Snowden Asylum: It's Game Over For South American Demagogues
For more than a decade of high oil prices and commodity booms, lead mostly by China's impressive economic growth but also by India's and other rising economies, several resource-rich South American nations like Brazil, Argentina, Paraguay and Venezuela saw their fortunes rise as China and others came to their markets to buy massive shipments of soy beans, oil, iron ore, and many other raw materials and primary products.
Brazil developed a formidable internal market and achieved high economic growth for almost a decade, while expanding its foreign reserves, Colombia and Peru came out of economic stagnation, and Venezuela developed a trade relationship with China, based almost solely on oil exports.
Bountiful reserves, pouring foreign investment and increasing revenues from commodity booms also benefited the political and electoral fortunes of leftist governments who were reelected time and again while their administrations ran generous social assistance programs to benefit the poor.
Venezuela's Hugo Chavez, Brazil's Lula da Silva, Argentina's Cristina Kirchner, Bolivia's Evo Morales and Ecuador's Rafael Correa were all reelected to office, some of them more than twice, while the bonanza enabled a regional platform of ideological propaganda — both locally and around the world. Chavez advanced his ideological agenda through ALBA and other regional initiatives to promote his particular vision of Latin American integration based on a socialist and anti-imperialist agenda He handed out generous aid, cheap and even free oil to Cuba and other poor Caribbean economies. Brazil became one of the largest economies in the world in the rankings where European economies, like Italy, Spain and France descended while plagued with economic sluggishness. The BRICS story promoted a new Brazil to the world, one capable of negotiating face to face with global economies the like of China and the U.S.
Countless political magazines, university classrooms and conferences debated Latin America's new socialist leaderships, their new socially inclusive economic policies, redistribution of wealth and newly found nationalism, while we also witnessed a rising chorus condemning the Washington consensus, globalization and free-market policies and in favor of the more state controlled and socialist economic policies of these rising economies.
Lula, Chavez, the Kirchners (both Nestor and Cristina), Evo and Correa, became friends and close allies, defending a new regional identity. They also shared more than an ideological platform, many a times, Chavez granted loans to Argentina and other allies to help them sort out crisis at home, Lula openly supported leftist presidential candidates in Latin America. They became a regional ideological power group, colorfully Latin American too, with self-aggrandizement and messianic characteristics: Chavez, Lula, Correa, all competing among themselves to be the new anti-imperialist moral leader of the region. They supported the Cuban regime of Raul and Fidel Castro, who were happy to embrace the new leftists leaders. Both Chavez and Lula toured the world seeking economic and political ties with countries like China, Iran, and Libya, even with Syria while engaging in anti-American propaganda, they tried to oust most North American and European energy corporations from Ecuador, Bolivia, Venezuela, Argentina and Brazil, leaving the market ready for Brazil and Argentina's corporate energy champions, like Petrobras, Vale and YPF. They did invite in "ideologically-friendly" clients, namely China, which they saw as the new global economic power.
But nothing last forever, and by 2012 the great world commodity boom had come to an end; prices of soybeans and other primary products started to come down, China's economy had slowed down its impressive growth pace to 7%, while Brazil's economy remains stagnant at an annual average of 1% since 2011.
The good times are over, economic sluggishness in the face of corrupted and neglectful handling of economic policies, rising inflation, crime, recurring currency devaluations and shortages and rising costs of food, goods and dollars, have now become the everyday talk of millions of Venezuelans, Ecuadorians, Bolivians, Brazilians and Argentineans while their "progressive" governments display unconvincing economic statistics to hide their failed policies: in Argentina, the INDEC has lost all credibility reporting inflation of 10% while Argentineans know it will be around 30% and while Guillermo Moreno, Argentina's Secretary of Domestic Trade, asks Argentineans to stop consuming tomatoes, the Kirchner's way to curb inflation!
In Venezuela, people have to go from one supermarket to another trying to find basic household supplies like paper tissue, government officials are scrambling to resolve an economic nightmare of high-inflationary forces and slow growth at the same time oil prices remain flat and internal budgetary pressures grow. In the face of massive protests, Brazil's Secretariat of Strategic Affairs claimed their country has lifted dozens of millions of Brazilians out of poverty, but defines "middle-class" very broadly, using a per capita monthly income range from $140 to $493, even millions of Brazilians without a bank account, without a car, are defined as middle-class under this benchmarks, which helps explain why these millions of happy new "middle-classes" took to the streets recently to protests against increments in public transportation costs.
Brazil's economic growth continues flat for the third year in a row, even after massive government intervention and public investments to prop up their economy, inflationary pressures and slow growth have cornered Dilma's administration. Even Brazilian multi-millionaires like Batista, a very closed friend of Lula and Dilma who became billionaire thanks to massive government contracts, lost most of his wealth, and investors from around the world have taken their assets out of Brazil's Bovespa. Argentina, Bolivia and Ecuador aren't doing any better either, they are suffering too from rising inflation originated from fiscal irresponsibility, and are now creating more poverty than ever before in their history.
The narrative of social and economic collectivism has come to an end in the region as these leaders failed to deliver the prosperity they promised more than ten years ago. In the face of these challenges, demagoguery is displacing much needed economic policy revision and reforms. Populists like Venezuelan President Nicolas Maduro and Ecuador's Rafael Correa resort to even more political demagoguery and anti-American propaganda as internal economic and social problems rise. The Snowden case represents a surge of fresh air to seek quarrels with the U.S. and distract their societies with cheap nationalism, to invent enemies, to legitimize and hide their own social and economic follies.
But their troubles are only beginning. The U.S.-led shale revolution took the world and specially these countries, by surprise. Venezuela, Brazil, Bolivia and Argentina, all are resource-rich countries that have neglected industrialization strategies and now face greater challenges as the cost of energy and commodities come down. U.S. oil demand is at a 17-year low and the country is expected to become the largest oil producer in the world by 2020. Cheap gas and oil in North America also means more factories and economic growth in that region, where many pipelines and infrastructure throughout Canada, the U.S. and Mexico are under construction now and are attracting enormous foreign and domestic direct investments that could have otherwise landed in South America, had the region pursued more reasonable industrial and economic policies.
Venezuela, Argentina, Ecuador and Bolivia have little options, Brazil is a country with solid fundamentals and can change course in matter of months because it has solid institutions and better balances than most countries in the region, but theirs will be a slow recovery, with little or no help from their regional partners also in trouble, and with many pending reforms needed to really modernize their economy.
The massive protests in Brazil reveal a possible change in the political balance of Latin America's largest and most vibrant economy. I hope the Brazilian people prefer change; a new Brazilian administration will be able to promote much needed reforms, to open Brazil to world markets and competition and change the regressive populist dynamics in the region that are now bringing more poverty and social conflict.