In This Review

Forgotten Continent: The Battle for Latin America's Soul

Forgotten Continent: The Battle for Latin America's Soul
By Michael Reid
352 pp, Yale University Press, 2007

Latin America, it is safe to say, gets no respect in Washington. Mention the region at a meeting of foreign policy cognoscenti who are not Latin America specialists, and eyes immediately glaze over. There may be a quick discussion of Venezuela's Hugo Chávez, but attention will swiftly return to the Middle East, Russia, or China. Back in 1971, Richard Nixon advised the young Donald Rumsfeld, "Latin America doesn't matter. . . . People don't give one damn about Latin America now." Rumsfeld took Nixon's advice on where to focus his career, and the rest is history.

Coverage of Latin America in the mainstream media is little better. It merits attention primarily when it causes trouble for the United States. Thus more ink has been spilled on Chávez over the past few years than on the entire rest of the region combined. The only associations that many in the United States have with Latin America are problems such as drugs, gangs, and illegal immigration.

But Latin America should matter to Americans, and not simply because Latinos have passed African Americans as the United States' largest ethnic minority (15 percent versus 13 percent). The region is home to the world's largest collection of democracies, but it is also a place of huge social inequalities and ugly dictatorships. Consequently, it has been a key battleground of ideas, where competing models of development -- communist, socialist, free-market, mercantilist -- have clashed. The Cold War was fought out in Latin America, from the coup against Guatemala's Jacobo Arbenz in 1954, through the Cuban Revolution and the military dictatorships that arose in reaction to it, to the civil wars in Central America in the 1980s.

The penultimate act of this morality play came in the 1990s, when the region had returned to democracy and weathered the debt crisis of the 1980s. The end of the Cold War seemed to signal an opportunity for a new start. Washington and international financial institutions such as the International Monetary Fund and the World Bank pushed Latin American governments to open their economies to global trade and reduce the role of the state in economic management -- the so-called Washington consensus. This shift toward ideas and policies favored by the United States produced not the kind of explosive economic growth experienced in East Asia but rather a minicrisis of stagnation in the late 1990s and, in the case of Argentina in 2001, full-blown economic meltdown. This stagnation paved the way for the election of left-of-center leaders in Argentina, Bolivia, Brazil, Ecuador, Nicaragua, Uruguay, and Venezuela, some of whom have denounced "neoliberalism" and U.S. policies as the source of their countries' troubles.

Development models matter. If the United States cannot help steer countries in its own neighborhood toward liberal democracy and market-based economic growth, it is hard to see what business it has trying to transform the politics of countries halfway around the world that are culturally much more foreign. At the moment, the dominant discourse in the Western Hemisphere holds that U.S. ideas about development have failed.

The real story, however, is more complex: despite Chávez's antics, most Latin American countries have been successfully deepening their democratic institutions, integrating into the global economy, and beginning to address endemic social inequalities in ways that bode well for the future. This story of slow but steady progress by reformist, rather than revolutionary, governments across Latin America will never make headlines, but it is the topic of an excellent new book by Michael Reid, a longtime Latin America correspondent for The Economist. "Most Latin American countries were better placed in 2007 than they had been at any time in the previous quarter of a century," Reid writes. "Incomplete though they were, and despite some costly mistakes of implementation, the economic reforms have provided the region with a platform from which to seek its fortune in the world."

Reid points out that an accident of history -- the spike in oil prices since 2001 -- has given spurious plausibility to the alternative represented by Chávez's "Bolivarian Revolution" in Venezuela. That model is populist in the classic sense: it satisfies short-term popular demands for social spending but in ways that are completely unsustainable in the long run, and not just for countries without Venezuela's energy resources but also for Venezuela itself. The real action lies instead with countries such as Brazil and Mexico, whose reforms are likely to be much more enduring. As Reid notes, "Radical social movements of sometimes questionable representativeness might grab the headlines with street demonstrations, but the power of public opinion, expressed through the media, through local government or in civic groups, is often more significant in quietly achieving change."


There is evidence of progress on the part of reformist democratic leaders across Latin America in a number of domains -- most notably the high quality of macroeconomic policy management in virtually all of the region's countries. The debt crisis of the early 1980s was brought about by the failure of political leaders to rein in spending in the wake of the oil shocks of the 1970s. Central banks monetized fiscal deficits, bringing on a cycle of inflation, currency crises, capital flight, and economic contraction. Today, countries in the hemisphere without energy resources face rising import bills once again. But despite the anti-Washington consensus rhetoric, most countries have continued to follow relatively orthodox economic policies and have been rewarded by growth with low inflation. Many resource-exporting countries (Venezuela excepted) have created stabilization funds to squirrel away revenues for a rainy day -- the opposite of their behavior in earlier decades.

The strengthening of institutions, Reid points out, extends far beyond just macroeconomic policy. Latin America returned to formal democracy in the 1980s, and the quality of democracy there has been steadily rising since then. Enfranchisement is now universal throughout the region, and rates of voting are sharply up. This is true even of long-excluded indigenous populations in countries such as Bolivia and Peru, which has helped leaders of indigenous heritage (Evo Morales and Alejandro Toledo) get elected. Election fraud is largely a thing of the past -- a particularly notable achievement for Mexico, where the reformed Federal Electoral Institute has cleaned up the country's notoriously corrupt presidential election process (notwithstanding irresponsible charges to the contrary made by last year's losing candidate, Andrés Manuel López Obrador). There has also been decentralization in Colombia, Brazil, and other countries, bringing democracy closer to the people. A series of reformist elected mayors in Bogotá, for example, have implemented innovative programs to deal with drugs and gangs, sharply lowering the city's murder rate and improving public services. In Brazil, long dominated by traditional patronage politics, "voters have developed a habit of using the ballot box to punish mayors or governors who devoted a disproportionate share of their revenues to public employment rather than services or investment." Much of this deepening of democracy was made possible by the fact that since the end of the Cold War, the United States has no longer prevented left-leaning leaders from coming to power.

The most interesting developments have come in the social sector. Latin America was born with a birth defect: a highly unequal initial distribution of resources that dates back to the colonial era. In some countries, inequality was rooted in slavery; in others, it overlapped with stratifications based on ethnicity and race. This inequality has perpetuated itself over the generations in a remarkably durable fashion. That is why the region's economic performance has never matched that of the United States, or of the fast-developing countries in East Asia, over the long run. Oligarchic societies may be able to achieve high rates of growth for a period of time, but continuing inequities in distribution lead to political instability and populism, which then undermines growth. This story is being played out today in Andean countries such as Bolivia, Ecuador, and Venezuela.

But there is a great deal of social change brewing under the surface. Reid points out that across the continent there has been considerable de facto social mobility as societies have urbanized and become better educated. In 15 years, the percentage of Latin American households with electricity has gone up from 83 percent to 90 percent; rates of primary school attendance have shown similar increases. Globalization and emigration have exposed people to new places and ideas, and remittances from emigrants now far outstrip incoming foreign investment as a source of foreign exchange.

The most interesting innovations in the region are in targeted social programs that deal directly with the problem of poverty. These began during the 1990s with Mexico's Progresa, a conditional cash transfer (CCT) program that gave small stipends directly to poor people on the condition that parents sent their children to school. Under the name Oportunidades, the program was vastly expanded under President Vicente Fox after 2000 to cover the whole of Mexico. This approach was copied by Brazil in its Bolsa Família program, which now reaches one Brazilian family in four. Between 1996 and 2005, poverty in Mexico was cut in half, and between 1995 and 2004, Brazil's notoriously high Gini coefficient (a measure of economic inequality, with zero being absolute equality and one being absolute inequality) dropped from 0.599 to 0.571. These results were partly due to an extended period of economic growth underwritten by sensible macroeconomic policies and also partly to social programs that directly addressed the problem of inequality. CCT programs are far more sustainable, Reid points out, than Chávez's oil-financed top-down welfare programs.

It is interesting to note that innovative social policy has come from Latin America, not from Washington. The Washington consensus paid lip service to the need for a social safety net, but social policy was never at the core of U.S. policymakers' concerns. Indeed, many economists would argue that the best antipoverty program is rapid economic growth. They tend to regard new social programs with suspicion, since it was the old welfare-state entitlements in Latin America that led to fiscal bloat, oversized bureaucracies, and the debt crisis of the early 1980s.

The degree to which countries should emphasize targeted poverty programs rather than all-out growth is a policy discussion that needs to come out into the open much more than it has to date. It is true that rapid economic growth reduces poverty: some of the largest gains in poverty reduction have come in recent decades in China and India, where policy has focused on cutting back overgrown state sectors. In Latin America, however, only Chile has been able to sustain a long-term rate of growth that has made serious inroads into poverty, and still it remains a highly unequal society in international comparisons. Many growth advocates forget how important social policy -- in the form of early land reform and heavy investments in basic education -- was to East Asia's success. It is unrealistic to think that democratic politicians in Latin America can win electoral contests without having programs that specifically target the poor and excluded, which is perhaps why many CCT programs were initiated by centrist or center-right leaders, such as Mexico's Ernesto Zedillo and Fox and Brazil's Fernando Henrique Cardoso.


Forgotten Continent is two books in one, addressed to two different audiences. The first is a comprehensive primer on the history, politics, and culture of the hemisphere for those who are not familiar with the region. The second is an interesting argument about the state of contemporary Latin American politics for people who already are. Those in the second category can easily skip much of the book's first eight chapters. Even in the sections dealing with contemporary issues, the author feels obliged to provide background on everything from the war on drugs to the North American Free Trade Agreement to the maquiladoras in Mexico's Ciudad Juárez; even the best-intentioned autodidact probably does not want to know that much about that many issues. Still, it is good to be reminded of some history. After all, regime change with disastrous results was invented by the U.S. military not in the Middle East in 2003 -- but in the Caribbean Basin in the previous century.

The fact that progress is being made in certain areas should not obscure the huge challenges that Latin America faces. Fortunately, Forgotten Continent does not ignore those challenges. Of all of the areas of state reform, improving the rule of law is perhaps the most important -- and it is one in which little progress has been made. Judicial systems remain politicized and corrupt and often overwhelmed by narcotraffickers, transnational gangs founded in U.S. cities, and a youth bulge that has pushed crime rates up sharply across the continent. Although rates of primary and secondary education are up in many countries, the quality of education is abysmal -- probably the single most important source of the region's lagging economic competitiveness. In Argentina and Mexico, overcentralized educational systems are in the grip of teachers' unions that care more about job security than educational performance. And as Reid points out, although the overall level of social spending in Latin America is not bad when compared to other parts of the world, its composition is terrible, tending to go to the upper and middle classes rather than the poor. Brazil spends a quarter of its education budget on free public universities while neglecting universal primary and secondary education. Finally, labor markets everywhere are overregulated, the legacy of mid-twentieth-century welfare states. This reduces job growth and creates a privileged unionized sector while driving most workers into an unregulated informal sector.

But even this list of problems provides grounds for cautious optimism, since almost all of them are at least theoretically fixable through public policy. They are not rooted in culture or age-old Iberian traditions, any more than was hyperinflation or a lack of fiscal discipline. The real challenge lies in the ability of democratic politicians to build the political coalitions necessary to see these reforms through, which can be done, as statesmen such as Cardoso in Brazil and Zedillo in Mexico have shown. But fixing a pension system here or a school bureaucracy there is not sexy and never gets reported in any North American or European media (save perhaps for The Economist). As a result, there is a pessimistic bias that undermines the very prospects of democratic reform itself. As Reid observes, "One of the problems Latin America's democracies face is the persistent denial of progress by many academics, journalists and politicians, both within the region and among those who observe it from the United States and Europe."

Today, the task of democratic reformism is especially difficult because it must advance in the face of the new populist challenges offered by the likes of Chávez, Morales, and Argentina's Néstor Kirchner. Publics are highly mobilized and impatient with political processes that often take years to bear fruit. Reid is clearly right that a battle for Latin America's soul is unfolding today. Since this battle involves ideas and institutions dear to the hearts of Americans -- including democracy, individual rights, and free markets -- it is really too bad that so few of them are paying any attention.

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  • FRANCIS FUKUYAMA is Professor of International Political Economy and Director of the International Development Program at the School of Advanced International Studies, Johns Hopkins University.
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