Envisioning a prosperous and progressive future for Latin America.
In the past two decades, Latin America has gone through a major transformation. You could even call it a renaissance. This renaissance could continue for many decades, transforming most Latin American countries into highly developed, socially more equal and deeply democratic societies. In these societies, today’s poor and lower middle classes would be full participants in vibrant, socially progressive, diverse national cultures, both part of and very influential in shaping the global knowledge economy. Yet, there is no assurance that the renaissance will continue; Latin America is at a crucial moment. Hard work, planning, and serendipity have led us to a time and place where we have a historic opportunity to make a giant leap forward.
Hard work, planning, and serendipity have led us to a time and place where we have a historic opportunity to make a giant leap forward.
Beginning in the late 1980s and early 1990s, Latin American countries implemented national development strategies based on economic reform and democratic governance. In the 2000s, these reforms helped the region attain sustained economic growth of almost 4.5 percent per year since 2003. With hardly a ripple, Latin American economies just kept expanding through the economic crisis of 2008–2009. Two of the big economies, Argentina and Peru, have had much higher annual growth rates of about 7 to 7.5 percent.
Achieving these levels of economic expansion has opened up tremendous opportunities for changing Latin Americans’ lives and for further strengthening democracy in the region. The sustained nature of this growth has had a major impact on poverty reduction, at least in terms of how many people earn less than $2 per day, which is the way international agencies measure poverty, or $1 per day, which is the way these agencies measure extreme poverty. According to the Economic Commission for Latin America and the Caribbean (ECLAC), based on these measures, the percentage of people living under the poverty line decreased from 42 to 29 percent in 2000–2011, and those in extreme poverty decreased from 18 to 12 percent.
The bad news is that in the rural areas of Latin America, and in many of the larger countries such as Brazil, Colombia, Mexico, and Peru, the poverty and extreme poverty rates are still very high: 36 percent poverty and 15 percent extreme poverty in Brazil, 46 percent and 22 percent in Colombia, and 43 percent and 21 percent in Mexico. In Peru, an astronomically high 56 percent of people in rural areas are poor, and 20 percent are extremely poor, even after a decade of record economic growth. In the low-income Central American countries, more than half to three-quarters of people in rural areas are still poor, and one-fourth to one-half are extremely poor. In other words, sustained growth in Latin America has accomplished a lot, but there is still a long way to go.
That is not the only bad news on the poverty front. The figures I just cited only tell us that the percent of people in each country earning $2 or $1 per day is falling because economic growth is increasing their income. Welcome as that is, it hardly captures the various dimensions of poverty that do not change for poor people in Latin America even when their incomes rise. When a poor person makes $2.50/day instead of $2.00, she probably does not get access to good water or indoor plumbing or decent education and health care for her children. She probably does not get access to better housing or get empowered politically. She is still treated as a second-class citizen in the courts. On all these counts, the fundamentals of being poor in Latin America remain and, with them, the frustration and despair that accompany poverty.
Latin America’s renaissance is not just about economic growth and increasing the incomes of Latin America’s poor. We have had periods of rapid economic development and poverty reduction before. Yet, these past two decades have witnessed an even more important change: the region is enjoying its longest period of uninterrupted democracy and succession of popularly elected governments, whose elections have largely met international election standards. All this is a huge change from a generation ago when military governments ruled in countries like Argentina, Brazil, and Chile. Some of today’s governments are “leftist,” some are conservative, and some can be seen as authoritarian populist. Nevertheless, elections are taking place when they are scheduled, and leaders are subjecting themselves to the verdict of the voters. In almost all Latin American countries, this means every eligible adult, because voting is a legally required act. The voters have elected governments with different ideologies, but those of all ideological stripes are, so far, subjecting themselves to the voters’ decision as to whether or not they stay on.
For all the drama associated with electoral conflict, electoral democracy signals a “basic fundamental” of political stability for investors and economic markets in general. And even though electoral democracy has not eliminated corruption, it may have helped to contain it. When my political party, Perú Posible, led the movement in 2000 to prevent then president Fujimori from taking on dictatorial powers, the Peruvian government was infested with corruption. Drug money ruled the Peruvian political system and the economy. Economic growth had stagnated. By reestablishing democracy and containing corruption, we were able to unleash a decade of growth that is still in full swing.
So Latin America has come a long way toward creating the political stability needed for economic growth. But the region suffers from a low quality of democracy. Low-quality democracy does not include citizens sufficiently in the decision-making process and the exercise of power. Combined with poverty rates in most of Latin America that still remain relatively high, low-quality democracy has meant significant levels of marginalization and exclusion, which constantly test the stability of the political system. This situation is exacerbated by extreme inequality in income distribution. Latin America, along with Africa, is the most economically unequal region in the world. Income inequality is declining in some countries from very high levels in places such as Brazil, Chile, and Mexico, but as long as it remains as extreme as it is now, it could set off a vicious cycle of political instability, breakdowns in the democratic rule of law, and a slowing of economic growth.
In our past, when leaders talked about democracy, there was an assumption that this meant a government elected by the majority that works for the majority. But what we have realized is that simply holding elections is not enough to make sure that the government works for the people. Leaders who have been working for the benefit of themselves and their friends, weak institutions with little capacity to deliver results, and the insidious challenges posed by powerful narcotrafficking networks have meant that while we hold democratic ideals, our ostensibly democratic elections have not delivered the concrete and measurable results we wanted and expected. If we do not create shared democratic societies that deliver concrete and measurable results, there will be unrest. Empty stomachs, unequal opportunity, inequitable distribution of resources, and inefficient and insensitive institutions will beget societal tension, conflict, and violence. A democracy that does not serve the majority of the people is not a functioning democracy.
If we make this leap, Latin America will be a region that stands on its own feet; it will lead to economic independence, growth, and a horizontal relationship power-wise with the rest of the world at the national and regional levels.
Latin America today has an enormous and unique opportunity. No other region has our abundance of natural resources and macroeconomic flexibility, combined with high levels of national language homogeneity and cultural and historical commonalities. All this gives us the ability to integrate ourselves in terms of infrastructure and trade and to develop comparative and competitive advantages that enable us to compete in the global economy. If we make this leap, Latin America will be a region that stands on its own feet. We will have learned from our own mistakes and cultivated independence, health, and knowledge at the individual and community levels, which will lead to economic independence, growth, and a horizontal relationship power-wise with the rest of the world at the national and regional levels.
Economic growth is, of course, a means, not an end. Economic growth alone is not sufficient to improve people’s well-being, to give equal opportunity for all, or to ensure the possibility of future growth and stability. In my vision of a shared society, Latin Americans would enjoy the benefits of economic growth that are created from focusing on sustainable development and investing in the minds and health of our people and societies to ensure equal opportunities for all.
This essay is adapted from Alejandro Toledo’s forthcoming book, The Shared Society »