Latin America the Morning After: Euphoric Perceptions, Fragile Realities
Article Summary and Author Biography
When thinking about Latin America, despair can be as disorienting as optimism. In the early 1990s, economic euphoria reigned in Latin America. Then came Mexico. The current gloom--the Tequila effect--will also pass. The recent wave of reforms dealt swiftly with such problems as inflation, low exports, currency instability, capital flight, and the boosting of regional trade. But to ensure prosperity after the peso debacle, Latin America must address its underlying woes: poverty, low productivity, and chronically ineffectual civic institutions.
Moisés Naím is a Senior Associate at the Carnegie Endowment for International Peace and Chair of its Latin American programs. Formerly, he was Minister of Industry of Venezuela and Executive Director of the World Bank.
Bewildered by the bizarre turn of events in Mexico, novelist Gabriel García Márquez told his colleague Carlos Fuentes that they should throw their books into the sea. "We have been totally defeated by reality," said García Márquez.
If Latin American realities defeat novelists with the magical imagination of García Márquez, foreign investors and policymakers are much easier prey. In mid-1994, the Financial Times warned that, "For those that think of Latin America in terms of generals, jungles, and sackfuls of worthless currency, it may be a time to overhaul some myths. Things have changed. South America's soldiers have long since goose-stepped back to the barracks, their power usurped by squadrons of technocrats and battalions of economic miracle-makers." Less than six months later, however, the same newspaper informed its readers that "Mexico's currency crisis has dimmed expectations for economies throughout Latin America. The crisis and the border war which flared up in January between Peru and Ecuador have raised some fundamental questions in the minds of investors about the wisdom of investment in Latin America. Given the losses they have suffered, some may well retire from the region for good."
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