Economic Liberalization Stammers in Latin America

Liberalization is taking a back seat. Almost everywhere you look in Latin America, the left is running the show—or on the verge of doing so if Gustavo Petro wins the soon-to-be presidential elections in Colombia and Lula da Silva (yes, the corrupt former president who presided over a vast empire of graft and spent time in jail) is elected again in October in Brazil. 

From Mexico to Chile, it is the archaic, not the social-democratic, version of the left that is in control and steering the subcontinent away from the path of liberalization it had embarked on in recent years. 

Several factors account for this—the end of the commodities boom a decade ago (a new one is in the makings, but that is another story), the devastating socioeconomic effects of the pandemic, the complacency of center-right and centrist governments that preferred to live off the legacy of the free-market reforms of the 1990s rather than push forward, and a certain frivolity on the part of younger generations more interested in “rights” and entitlements than in working, saving and investing. 

In Mexico, the country with the second-largest economy and population, López Obrador is dismantling the electoral system that has been a centerpiece of its democracy since 2000, nationalizing industries (lithium most recently) and reversing the liberalization of the oil and electricity sectors, while unleashing abuse on critics in the media and Congress (his party has announced criminal actions against some lawmakers who voted against a statist electricity reform recently). 

In Chile, at the other end of the region, a new constitution is being written that is far to the left of the country (the members of the constitutional convention were elected when Chile was undergoing great social and political upheaval, while the recently-elected Congress, which reflects a more serene view of things, is equally split between left and right). 

Special jurisdictions contemplated in the constitution will create parallel systems of justice for indigenous groups. The total or partial nationalization of key industries is being discussed, the separation between the lower and higher houses of Congress is being eliminated and so forth. 

In Peru, where a Marxist president was elected with the support of a party closely tied to Cuba, the mining industry, a mainstay of the economy, has virtually ground to a halt because of anti-mining groups directly or indirectly encouraged by the government. The president is also pushing the idea of a new constitution even though he is fully aware that the path he is pursuing to try to bring about a constituent assembly is illegal.

Venezuela and its allies have tried to undermine Colombia’s democracy for years. This country has been a bulwark against Chavismo, but now Petro, Caracas’ close ally (he has tried to maintain a tactical distance of late), is running ahead in the polls. His victory would hand the hard left one of its greatest victories in Latin America. If Lula were to win in Brazil, he would become, as he did in his previous administrations, a close supporter of the radical-left agenda in Latin America while avoiding some of its worse excesses at home. 

During a recent visit to Uruguay, I talked to president Lacalle Pou, one of the few leaders battling for open markets, globalization, and the consolidation of liberal democracy in the region. When I asked him if he felt intimidated by the fact that his small country is now part of a tiny minority, he smiled and said, “we will continue to do the right thing regardless of what others do, but it makes things harder.” He was referring to the fact that he is pushing the Southern Common Market, an epitome of protectionism, to open itself to trade with the rest of the world but is facing heavy opposition from many of his neighbors, including Argentina.

Alvaro Vargas Llosa is a Senior Fellow at the Independent Institute. His Independent books include Global Crossings, Liberty for Latin America, and The Che Guevara Myth.
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