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South American

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Bolivia and Brazil

To nobody’s great surprise, Bolivia’s President Evo Morales has won a third 5-year term by a landslide majority. It’s no surprise because Bolivia’s Gross Domestic Product (GDP) has tripled since he took office in 2006. The number of people living in poverty has fallen by a quarter, even the poorest now have the right to a pension, and illiteracy has fallen to zero. Of course he won.

What has happened in Bolivia seems as miraculous as what happened in Brazil, where another left-wing president, Luiz Inacio “Lula” da Silva, took office in 2003. The economy started growing at 5 percent a year, unemployment fell steeply, and some 40 million Brazilians, almost a quarter of the population, were lifted out of poverty. Lula’s former chief of staff and successor as president, Dilma Rousseff, is also likely to win another term in office.

Is there some secret they share? Many other South American economies have been growing fast too, but without the dramatic change in the distribution of income that has happened in Brazil and Bolivia. Even the late Hugo Chavez’s “Bolivarian revolution” in Venezuela, for all its anti-imperialist rhetoric and despite the country’s great oil wealth, has not delivered a comparable transformation in the lives of the poor.

Evo Morales has another claim to fame, too. He comes from the poorest of the poor: “Until I was 14, I had no idea there was such a thing as underwear. I slept in my clothes… (which) my mother only removed for two reasons: to look for lice or to patch an elbow or a knee,” he wrote in his recent autobiography. He spent only a short time in school, and he did not become fluent in Spanish until he was a young adult.

Morales grew up speaking Aymara, one of the languages spoken by Bolivia’s indigenous peoples. They are a two-thirds majority of the country’s population, but in almost 200 years of independence Morales is the first indigenous Bolivian to become president (all previous presidents were drawn from the 15 percent white minority). And his government passed a new constitution in 2009 that entrenches indigenous rights in politics and in law.

So should we hail the arrival of a new and better model for economic growth and social justice? Unfortunately, no. The only economic secret that Lula, Dilma and Evo all share is that if you want the economy to grow, you must not frighten the horses.

The international markets got ready for a meltdown when Lula, a self-taught former trade union leader with a penchant for radical rhetoric, became president of Brazil, but he turned out to be the very soul of fiscal responsibility. And although Morales nationalised a large part of the Bolivian economy – oil, gas, tin and zinc mining and key utilities – he negotiated deals that compensated foreign investors and kept the markets happy.

All the rest of it – things like Morales calling Barack Obama “an imperialist” at the UN General Assembly meeting in New York last month, and Rousseff cancelling a scheduled state visit to the United States last year after Edward Snowden revealed that the US National Security Agency had been spying on her emails – simply doesn’t worry serious investors so long as the numbers come out right and the financial and fiscal environment is predictable.

So Morales has not been punished by the markets for being a “socialist”, and neither has Rousseff. Both still have strong support at home, too. Unlike Morales, Rousseff didn’t get enough votes in the first round of the presidential election earlier this month to avoid a run-off on 26 October, but she will probably win again even though the Brazilian economy is now teetering on the brink of a recession.

Despite all the similarities, however, comparing Brazil and Bolivia is rather like comparing apples and oranges here. Brazil has a very large and diversified internal market (fourth largest car-maker in the world, for example), and has twenty times as many people as Bolivia.  The latter has an economy that is almost totally dependent on the export of commodities, mainly oil, gas and minerals.

Bolivia’s soaring GDP of the past decade, and the modest prosperity it has brought to what was South America’s poorest country, is mostly fairy gold. What goes up usually comes down again eventually, and what drove Bolivia’s GDP up was almost entirely rising commodity prices. When they come down again, so will the GDP, the government’s income, and its ability to support even the sketchiest outline of a welfare state.

In the meantime, Morales has spent the extra money wisely, and it will be very hard for any successor to abandon this kind of “social spending”. He has also made it normal for Bolivia’s indigenous majority to have a big say in policy decisions at the national level, and that too will be almost impossible to roll back. He has even built up big financial reserves to cope with falling commodity prices. But he has not really transformed the economy.
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To shorten to 725 words, omit paragraphs 4 and 5. (“Evo…law”)

South American Union

6 December 2004

South American Union

By Gwynne Dyer

It’s not even a free trade area yet, but when it grows up it wants to be just like the European Union. The whole history of the continent is against it, of course, but then Europe’s previous history didn’t leave much room for optimism either.

On Thursday, 9 December, the leaders of every South American country except the three Guyanas will gather in Ayacucho, Peru to sign the preamble to the Foundation Act of the South American Union (SAU). They chose Ayacucho because that was where South American patriots defeated the last Spanish royal troops and ensured the independence of the Spanish-speaking half of the continent exactly 180 years ago this month — but the single, united republic that Simon Bolivar dreamed of was swiftly defeated by the realities of geography.

The Portuguese-speaking half of the continent has always been a single country, because communications are relatively easy in Brazil, but the mountains and rivers that divide up the rest of the region ensured that there would be nine separate Spanish-speaking republics (with about the same total population) in the other half. It has truly been “180 years of solitude,” to adapt Gabriel Garcia Marquez’s famous phrase, with land travel between the various South American countries generally more difficult than in any other continent except Africa. Now they want to change all that.

The original concept of the SAU came from Brazil’s last president, Fernando Henrique Cardoso, who invited the other South American presidents to Brasilia in 2000 for a first-ever continental summit, but the idea has been vigorously backed by his successor, President Luis Inacio “Lula” da Silva, and by Venezuelan President Hugo Chavez. Both men, unsurprisingly, are on the left: South American solidarity has grown more attractive as the United States has moved right and many South American governments have moved left. But there is more to it than that.

South Americans were acutely conscious that as the rest of the world moved into trading blocs, their continent was being left behind once again. The European Union, the North American Free Trade Area (NAFTA) and the Association of South-East Asian Nations (ASEAN) were old news, but Washington’s proposal for a hemisphere-wide, US-led Free Trade Area of the Americas (FTAA) threatened to extinguish any prospect of a common South American future and goaded many local patriots into action.

Last month’s announcement that the ASEAN leaders and China, Japan and South Korea were contemplating a broader East Asia Free Trade Area raised the stakes considerably, for such a trading bloc, especially if it also included India, would embrace about half the human population and a good third of the world’s economy — the fastest-growing part, at that. If the FTAA were anywhere near ready, the lure of belonging to such a large trading bloc might trump the attraction of a mere South American Union, but it is not.

The Bush administration has been totally distracted by Iraq, and there have not even been substantive negotiations on the FTAA for two years. The Central American Free Trade Area (CAFTA), lowering tariff barriers between the US and six smallish Central American and Caribbean countries, was supposed to be a stepping stone towards the FTAA, but even that deal now faces probable defeat in the US Congress over a piddling question of sugar quotas. So the runway was clear for the SAU.

The South American Union is not meant to be just a free trade area, either, although that will be the first major step in the process. Its founders are talking about a parliament for the whole continent, and even about a common currency in the end. Their model is explicitly the European Union, which grew to its present scope of 450 million people in 25 countries speaking 18 languages by similar stages over five decades. They believe that South America, with 400 million people in ten countries speaking only two languages, can do it even faster. They may be right.

The ceremony at Ayacucho is a modest start: the ten presidents are signing a two-page preamble to a constitution whose contents will only be discussed in detail at a conference that is still six month away. However, this month should see the signature of a free trade deal between the two existing trading blocks in South America, Mercosur and the Community of Andean Nations, which together include all the SAU members except Chile. That is a real signal of intent.

It will obviously be years before anything resembling a true South American common market, let alone a unified political space, begins to emerge from the negotiations, and at least two countries, Chile and Uruguay, are openly sceptical about the prospects for success. In fact, if the United States could drag its attention away from the Middle East and re-focus on its ambitions for its own hemisphere right now, it would probably be able to seduce some potential SAU members away with special one-to-one free trade deals with the US and wreck the whole plan.

But there is little sign of that happening soon, and after a couple of years the momentum towards the South American Union will start to build up. After centuries off in the corner, South America may be joining the world at last.

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To shorten to 725 words, omit paragraphs 6 and 7. (“Last…SAU”)