105, 106, 108, 111, 113, 115, 159,215, 257

foreign 77, 118, 159, 262forgiveness 47social 158–9, 257–8, 260socialization of private 45–6

‘Decent Work’ agenda 228–9deconcentration 258deforestation 128, 247democracy 37, 91, 141–55, 157–69,

193, 202, 257, 258, 266and civil society 202, 207consolidated 149–51, 152, 153, 169,

218disenchantment with 166–7and neoliberalism 259–60and the peasantry 243, 246, 247Schumpeterian view 169technocratic 164–6, 168, 169, 259

democratic governance 17, 18, 19democratization 31, 151, 153, 259–60denationalization 6dependency 262

economic 46, 69–74, 75, 76, 91, 124export 120–2, 136, 255financial 12–13geopolitical 73technological 13–14

dependency theory 11–14, 17, 19,146–7, 148, 154–5, 173, 174–5,176, 260, 261

depoliticization 159–62, 163, 167, 169Depression 25, 43, 46deregulation 218deterritorialization 87development 141–55

see also sustainable developmentassociated dependent 146from within 264

and livelihoods 175–9, 185–8socialist routes 73–4, 84–6uneven 63, 65, 195, 198–9

dictatorships 27–31see also authoritarian regimes;

military regimesdisappeared persons 200–1‘discouraged worker’ effect 220discrimination 199, 265

see also racismdiversification 244–5Dominica 69, 76, 81, 82Dominican Republic 77, 82, 87, 88,

223, 225, 226, 227drug economy 90, 104, 111, 112, 113,

122, 150, 167Dutch disease 123

East Asia 9, 10, 11–12, 16, 19, 44, 51,52, 263, 267

Eastern Europe 10, 16, 219, 260economic

crisis 43–9, 84–6, 142, 143, 146, 148,152–3, 193, 194, 210, 211–14,215, 218, 265

growth 43, 44, 45, 47, 48, 50–2, 58,63, 65, 85, 86, 95, 96, 98, 105–6,110, 111, 115, 118, 120, 126, 129,131, 133, 136, 137, 143, 144, 147,151, 234, 255, 258, 260, 262, 266

integration 39–41, 45, 46, 59, 78, 91,102, 148, 260, 262

reform see neoliberal economicreform

spaces 57–63, 65stability 17, 97, 164, 165–6

Economic Commission for LatinAmerica (ECLA) 26, 260

Economic Commission for LatinAmerica and the Caribbean(ECLAC) 166, 260, 264

ecosystems 120, 127, 136, 206Ecuador 8, 27, 39, 51, 55, 76, 96, 100,

120, 149, 151, 153, 157, 166, 167,168, 179, 181, 183–5, 187, 190–1,195, 199, 200, 203–8, 237–8,246–8, 258, 267

education 184, 186, 194–5, 214,229–30

El Salvador 8, 39, 72, 87, 89, 97, 100,161, 205, 218, 226, 233, 246

elites 30, 144, 145, 149, 150, 151,152–3, 154, 155, 175

employment 59, 60, 210–30, 255see also labourconditions 91, 217–18, 220–1,

228–9, 232neoliberal reforms 52, 54–6, 57squeeze 240state 19, 56, 215–16, 219, 255urban 215–28

enclave economies 123–4energy 99, 122, 123–4, 128, 130Enlightenment 24, 29, 31, 34, 194entrepreneurs 20, 43, 45, 56, 146, 158,

176, 229, 253, 255, 256environment 120, 128, 180, 206, 267

browning of 131movements 246–9, 259, 267and sustainable development 117,

118, 127, 128–32, 136, 137

Inde

x

312

equity 36, 145, 265, 267see also asymmetries; inequalities

ethnic rights 203–4, 206see also indigenous peoples; racism

Europe 22, 23, 24, 25, 26, 29, 43, 74,75–6, 87, 95, 97, 112, 145, 147,188, 190

see also Eastern EuropeEuropean Economic Community

(EEC) 88European Union (EU) 7, 10, 69, 75, 76,

78, 123, 150exchange rates 13, 48, 50, 123exclusion 36, 267export processing zones (free zones)

82exports 10–11, 13, 24, 31, 57, 58–9,

60–1, 63, 65, 67–8, 69, 73, 75–6,77, 78, 80–3, 84, 88–90, 97, 100,102, 104–5, 109, 110, 113, 114,115, 120–3, 130, 179, 182–3, 215,253

agricultural 74, 75–6, 77, 83, 122,124–8, 234–5, 236–8, 243–5

competitiveness 50dependency 120–2, 136, 255diversification 51, 52growth 9, 51–2, 54, 59–60industrial 121manufacturing 60, 61–3, 105, 253mineral 105, 111non-traditional (NTE) 19, 60–1, 78,

81–3, 89, 91, 117–18non-traditional agricultural (NTAE)

83, 122, 124–8, 234–5, 236–8,243–5

trade reform 51–4volumes 43, 44

extinction 118–20extractive reserves 133, 134

families 99see also households

farmers 85, 232capitalist 232, 233, 234, 235, 240,

241, 243–4large 127, 233medium 127, 232, 233parceleros 233, 244small 83, 124, 126–7

feminism 200fertility 96, 113firms 57–9, 65

see also transnational corporationsfishing 51, 60, 117, 118, 123, 128flower industry 100, 179, 237, 238food import substitution (FIS) 244–5food security 124forestry 51, 117, 120, 123, 130, 132

plantation 60France 88free market (laissez-faire model) 31,

123, 150, 151–2, 159, 176, 194,195, 202–3, 205, 207, 242–5, 263

see also neoliberal economicreforms

Free Trade Area of the Americas(FTAA) 39, 41, 88, 89

fruit industry 124–8, 179, 234, 236,237, 244

Fujimori, Alberto 18, 162, 167, 168, 203

functional dualism 174fusion effect 33

García, Alan 166–7GATT 123gender issues 210, 211, 212, 214, 216,

220, 221–8, 230see also women

genocide 201global economic integration 39–41, 45,

46, 59, 78, 91, 102, 148, 260, 262global village concept 77–9globalization 3–20, 23, 39, 49, 67–91,

141, 144, 146, 215, 229–30, 253,259, 261–5

and agriculture 122, 126, 232,234–40

and civil society 193, 194, 206–7,208

constraints/opportunities 14differentiation of 7–9inclusionary 266–7inequalities of 6, 7–8, 11, 102, 110and livelihoods 173, 179–80, 181,

188–91and place formation 179–80resistance to 5, 157, 163–4, 166and rural livelihoods 232, 234–40,

248, 249and sustainable development 117,

135and urbanization 94, 98, 110, 112,

114, 115and worker rights 218

gold mining 120, 189governance 17, 18, 19grassroots politics 193–208, 232,

246–50Grenada 74, 76Guadalajara, Mexico 106, 212, 227Guatemala 8, 37, 39, 60, 69, 72, 74, 87,

89, 96, 122, 149, 161, 166–8, 201,218, 244, 259

guerrilla movements 111, 205–6see also Zapatistas

Gutiérrez, Lúcio 37, 157, 248Guyana 39, 74, 77

Haiti 8, 72, 77, 80, 82, 87, 88, 168health care 214hegemony 9, 73–4, 78, 84, 91Helms-Burton Amendment 1996 73Hispanic culture 25, 26Honduras 8, 39, 77, 87, 89, 96, 167Hong Kong 11households 223, 226–8Human Development Index (HDI)

70–1, 72, 76human rights 37, 91, 159, 160–1, 166,

168, 194–6, 203–4civil 194, 205ethnic 203–4, 206material/economic 198political 2–5, 194property 233social 194, 205women’s 196, 199–201, 203–4, 206,

233workers’ 228–9

hustling 86hyper-politicization 161

hyperglobalist thesis 6hyperinflation 44–5

identity 30–1, 199–200, 205Baroque 31and modernity 22–38oppositional 26personal 32

identity theory 197ideological traditionalism 33‘IMF riots’ 185import substitution industrialization

(ISI) 13, 14, 17, 67, 88, 89, 97, 101,102, 103, 104, 105, 106, 109, 111,112, 113, 115, 148, 159, 242

imports 10, 50, 51, 52, 69, 75, 77, 84–5,235, 244–5

Incas 94, 189incomes 212, 237, 241

see also wagesdistribution 41–2, 56–7, 108, 259,

260, 265polarization 109, 110

independence 23, 87Indians 24, 30, 34, 35, 37, 188–9, 204,

247indigenista 25indigenous peoples 131, 133, 134, 166,

169, 184, 185, 188–9, 197, 201,203, 204, 205, 206–7, 208, 232,233, 246–50, 267

individualism 32industrialization 13–14, 24, 25–7, 31,

43–4, 58, 74–5, 77, 82, 96, 110,121, 136, 148

see also import substitutionindustrialization

inequality 6, 7–8, 11, 57, 78, 79, 80,102–4, 107–8, 110, 113–15, 124,126–7, 159, 166, 193, 195, 242,246, 255, 256–8, 259, 260, 263,265, 266, 267

see also asymmetriesinflation 15, 44–5, 148, 253informal sector 36, 97, 174, 175, 210,

214, 218–21, 225, 229information technology 215, 229–30institutionalization 204–5, 207institutions 178

see also international financialinstitutions

intellectuals 25, 30Inter-American Development Bank

(IADB or IDB) 47, 166, 257–8interest rates 46, 77interests 142international development agencies 80international financial institutions (IFIs)

9, 16, 217, 262, 266–7International Labour Organization

(ILO) 55, 206International Monetary Fund (IMF) 15,

16, 45, 46, 47, 77, 88, 89, 97, 104,150, 158, 165, 190–1, 215, 266

investment 10, 45, 50–1, 52, 58, 78, 85,90, 104, 105, 124, 126, 253, 255,263

inward-orientation 17, 43–5, 46, 56, 61,63, 262

see also import substitutionindustrialization

Index

313

Italy 95, 100

Jamaica 39, 74, 77, 82, 83–4, 86, 87Japan 9, 11, 61, 78, 106

labour 58, 127, 147see also employmentcasualization 236laws 217–18low cost 61markets 16, 55–6, 221–8mobility 6, 7, 11, 48, 89, 98, 99, 264neoliberal reform of 16, 54–6, 57,

255reproductive 227rural 232, 235–40seasonal 235, 236, 237, 241as social actor 142, 152and the state 143, 152, 153temporary 235, 236, 238tenant 235, 236

‘lack of alternatives’ argument 259, 266Lagos, Ricardo 262land 182, 183–4, 233

collective rights 203, 206–7hunger 131, 133invasions 183–4, 196, 246reforms 147, 183squeeze 240struggles 183–4, 196, 197, 203,

206–7, 233, 242, 246, 246–7, 249landlessness 180, 233, 242, 246–7, 267latifundia system 232, 233, 235, 236learned hopelessness syndrome 36legalism 34–5liberalism 30Lima, Peru 95, 101, 175–6, 179–80,

199liquidity 12literature 24–5, 27, 28–9, 32livelihoods 173–91, 193–208

asset-based framework 176–8, 181,183, 184–5, 186, 210–12, 241

cultural issues 177, 180–1definition 181dependent 174–5, 176politics 177, 180–1, 183–5rural 232–50strategies 175–9, 210, 211–14, 253transnational 207urban 210–30vulnerability 264, 265, 266

living standards 41–2, 100, 102, 114local 23, 115, 181, 197, 258Lomé Conventions 75lost decade 27–31, 97, 195, 223‘Lula’ see da Silva, Luiz Inácio

macondism 28–9malnutrition 99manufacturing 10, 13, 58, 59, 60, 61–3,

82, 83, 88–9, 90, 101, 102, 105,105–6, 109, 110, 123, 253

maquilas (assembly factories) 61,106–7, 179, 206, 208

Marshall Aid Plan 46Marxism 26, 146, 148

see also neo-MarxismMayan people 94, 247media 78–9mediazation 28

Menem, Carlos 164Mercosur 11, 39, 40, 41, 67, 123, 267mestizaje 25, 35metals markets 120, 122, 123, 124,

130, 188–9see also copper

Mexico 8, 9, 10, 12, 14, 28, 31, 39–65,67, 69, 72, 82, 86–90, 94, 96, 97,99, 100, 102, 104–9, 111, 115,121, 123, 124, 132, 136, 149, 150,151, 155, 157, 159, 162, 179, 185,198, 200, 203, 205–8, 212,217–18, 220, 224, 226–7, 233,237, 241, 246, 253, 258, 267

Mexico City 95, 101, 102, 106, 108–9,115, 199

micro-enterprises 59migradollars 87, 241migration 79, 87, 182, 183, 190–1,

194–5barriers to 265European to Latin America 95–6from Latin America to the USA

96–7, 100, 108, 182, 190, 191, 241illegal 11rural-urban 95, 96, 98–100, 103,

114, 236, 238, 241transnational within Latin America

241military coups 27, 36–7, 104, 125, 161,

167, 168, 265military regimes 146, 148–9, 152, 153,

158, 159–61, 163, 164–5, 167,193, 194, 195, 196, 198, 200, 201,203

mineral economies 105, 111, 122, 123,124, 128, 130

minifundia system 232mining 117, 120, 123–4, 128, 188–9,

215–16modernity 3, 22–38

ambivalence of 28–30as external 31Latin American 23–38oligarchic 24–5subordinate/peripheral 22

modernization 157–9, 163, 167, 169,174, 193, 242–3, 249, 259, 260

modernization theory 26, 144–6,147–8, 149–51, 154

Montserrat 84, 88morality 33Mothers of the Plaza de Mayo 201,

202Movimento Sem Terra (MST)

(Landless Rural WorkersMovement) 180, 233, 246–7

multiculturalism 203

nation-state 6, 11–12, 15, 16, 19–20,193, 195, 196, 198, 205, 206–7

nationalism 195natural resources 117–22, 128–9, 136

non-renewable 118, 120, 128renewable 60, 120, 128

needs 118, 119, 258neo-indigenismo 30neo-Marxism 6, 260neoliberal economic reform 15–16,

17–18, 39–66, 67–91, 104, 105,110, 111, 114–15, 150, 151–2,

155, 157–9, 162, 163, 164, 165–6,169, 175, 181, 185, 197–8, 203,205–6, 208, 253–60

aggressive/cautious reformers 48, 50agricultural 232–40, 242, 244–8consolidation 50, 59debt crisis 76–7economic spaces of 57–63historical context 43–6impacts 50–7income polarization 109and place formation 179problems 52–7stages of 50and sustainable development 122,

124–5, 128, 132, 136neoliberal multiculturalism 203neoliberal populism 27, 148, 151, 165,

174, 175neoliberalism 14–20, 31–2, 67–91, 173,

181–3, 189alternatives to 253, 259–67and civil society 193, 194, 197–8,

203, 205–6, 208contradictions to 258–9crisis 157–69cultural effects 157–69and democracy 259–60development model 80–4evaluation 253–9historical context 43–6hyperglobalist thesis 6implementation 27and labour 16, 54–6, 57, 255and Latin American modernization

24migratory response to 87political base 18–19resistance to 157and rural livelihoods 232–3, 234–40,

242, 244, 245, 246, 249social base 17–19socio-political impacts 157–69,

255–7success of 16–17, 31and urban livelihoods 210, 211–14,

218, 219, 224–6neostructuralism 261–6Netherlands 182Netherlands Antilles 84, 88New Economic Model (NEM) 97,

101–2, 107, 108, 115New Economic Policy (Bolivian) 216,

217new peasant movement 232, 246–50new social movement (NSM) theory

197New World Order 205newly industrializing countries (NICs)

9, 10, 11–12, 44, 263Nicaragua 37, 39, 72, 74, 77, 81, 87, 89,

96, 112, 121, 149, 161, 166,199–200, 205, 215, 219, 233, 253

non-governmental organizations(NGOs) 132, 133, 134, 135, 159,173, 185–8, 190, 193, 195, 204–5,205, 242, 243, 245, 246, 248, 258,264

North America 9, 10, 22, 23, 25, 26,28, 29, 35, 39, 41, 67, 78, 147, 188,190, 246

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see also United States of AmericaNorth American Free Trade Area

(NAFTA) 10, 11, 39, 40, 41, 61,67, 82, 89–90, 104, 106–7, 108,115, 123, 246

North Atlantic region 74, 76

occupational density 212offshore finance 10, 45, 84oil 51, 58, 120, 122, 124, 147open regionalism 264Operation Bootstrap 74–5opium 111Ortega, Daniel 74outward-orientation 47–63, 67, 80, 91,

111, 253, 255, 264see also neoliberal economic

reforms; New Economic Modelownership 124

Panama 87, 88, 218Panama Canal Zone 73paradox of plenty 120, 137Paraguay 37, 39, 51, 149, 168, 199, 218,

244, 246parceleros 233, 244participation 132, 143, 144, 154, 193,

199, 202, 206, 208, 258, 264, 265peasants 147, 151, 181, 182, 185, 186,

196, 197, 198, 203, 232–50economy 175, 234, 240–6patrols 198proletarianization 234, 240–6social movements 28–9, 232,

246–50pensions 225–6, 253, 258Pentecostal movement 37–8Pérez, Carlos Andrés 167periphery 8, 9, 11–12, 63, 79, 120, 137,

144, 264, 265see also centre-periphery; semi-

peripheryPeru 15, 16, 18, 27, 35–7, 39, 50, 51,

55, 57, 58, 98, 101, 122, 124, 147,149, 151, 153, 155, 161, 162,166–8, 175–6, 179–80, 182, 185,186, 189, 198, 203, 205, 208, 217,233, 257

petroleum 77, 121, 128pharmaceuticals 74–5Pinochet, Augusto 19, 34, 104, 110,

125, 158, 160–1, 202, 265place formation 179–80Plan Piloto Forestal, Quintana Roo 132plantations 60polarization 109, 110, 114political

see also grassroots politicsagency 173base of neoliberalism 18–19economy 3, 16, 117–37, 141–3, 144,

146, 147, 148, 151–5, 173, 175,176, 178, 182, 253, 259

fatigue 161indifference 167instability 36–7, 153legitimation 162–4sociology 144–6

political parties 18, 147, 153, 154pollution 118, 120, 127, 128, 129, 131poor 37, 159

see also povertylivelihoods 174–5, 176, 181, 182–4,

186–7organizations for 173urban 199, 210–14, 216, 219–20,

226, 228, 230popular

culture 28, 32economy see informal sectorpolitics 25, 27, 148, 151, 165religiosity 31

population 41, 42Central America and the Caribbean

69, 70–1growth 96, 101, 107, 109–10,

112–13, 117, 136and sustainable development 117,

136urban 93, 94, 95, 96, 101, 107

Portugal 94, 95Positivism 24postmodernism 31–2Potosí, Bolivia 188–9poverty 36, 56–7, 80, 150, 169, 174–5,

176, 181, 212, 218, 228, 253,257–8, 264, 265, 267

see also poorfeminization 200rural 96, 97, 103–4, 108, 110, 113,

115, 131, 133, 135, 175, 232, 233,241–2, 245

and sustainable development 129,131, 133, 135, 136–7

technocratic approach to 166urban 95, 97–8, 99, 100, 102–4, 108,

109, 110–11, 113–15, 174–5power 142, 245–6preservation 128, 131prices 7, 122–3, 127, 255primary products 9, 10, 13, 19, 24, 31,

52–3, 60–1, 73, 75–6, 77, 78, 83,84, 102, 105, 109, 111, 113, 118,120–32, 136, 137, 179, 253, 255

see also natural resourcesprivate sphere 198, 199, 210privatization 15, 58, 218productivity 58proletarianization 234, 240–6property rights 233protectionism 43, 49, 50, 52, 123Protestantism 190, 200pseudo-modernity 29public sphere 15, 48–9, 57, 80–1, 98,

182, 195–6, 198, 199, 205, 210,214, 228, 242

Puerto Rico 73, 74–5, 90, 223, 225,226

race 24, 25see also ethnic rights; indigenous

peoplesracism 24, 199

masked 35–6rainforests 247ranching 120, 129, 133Reagan, Ronald 67, 74, 81‘real marvellous’ 27realism 25

magic 27, 32recession 27, 123reconversion 243–4

regional integration 39–41, 89, 264regional trading blocks 87–90regionalism 123religion 37–8

see also Christianityfundamentalism 30

resource mobilization theory (RMT)196–7

revolution 146, 151risk-aversion strategies 12Roman Catholic Church 24, 27, 29, 30,

31, 33, 34, 35, 159, 189–90, 200,201

Romanticism 24rubber tappers 247rule of law 149, 150, 153–4, 155, 160rural areas 126–7, 131, 135, 136, 178,

179, 181–2, 183, 185–8livelihoods 232–50migration 95, 96, 98–100, 103, 114,

236, 238, 241poverty 96, 97, 103–4, 108, 110,

113, 115, 131, 133, 135, 175, 232,233, 241–2, 245

rural non-agricultural income(RNAI)/rural non-farm income(RNFI) 239

rural non-farm employment(RNFE)/rural non-agriculturalemployment (RNAE) 236,239–40

St. Kitts and Nevis 87St. Lucia 69, 76St. Vincent 69, 76Samper 111Sandinista regime 81, 89, 199–200,

215, 219, 253Santiago, Chile 63, 100, 109, 110, 161São Paulo, Brazil 95, 100, 101–2, 199,

200savings 45, 253scepticism 6–7secularization 31, 37security 124, 265–6self-help 195semi-periphery 8, 9semi-proletariat 234, 240–6service industries 59, 109shantytowns 195, 199, 200, 258–9, 267‘shrinking world’ 78silver mining 124, 188–9Singapore 11slavery 35, 98social

capital 176, 181, 182, 183, 186, 187,210, 211, 212, 229, 241, 264

cohesion 265conflict 124, 134, 142–3, 227–8,

246–7debt 158–9, 257–8, 260difference 194–6, 202–7exclusion 36, 267expenditure 15, 48–9, 57, 80–1, 98,

182, 214, 228, 242hierarchies 194mobility 163order 148, 152policy 48question 25vulnerability 266

Index

315

social movement theory 1999social movements 173, 178, 181, 183,

189, 190, 195–208, 246–9, 267ecological 259, 267institutionalization 204–5, 207new 196–202peasant 28–9, 232, 246–50of the urban poor 258–9

social sciences 26socialism 26, 73–4, 84–6, 161, 248,

253, 260solidarity 36South Korea 9, 11, 51, 61, 232Southern Cone 39, 94, 95, 148, 161,

198, 200–1Southern Consensus 267Soviet Union (USSR) 10, 16, 84, 219Spain 29, 31, 34, 73, 86, 87, 94, 95, 96,

98, 100, 182, 188–9, 190spatial segregation 110–11squatter settlements 195, 199, 200,

258–9, 267state 141–3, 165, 178

see also nation-stateauthoritarian capitalist 143autonomy 151, 152bureaucratic-authoritarian 148and civil society 193–6, 198, 200,

202–3, 204, 205, 207, 208, 245crisis 147–8democratic capitalist 142, 143, 146,

148, 149–50, 151, 152–3, 154and the economy 43–4, 47, 58,

63–5, 67–8, 131employment 19, 56, 215–16, 219,

255form 141–2, 143, 146–7, 148,

149–50, 151, 152–3, 154and labour 255and land use 233modernization 43–4, 145, 151, 259neostructuralist view of 263, 265and the peasantry 242–5, 246reduction in the roles of 159, 203,

204, 257–8, 259, 261, 263and sustainable development 131,

132, 134state managers 141, 142, 143, 144,

152–3, 154, 155street vendors 179–80strikes 142structural adjustment programmes

(SAPs) 12, 98, 102, 158, 159, 165,167, 168, 181, 206, 241–2

structuralism 11–14, 17, 19, 260structure

reform 39–65rigidities 217

subsidies 265sugar 84, 86, 147, 234Surinam 39, 88sustainable development 117–37, 176,

244–5

Taiwan 9, 11, 51, 232tariffs 43, 49, 50, 52tax exemptions 74–5technocracy 17–18, 164–6, 168, 169,

253, 259

technology 13–14, 58, 79, 100, 207,215, 229–30, 235

telenovelas (soap operas) 28, 32television 27, 28, 32, 162tenant labour 235, 236Tequila crisis 1994 108, 115textile industry 74, 82, 113third sector 193, 204–5

see also non governmentalorganizations

tourism 85, 86trade

dependency 69–73embargos 73liberalization 16, 49–50, 51–4surplus 74vulnerability 264

trade unions 61, 81, 200, 207, 218,246, 255

trading blocks 7, 87–90traditional societies 33, 145training 229–30Transamazon Highway 247transformationalist thesis 7transnational corporations (TNCs) 6,

9, 10, 14, 16, 45, 47, 50, 54, 58, 59,60, 61, 65, 67, 77, 88, 122, 124,126, 130, 146, 198, 215, 249, 262,263, 264, 266

transnationalism 87networks 207

transport 100, 113Trinidad and Tobago 39, 77tripolar world 9–11truncated convergence 8Turks and Caicos Islands 84

uncertainty 45, 50under-development 146–7underemployment 215–17unemployment 54, 55–6, 97, 102,

215–17, 255unequal exchange theory 13United Kingdom (UK) 69

see also BritainUnited Nations Conference on Trade

and Development (UNCTAD)267

United Nations DevelopmentProgramme (UNDP) 265–6

United Nations Economic Commissionfor Latin America (UNECLA) seeEconomic Commission for LatinAmerica; Economic Commissionfor Latin America and theCaribbean

United Nations (UN) 134, 150, 166,206, 260

United States of America (USA) 5,9–11, 14, 24, 25, 32, 39, 41–2, 45,46, 52, 58, 61, 67, 69, 72–5, 78–9,81, 83–8, 90, 91, 96–7, 100, 106,108, 112, 123, 133, 144, 145, 149,150, 152, 157, 165, 168, 182, 189,190, 191, 241, 260

see also North Americaurban areas 174–5, 181, 182, 183,

186–7, 198–9employment 215–21

labour market 221–8livelihoods 210–30poverty 95, 97–8, 99, 100, 102–4,

108, 109, 110–11, 113–15, 174–5,258–9

urban informal sector (UIS) 210, 214,218–21, 256

urbanization 93–116, 104–14of affluence 109and civil society 195explanations for 95–8and globalization 94, 98, 110, 112,

114, 115and poverty 95, 97–8, 99, 100,

102–4, 108, 109, 110–11, 113–15

rural-urban migration 95, 96,98–100, 103, 114, 236, 238, 241

successes of 93, 94Uruguay 8, 27, 39, 95, 96, 98, 103, 115,

123, 144, 146, 148, 154, 155, 158,159–60, 216, 265

Venezuela 8, 16, 28, 37, 39, 45, 88, 89,98, 121, 123, 124, 142, 144, 146,147, 149, 151, 153, 154, 155, 157,161, 166, 167, 168

violence 24–5, 111–13, 131, 161, 167,182

intra-household 227–8state 201

volantes 238voting 143, 167, 169, 199, 203vulnerability

financial 12–13, 264, 265, 266social 266trade 264

wages 57, 216–18, 225–6, 227, 236see also incomesminimum wage 256real 256

Washington consensus 12, 15, 16, 18,47–9, 54, 97, 157, 261

water supply 120, 127, 128, 198wealth 109, 143, 154, 256windfall profits 122–3wine industry 179women 33, 198, 199–200, 232

labour 127, 206, 210, 211, 212, 214,216, 220, 221–8, 230, 236–8, 239,255

rights 196, 199–201, 203–4, 206,233

rural 236–8, 239and social movements 200–1,

248urban 98, 99, 210, 211, 212, 214,

216, 220, 221–8, 230World Bank 5, 8, 12, 16, 46, 47, 50–1,

77, 80, 88, 89, 94, 102, 104, 111,130, 133, 134, 150, 158, 165,166, 189, 206, 215, 233, 266, 267

world systems theory 174World Trade Organization (WTO) 69,

76, 150, 266

Zapatistas 108, 185, 205–6, 207, 246

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Documents

Latin America Transformed: Globalization and Modernity (Arnold Publication)