Threat and Opportunity in the Americas

Political leaders in Washington and in Latin America began 1985 with sharply different perspectives.

The Reagan Administration was ostentatiously pleased with the state of the western hemisphere. It was gratified by Latin America’s steady turn toward democracy, which it thought would foster more cordial inter-American relations. The U.S. government was confident that Latin America’s debt crisis was easing, at least for the major countries, and that the debt management strategy employed since 1982 had proved largely successful. Washington was heartened that most Latin American countries were beginning to implement economic policies that were endorsed by the International Monetary Fund (IMF), policies designed to cut public sector deficits and generate trade surpluses so the countries could service their debts.

And, as had been the case since 1981, the U.S. Administration began 1985 strongly focused on Central America. Washington was pleased that the government of President José Napoleón Duarte in El Salvador was getting stronger while the Sandinista government in Nicaragua was weakening. Fresh from its overwhelming electoral triumph, the Reagan Administration sought additional resources from Congress for pressing these perceived advantages, in order to defeat what it regarded as a communist threat in Central America.

Latin Americans, however, were apprehensive and frustrated. They feared that the modest economic recovery of 1984 could not be sustained, and that the hemisphere’s depression would deepen. Satisfaction about Latin America’s turn to democracy was tempered by fears that harsh economic problems could overwhelm the fragile new civilian regimes.

Forced to implement extraordinarily painful austerity programs, many Latin Americans resented the fact that Washington talked eloquently about promoting democracy but did little concretely to alleviate their debt burdens. On the contrary, they felt that the United States was preaching discipline to them while running up unprecedented budget deficits that contributed to high real interest rates, which in turn increased their debt service. And although many wanted to cut back bloated public sectors, Latin American leaders resisted what they saw as self-serving U.S. homilies on the virtues of the market and foreign investment.