Latin America was a media event in 1982. "The fire next door" in Central America continued to make front-page headlines. In the spring war broke out between Argentina and Britain in the South Atlantic, where space-age weapons were used to fight a conflict that seemed a throwback to the nineteenth century. By the end of the year the debt crisis was center stage, with Argentina, Mexico and Brazil struggling to avoid default on a collective foreign debt of $200 billion.

The story of Central America is told elsewhere in this issue. But what is easy to overlook is its impact on the Reagan Administration's policy thrust in South America. Preoccupied with falling dominoes in the U.S. "backyard," Reagan regarded South America as important more for its potential contribution to the U.S. effort in Central America than for itself. South America's military governments were seen as possible providers of training and weapons to their beleaguered Central American counterparts. The relatively wealthy democracies, especially those bordering on the Caribbean, were viewed as potential donors of economic assistance. Whether military or economic, however, South America's involvement in Central America would make U.S. policy there seem less unilateral.

Concern that hostile external forces might at some point expand their efforts beyond Central America-even to the strategic Southern Cone-led the Administration to set particular store on a much warmer and more cooperative relationship with the military regimes of the area. Moreover, the Reagan Administration clearly rejected its predecessor's strong and public preaching on human rights. Seeking to undo the perceived damage, the Administration adopted a low-profile human rights policy that stressed behind-the-scenes persuasion. It complemented these efforts with frequent high-level military visits aimed at further cementing U.S. ties with South America's anti-communist authoritarian regimes.

In the event, it was the most courted of these regimes, the junta in Argentina, that launched the Falklands war. Faced with a choice between two allies, the Administration attempted mediation; but when this failed it came down on the side of Britain-in a fashion that increased what in any event would have been adverse reactions in Latin America. One of the results was to dramatize the ineffectiveness of hemispheric security machinery. Another was to turn Latin American countries further away from what they perceived as a U.S. obsession with the East-West threat. The security emphasis that had marked the policy of the Reagan Administration was dealt a hard blow.

Then, in the summer, the debt crisis broke out in Argentina and Mexico, and by December, in Brazil. Initially, the Reagan Administration's international economic policies had emphasized the private sector and downgraded multilateral lending institutions, especially the International Monetary Fund (IMF). But in response to the crisis it moved by the end of the year to a radical change in its policy toward the IMF and acted unilaterally to provide emergency loans to the affected countries.

It was, in short, a year in which the South American policies initially proclaimed by the Reagan Administration were tested and found wanting. While its ability to change with events was a welcome sign, it remained to be seen whether a South American policy was evolving that would be more in tune with the dominant economic and social concerns of the area.

II

The facts of the Falklands conflict are well known and need not be repeated in detail.1 After years of sporadic attempts to persuade Great Britain to negotiate Argentina's claim to the islands, which Britain had administered since 1833, Argentina decided to take them by force. Britain responded to the April 2 invasion by sending a 35-ship task force to the South Atlantic, invoking the right of self-defense. During the nearly three weeks it took for the British fleet to travel the 8,000 miles to the Falklands, efforts were made to find a diplomatic solution. On April 3, the U.N. Security Council called for a withdrawal of all forces, a cessation of hostilities and negotiations between Argentina and Britain. The European Economic Community imposed economic sanctions on Argentina several days later. But by far the most ambitious and spectacular attempt to avoid military conflict between Britain and Argentina was the long-distance shuttle diplomacy of U.S. Secretary of State Alexander M. Haig, Jr.

Haig's intense personal involvement was perhaps a natural attempt to avoid having to choose between a European and a Latin American ally. Although there apparently were some officials within the Reagan Administration who argued for a tilt toward Argentina, there was never much doubt that the United States would ultimately side with Britain. This is not only because U.S. security concerns in Europe were paramount and the Thatcher government strongly supported U.S. policies there. Also relevant was the fear that the wrong signal might be sent to friends and foes alike were the United States to tolerate the use of force for purposes of settling territorial disputes.

Despite herculean efforts, Haig's shuttle diplomacy failed. Argentina insisted that the sovereignty issue be resolved in Argentina's favor prior to any negotiations. For Britain, this would negate the whole point of negotiations, which was to resolve disputed sovereignty claims. It would also constitute a British capitulation to Argentina's use of force. Although the United States had never taken, and continued not to take, a position on the sovereignty issue, it agreed with Britain that a sovereignty decision should be the object rather than a precondition of any negotiations. By the end of April, when it became clear that diplomacy was not working, Haig announced the U.S. decision to side with Britain. Limited economic sanctions were ordered against Argentina and the United States supplied fuel, missiles, ammunition and intelligence (but not manpower) to Britain.

Even before the surrender of the Argentine forces on June 14, the United States became the target of strong criticism-both for the role its policies had played in fostering unrealistic expectations about U.S. support on the part of General Leopoldo Galtieri's government, and for the mediation effort. The criticism is well-placed, although it is important to emphasize that the invasion grew primarily out of Argentina's history and present circumstances.

For more than a century, Argentine schoolchildren have been taught that the Malvinas (Argentina's name for the islands) belong to Argentina. Since the 1960s, small innovations in British administration of the islands had encouraged Argentina to believe that Britain would eventually transfer the islands to Argentina. As the 150th anniversary (in January 1983) of the British seizure of the islands drew closer, Argentina's patience began to wane. This coincided with a period of deepening political and economic deterioration within Argentina. The guerrilla threat of the mid-1970s had receded into history. The Argentine public intensified its demands for an accounting by the military of the thousands of "disappeared" persons and for an end to military rule. The military were also blamed for inflation rates of over 100 percent, growing unemployment, economic stagnation and corruption. Thus they sought ways to bolster their sagging popularity and thereby set the terms for the transition to civilian rule that might prove necessary. The taking of the Falklands, given the nationalist surge it would produce, seemed a made-to-order solution.

The Argentine decision to invade the Falklands showed clearly that U.S. policies designed to increase U.S. influence over South America's military regimes and obtain their cooperation had not only failed in the case of Argentina, but also had achieved the opposite effect. U.S. attempts to enlist the Argentine military in an anti-communist alliance gave the generals an exaggerated sense of their importance to the United States that caused them to make several costly miscalculations.

First, they believed that the United States would not oppose an Argentine invasion of the Falklands-both as a quid pro quo for Argentina's support of U.S. hemispheric security policy and because the United States was pro-Argentine. With the United States out of the picture, and the advantage of geography on their side, the military believed they could defeat any attempt by Britain to recapture the islands.

But the generals never really thought the British would fight. This second major miscalculation was partly a result of the generals' insularity. Accustomed mainly to their version of strategic military thinking, the generals decided the islands lacked strategic importance for Britain. They apparently did not take into account the role that British domestic pressures and the "end of Empire" psychology would play in determining the British response. Moreover, the generals' error in judgment also grew out of their belief that the United States, acting under principles dating from the Monroe Doctrine and reiterated in the Rio Pact (the Inter-American Treaty of Reciprocal Assistance), would do everything in its power to prevent European ships from entering and doing battle in hemispheric waters.

The criticism of Haig's shuttle diplomacy centers mainly on its style. Had the Secretary of State made clear from the beginning that the United States would support Britain should a negotiated settlement prove impossible, Latin America's sense of betrayal when the United States dropped its neutrality might have been reduced. U.S.-Latin American relations might also have been less impaired had Haig been more willing to involve other Latin American governments in his mediation effort. But one also cannot help asking whether Haig should have undertaken the mediation effort at all, since a telephone call from President Reagan to President Galtieri the day before the invasion had failed to dissuade the general from his course.

III

In the wake of the Falklands conflict, there were many who thought that U.S. policy during the war had inflicted serious and lasting damage on U.S. relations with Latin America. In the event, such predictions seemed exaggerated, but there was a significant residue which could affect future hemispheric cooperation on security issues.

On the one hand, Latin American unity and support for Argentina were weaker than they appeared on the surface. Brazil, Mexico and Colombia, for example, considered the Argentine invasion a violation of international law, as did the United States. Countries that risked losing territory if Argentina's use of force became a valid precedent for solving territorial disputes were lukewarm toward Argentina. These included Chile (whose Beagle Islands are claimed by Argentina), Guyana (two-thirds of whose territory is claimed by Venezuela) and Colombia (whose offshore islands are claimed by Nicaragua).

On the other hand, support for Argentina's claim to the Falklands was very strong. For the Latins, Great Britain's control of the Falklands was anachronistic and illegitimate in an age of decolonization. The sending of the British fleet into Latin American waters and the sinking of the Argentine cruiser General Belgrano, which cost hundreds of Argentine lives, revived memories of late nineteenth-century British economic dominance in the hemisphere and cast the Falklands conflict in a North-South context.

Within this context, Great Britain, not Argentina, was the aggressor and it would have been logical to take collective hemispheric action against Britain under the provisions of the Rio Pact. This did not occur. The Organization of American States (OAS) did pass two resolutions, one supporting Argentina's claim to sovereignty over the Falklands and the other condemning Great Britain's "unjustified and disproportionate armed attack" against Argentina. On both resolutions, which passed by 17 votes, the United States abstained. This compounded the overwhelming sense of betrayal experienced by Latin America when the United States openly sided with and aided Great Britain. It also served to reaffirm U.S. distinctiveness from, as opposed to kinship with, its southern neighbors.

Latin America responded by playing up its differences with the United States. One obvious issue on which to vent anti-U.S. feelings was the role of the OAS. Arguing that the Falklands conflict had proved the organization useless for protecting the hemisphere against invasion by extra-hemispheric powers, some Latin American spokesmen argued for its abolition. Most critics, however, merely demanded structural reforms and perhaps the organization's transfer from Washington to Latin America.

The other target was the East-West conflict and U.S. preoccupation with communist subversion in the hemisphere. South Americans in particular began to argue with greater frequency that the East-West conflict served U.S. interests by making it difficult for Latin America to expand its economic ties with communist countries and thereby reduce its dependence on the United States. They also increasingly took issue with the idea that the Soviet Union or its so-called surrogates posed a security threat to the hemisphere. This position was understandable in view of the fact that Soviet activity in South America had always been limited, communist parties were weak and Marxist guerrilla movements in South America were few and small.

These arguments were reinforced by actions signaling a stronger commitment to nonalignment on the part of some countries and its rediscovery on the part of others. Colombia and Venezuela in particular formally applied for membership in the nonaligned movement. Together with Mexico, they adopted a lower profile in support of the Caribbean Basin Initiative, the program designed to provide non-Marxist Central American and Caribbean states with investment incentives, preferred access to U.S. markets and increased economic aid. Venezuela, which had strongly supported U.S. policy in El Salvador until the March 1982 elections there, joined with Mexico in urging negotiations between Honduras and Nicaragua and a peaceful settlement of the crisis in Central America. And Colombia's new president used President Reagan's visit to his country in December as an opportunity to criticize U.S. policy toward Marxist regimes in the hemisphere.

Such sentiments were not new. Dissatisfaction with the OAS had existed almost since its founding, because of successful U.S. efforts to use the organization in fighting the cold war. And Latin America had been flirting with nonalignment at least since the early 1970s, when Mexico had led the Third World's call for a New International Economic Order. In point of fact, Latin America for some time had wanted the United States to relate to it in North-South rather than East-West terms and to focus on economic rather than security issues. It took the Falklands conflict to focus U.S. attention on these tension points in the Latin American relationship.2

The situation was more complex, however. For, despite its differences with "the colossus of the North," Latin America also felt a common sense of hemispheric identity with the United States. This explains the sense of betrayal Latin Americans experienced when the United States sided with Britain in the Falklands war. Traditionally this sense of hemispheric identity has been described as the "Western Hemisphere Idea." It posits the existence of common historical experiences between the United States and Latin America and, by extension, common interests and perspectives. The most salient shared experience was colonization by European powers, but Latin America and the United States also share their location in the relatively isolated Western Hemisphere. In contrast to the "old" societies of Europe, they are "new" societies, faced with similar challenges of forging identities and building political, economic and social institutions that blend the old with the new. Shared problems lend themselves to cooperative solutions. The "Western Hemisphere Idea" thus leads easily to the concept of hemispheric cooperation for mutual benefit.

From the Latin American perspective, the United States has adhered to a very narrow concept of inter-American cooperation that focused on hemispheric security to the virtual exclusion of everything else. Even U.S.-sponsored programs that ostensibly involved economic cooperation, such as the Alliance for Progress of the early 1960s and the more recent Caribbean Basin Initiative, had an anti-communist thrust.

Latin America, however, has had a very different conception of the "Western Hemisphere Idea." Impressed by U.S. economic growth, the Latins have wanted the United States to aid in achieving high and sustained rates of growth (but with no strings attached). In the political sphere, the situation was more complicated and ambiguous. Characterized by authoritarian governments throughout much of their history, Latin American countries nonetheless contained important groups that aspired to live under democratic rule. The cooperation that these Latin Americans desired from the United States was subtle and involved support for evolving democratic forces, practices and institutions, short of intervention in the political processes of the countries of the region.

While the Latin version of the "Western Hemisphere Idea" never supplanted the security-oriented U.S. version of the concept, some movement toward the former had been achieved during the early years of the Carter Administration. The first year of the Reagan Administration, however, was viewed as a regression. Once again, the United States was obsessed with the East-West conflict, leading it to downplay democracy and to strengthen its ties with authoritarian regimes. Reagan's economic policies also seemed to turn back the clock.

As a region characterized by economies with large state sectors, Latin America found particularly objectionable Reagan's proselytizing in favor of private-sector solutions to economic development problems. The Administration's efforts to reduce the role of multilateral lending institutions such as the IMF, the World Bank and the Inter-American Development Bank (IADB), on the grounds that they had contributed to excessive growth of unproductive state sectors in Third World economies, undermined private sector potential, and failed to apply strict conditionality to their loans, were also deeply resented. Finally, the wealthier developing countries of Latin America, such as Brazil and Mexico, were especially disturbed by the Administration's desire to "graduate" them and other advanced Third World countries from eligibility for these low-cost loans on the grounds that they were sufficiently developed to pay higher interest rates in the commercial market.

Thus, by the middle of 1982 there was a wide gulf between U.S. and Latin American conceptions of the "Western Hemisphere Idea," and Latin American countries were sharply critical of the international economic policies of the Reagan Administration. On the first point, the fallout from the Falklands conflict made continued U.S. emphasis on collective security untenable; it remained for events, in the form of the Latin American debt crisis, to force the Administration to reexamine its economic policies.

IV

Technically speaking, the debt crisis was not a Latin American or an inter-American issue but a global issue. Latin America, however, accounted for nearly half of the Third World's $500-billion foreign debt. The three largest debtors-Brazil, Mexico and Argentina, which owed $85 billion, $80 billion and $40 billion respectively-were all Latin American. The most heavily exposed commercial banks in the region were the major U.S. money-center banks. All of these factors gave an important regional dimension to the debt crisis.3

The explanation for Latin America's particularly high indebtedness lies with the level of development of its major debtors and the strategies they pursued to achieve it. Brazil, Mexico and Argentina made a big push throughout the 1970s for rapid and sustained industrial growth based in large part on what was then cheap and plentiful borrowed capital. Interest rates were relatively low and petrodollars had to be recycled. Advanced developing countries such as Brazil, Mexico and Argentina, with their large populations and expanding economies, became attractive borrowers-often more attractive than the Organization for Economic Development and Cooperation (OECD) countries, whose economies were not growing nearly as fast.

Initially, everything seemed to work out well. Brazil and Mexico in particular often achieved growth rates of eight to ten percent annually, though for different reasons. Brazil vastly increased its export capacity and sought new and more diversified markets, particularly among Third World countries. In the Mexican case, impressive growth of petroleum exports allowed major investments in economic and social infrastructure. Argentina's rich agricultural export base, wealthy and well-educated population, and apparent political stability during the late 1970s made it an attractive target for lending during that period.

By the early 1980s, however, things began to unravel. The combination of factors that put the European and U.S. economies into deep recession began to undermine the development strategies of the advanced Latin American countries. Since much of the debt was at variable interest rates, they suddenly found their escalating interest payments consuming an even larger share of their export earnings. The recession in Europe and the United States exacerbated the problem by reducing both the quantity and price of Latin American exports to the industrialized world. For Brazil, the situation was particularly acute since it was more reliant on Third World markets especially hard-hit by the recession.

While the signs of what was to occur were there to see by late 1980, few people were looking for them. Instead, the Latin American countries, together with the industrialized countries and the commercial banks, clung to their belief that an end to the recession was around the corner. In the meantime, continually expanding credit needs of the major debtors were met by increasing recourse to short-term, higher-interest loans in 1981 and early 1982.

Argentina was the first to feel the liquidity crunch. Unable to absorb the direct and indirect costs of the Falklands war and the impact of the recession, the country suspended payments on principal in July 1982. This, in turn, caused foreign banks to become wary and reduce their lending to Latin America.

The slowdown in bank lending contributed to the liquidity crisis in Mexico, which had been hard hit by falling oil prices. In August the government requested a standstill on repayment of principal, an eventual restructuring of its debt and new money from banks and governments in order to continue payments of interest. It is to the credit of the Reagan Administration (and particularly Federal Reserve Chairman Paul Volcker) that it put its ideological preferences for private-sector solutions to economic problems aside and made available, at record speed, $1 billion in Commodity Credit Corporation credits, a $1-billion advance purchase of petroleum for the Strategic Petroleum Reserve and nearly $1 billion in U.S. Treasury credits under a swap agreement between the two countries' central banks. U.S. officials also worked closely with the IMF and Mexico to put together a $3.9-billion IMF loan package for Mexico. But many in the Administration believed that U.S. assistance to Mexico was a special case because of our shared border and our intensely intertwined economies.

By September it was already clear to most of the member countries of the IMF, whose representatives were assembled in Toronto for the Fund's annual meeting, that a major international financial crisis was looming and the IMF was inadequately funded to meet the increased demands placed on it. Mexico was manageable, but it was only the tip of the iceberg. If several large debtors should require simultaneous bailouts, the Fund would not have sufficient resources. If it was clear to most of the Fund members that the resources of the IMF had to be greatly increased-the consensus figure was by 100 percent-the United States remained unconvinced. Arguing that such a great increase could encourage fiscal irresponsibility, the United States favored only a 25 percent increase.

The next crisis-that of Brazil-made the United States reconsider its position. Hit hard by the contraction of private capital flows to Latin America in the aftermath of the Falklands war and the Mexican crisis, Brazil found itself on the verge of default by November. The United States responded with a $1.2-billion loan, announced by President Reagan during his November visit to the country, and with an additional $300 million in December. The United States also went along with a two-year extension (until 1985) of Brazil's export subsidy system. Finally, U.S. officials again found themselves working closely with their IMF counterparts to make available IMF credits totaling nearly $5 billion.

But the IMF's $5 billion alone would not solve the problem. Additional commitments from private commercial banks were also essential. December thus found high-level officials of the Reagan Administration engaged in a joint effort with IMF officials to persuade private banks both to restore their lending levels to where they had been before the summer and provide new money to Brazil. Similar efforts were made on behalf of Argentina, which began negotiating for a $2-billion IMF loan, and for Mexico, where private lending had also been sharply reduced.

The Brazilian crisis forced the Reagan Administration to make a final break with its original stance on multilateral lending institutions and private sector solutions to economic development problems. At a December meeting in Europe of the world's major industrialized powers, the United States agreed to a 50-percent increase in quota payments to the IMF and supported an expansion of the Fund's basic lending resources from $62 billion to $93 billion. U.S. Secretary of the Treasury Donald Regan then broke new ground by suggesting that the five industrialized nations present (the United States, Germany, France, Britain, and Japan) create a system of emergency financing for nations needing loans to tide them over for short periods of time. Mr. Regan had gone even further in a talk in Washington several days earlier in which he had suggested the convening of a Bretton Woods-type conference to discuss ways of strengthening the international monetary system. That his statement did not yet represent an official Administration position was evident when Secretary of State George Shultz called the idea premature. Shultz then argued for shifting the emphasis from the debt issue to the problem of how to expand world trade, on the grounds that a resolution of the former would be impossible without the latter.

The Shultz position is essentially that of Latin America and other Third World nations. With interest payments consuming between 35 and 45 percent of the export earnings of the three big Latin American debtors, while exports continue to stagnate or decline, these countries cannot hope to live up to their financial obligations. In fact, they have already failed to do so in some respects. By December, Argentina, Mexico and Brazil had all announced suspension of payments of principal. It is not clear what, if anything, would sufficiently improve their liquidity to allow them to resume such payments in the near future.

There is also reason to question whether any of these countries will be able to implement the austerity programs to which they have committed themselves as a condition for receiving IMF funds. Both Argentina and Mexico have poor track records on cutting government spending. Brazil's performance has been more credible, but for this very reason there is little more Brazil can do internally to improve its financial position. If the current economic crisis continues, austerity may have politically costly implications for all three. High rates of unemployment, combined with escalating costs of basic commodities for the poor and a pronounced deterioration in the purchasing power of Latin America's heretofore privileged middle class, constitute a potentially explosive mix.

Instead of pushing the situation to its limits, these governments will probably relax their austerity programs to what they believe to be politically tolerable levels domestically-and gamble that the IMF, the commercial banks and the major industrialized countries will accept their decision, since failure to do so could produce a major default and possibly a collapse of the international financial order. Their gamble would probably pay off. The IMF, the governments of the major industrialized countries and the large commercial banks would probably conclude that some austerity is better than none, and that nothing justifies pulling the plug on countries whose default could create international financial chaos.

But it is one thing to decide not to pull the plug and another to come up with the new flows of capital that must continually be injected into the Latin American economies to keep them afloat. Although the United States is now committed to increasing its contribution to the IMF, for example, it is by no means certain that Congress will appropriate the additional funds. The less than enthusiastic response of members of the House Banking Committee to Treasury Secretary Donald Regan's advocacy in December of increased financial resources for the IMF is a disturbing development that could affect the largesse of other industrialized countries toward multilateral lending institutions. Nor does congressional inaction on the trade preferences contained in the President's Caribbean Basin Initiative augur well for keeping U.S. markets open to Latin American exports or for Secretary of State Shultz's aim of expanding world trade.

As 1982 drew to a close, therefore, the debt problem was far from resolved. However, the spectacular turnaround in the Reagan Administration's international economic policies and the increasing convergence between its views on the issues and those of Latin America were bright spots on a rather gloomy horizon.

V

The debt crisis coincides with a generalized trend in South America toward civilian rule. Peru and Ecuador were the first to change, installing civilian presidents during the Carter Administration. In 1982, the Bolivian military undid its 1980 coup by installing as president the man they had earlier ousted. Uruguay, still under military rule, held elections in 1982 for party leaders as a first step toward civilian rule. The result was an overwhelming victory for candidates opposed to the military.

Most impressive, however, because of the sheer size of the electorate and the tranquillity with which people lacking voting experience cast their ballots, were the November 1982 elections in Brazil. While the results implied probable military control of the presidency through the remainder of the decade, opposition candidates gained control of the country's most economically powerful states. In Argentina, the defeat of the military in the Falklands conflict, combined with their gross mismanagement of the economy, have increased pressures for early elections. Even in Chile, where General Pinochet still seems to be in control, a rapidly deteriorating economy is triggering calls for a return to democracy.

In the economic crisis of the 1930s, most elected governments in Latin America fell. That and historical experiences elsewhere have produced the conventional wisdom that democracies lacking strong roots are unviable in times of severe economic crisis, and that the strong hand of the military is needed to guide such societies toward economic recovery.

We do not yet know whether Latin America's current economic crisis will be as severe as the one in the 1930s. A recent annual survey of the Inter-American Development Bank concluded that Latin American economies, which grew at an average rate of nearly six percent over the past decade, will register overall growth rates of only 1.6 percent for 1982. With no signs yet of substantial recovery among the industrialized countries, there is little prospect in the foreseeable future that Latin America's economic growth rates will return to former levels. Some countries may even experience declines.

We should not rush to conclude, however, that slow economic growth in the 1980s will inevitably produce social unrest and military coups. It may. But South America's military establishments in particular are no longer the economic innocents they were in the 1930s. The military have now had several opportunities to put their nations' economic houses in order. Their policies have run the gamut from liberal free-trade to protectionist state-directed development strategies. Nothing has provided a definitive solution and in some cases the results have been almost totally negative.

Given this situation, South America's military establishments may be considerably more reluctant to depose elected governments trying to cope with economic crises. At the same time, support for the military from key groups in society, particularly in the middle class-traditionally a prerequisite for successful coups-may be less forthcoming in view of the loss of faith in the military's economic abilities. The result could well be that civilian governments may be around for some time despite the dismal economic situation.

If, however, the economic crises do lead to social unrest, mass demonstrations, violence or insurrection, military takeovers may prove unavoidable. Unlike the 1960s and 1970s, however, the military governments of the 1980s could be as short-lived as their civilian counterparts. Latin American societies are now more complex and their problems more intractable than in the past. To state it differently, they are more difficult to govern by recourse to fiat and force.

The implications of this for U.S. policy toward Latin America are important. Reagan's courting of South America's military regimes was at least partially based on the assumption that they would be with us for some time. That may be how it looked in 1980. But the view was different by 1983, when all bets were off on the staying power of both military and civilian governments. Given this situation, and in view of our values and traditions, it may be time for the Reagan Administration to give democracy, rather than authoritarianism, the benefit of the doubt. President Reagan's trip to Brazil and Colombia in late 1982 was a step in this direction. It should be followed by new initiatives in 1983 that reinforce the version of the "Western Hemisphere Idea" that stresses inter-American cooperation for economic and democratic development, not national security. In the end, that would also protect our own national security.

VI

The ability to adjust to crises and learn from one's mistakes does not translate automatically into the ability to anticipate and shape events. Nor does it lead to coherent and integrated policies. In fact, it is only a first step toward both. The changes in the Reagan Administration's policies toward South America during 1982, while helpful, have done little more than buy some time. What are needed now are initiatives on the growth and trade fronts, combined with innovative financial arrangements to keep new money flowing into Latin America. Whether the Reagan Administration can meet this challenge during the next two years remains to be seen.

If we compare the policies for South America unveiled by the Reagan Administration in 1981, however, with those actually in place by late 1982, the contrast is striking. Security concerns, formerly paramount, had taken second place to economic ones. Even more impressive was the shift in the Administration's thinking with regard to the IMF and other multilateral lending institutions. Although the Reagan Administration had not yet been converted to the Latin American version of the "Western Hemisphere Idea," it had moved a long way in directions more congenial to Latin American opinion, and more in line with basic U.S. interests in Latin America.

2 Viron P. Vaky, "The InterAmerican System in the Falklands Aftermath," Paper prepared for the seminar on "U.S.-Latin American Relations in the post-Malvinas Era" held at the Woodrow Wilson International Center for Scholars, July 15, 1982.

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  • Susan Kaufman Purcell is a Senior Fellow and Director of the Latin American Project at the Council on Foreign Relations. From January 1980 through June 1981, she was a member of the State Department's Policy Planning Staff.
  • More By Susan Kaufman Purcell