Neoliberalism, Geopolitics, and Oil - What is Really Occurring South of the Border?
BY JEREMY MARTIN
THE EUPHORIA OF THE 1990's that so encouragingly engulfed Latin America has ended. With Presidents Hugo Chavez of Venezuela and Evo Morales of Bolivia and their almost daily double-barreled blasts of hyperbole and rhetoric, the idea of a resurgent left in Latin America taking over has become a commonplace assessment. Indeed, the just concluded election of socialist Michele Bachelet in Chile and the upswing in the polls for Peru’s populist candidate Ollanta Humala would appear to confirm this notion.
While a case can be made for a rather dramatic swing of the political pendulum, why it has occurred is more complex. What are some of the origins of this emergent political mosaic?
Three important factors conspired to create the current Zeitgeist: corruption and cronyism; the U.S.'s inattention to the region; and energy/high priced oil.
First off, the core principles of the Washington Consensus - the collective term for John Williamson’s neoliberal tenets for development in Latin America, which has emerged as an all-time bogeyman of Latin American politics - were actually well founded. Take the roaring success of Chile and the successes of Brazil, Mexico and Peru. These countries followed the basic premises of market reform and have embraced globalization and free trade. Moreover, only amnesia could prevent memories of the hyper inflation that engulfed the region prior to realizing such reforms.
UNFORTUNATELY, when it came to implementation of needed economic reforms, the key principle that seemed to be ignored was that of a responsible, transparent state. Nowhere in John Williamson’s original framework did he prescribe selling the state's monopolies to private, elitist monopolies or capitalization programs without any safety nets, i.e. welfare provision and income redistribution were and are important.
In Latin America, cronyism and corruption are far more culpable, particularly with regards to income inequality and its continued perniciousness.
Meanwhile, the United States, whose Monroe Doctrine and Roosevelt Corollary were to have permanently ensconced Latin America as the top foreign policy priority shifted its attention elsewhere.
The beginning of the shift, and increased inattention, occurred with the first Gulf War in 1990-1991. At that same time, a relative calm and peace had enveloped Latin America. War and military dictatorships had almost disappeared from the region, with Colombia a notable exception. Besides drug interdiction and eventually NAFTA, the U.S.'s focus suffered from absenteeism.
For several years the lack of attention amounted to nothing more than benign neglect. Unfortunately, this gradually changed as misguided application of economic policies and ineffective governments took their toll, coinciding with a downturn in the global economy and the terrorist attacks on the U.S. Borrowing from Defense Secretary Donald Rumsfeld, as the U.S. leaned forward in the Middle East, Latin America began to lean left.
YET, MOST critical to the emergence and triumphs of many of the aforementioned leaders has been energy; no other current issue is as deep cutting or polemical in the region.
Indeed, the contentiousness of energy was the key factor for Evo Morales' election. Major missteps on how to handle Bolivia's massive natural gas reserves toppled both of his predecessors.
Argentina’s Nestor Kirchner underscored the importance of energy for populist leaders by eschewing a bilateral agreement with Chile and cutting natural gas supplies to that country in order to assure supply to his own. Argentina’s natural gas straights derived from imprudent economic decisions and cronyism in the late 1990's that bankrupted the nation and crushed energy investment while rejuvenating populist rhetoric.
However, the role of energy could not be clearer than in Hugo Chavez's Venezuela where it - more specifically, the high price of oil - allows him to not only maintain, but increase his grip on power. Chavez has played fast and loose with many policies since being elected, but none more important than his continued meddling in the oil sector where he has rewritten almost every contract, agreement and investment framework, virtually subjecting investors in Venezuela - the world's 5th largest oil supplier – to his whims.
While energy may be a global matter, the current crop of presidents in Latin America are successfully making it a key local issue and rallying call for old school populism.
As the tilt left appears to continue across the region, let's hope that it does not become synonymous with Latin America being left behind.
Jeremy Martin is director of the energy program at the Institute of the Americas, a non-profit institution based at the University of California San Diego.
Originally published February 2006