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Unfiled February 24, 2006
The Backyard Trouble
By Kirill Pankratov Browse author

Last month elections in Bolivia brought to power the leftist indigenous leader and a former coca grower Evo Morales, who promised to end the "500 years of injustice" and let the Washington-sponsored (to the tune of $150 mln. a year) program of coca eradication go to hell.

Elections in Bolivia probably marked the last nail into Washington's neo-liberal (or, rather, neo-imperial) stranglehold on Latin America, which began in the mid-80's. It ended with a whimper, almost unnoticed in the background of numerous other troubles - in Iraq, Iran, Palestine and elsewhere.

In some sense it was Bolivia where it all started - the "Washington Consensus" and the "shock therapy" policies that the US pushed on the "emerging market" countries. Bolivia was the first country to sign on to such program - and apparently the last one to fall out. It was in Bolivia where the economist Jeffrey Sachs of the Harvard Institute for International Development (HIID) - the organization later proved scandal-ridden and corrupt, especially in its involvement in Russia - led the first "stabilization program," essentially "shock therapy." He later went on to advise similar programs in Poland, Russia and other countries, and usually left those countries after a not-very-long period, generally without a farewell parade on his way to the airport. Sachs has quietly distanced himself from those policies since then, and is now seen more often in the company of Bono preaching debt relief and poverty eradication in Africa.

The shock therapy in Bolivia was similar to the the Menem-Cavallo reforms in Argentina in 1990, Brazilian President Cardoso's "Real Plan" in 1994, and plenty of other similar measures across the Eastern Europe and South America in late 80's /early 90's. They largely succeeded in stopping hyperinflation which had plagued these economies. But that proved to be an easy part. The continuation of the "shock therapy" policies invariably led to a protracted industrial decline, rapid growth of foreign debt and eventually massive financial crises, starting with Mexico in December of 1994. It led to the spectacular defaults in Russia in 1998 and especially in Argentina in 2001, after which both countries rejected the US-pushed model. They have been doing much better economically ever since. In the last few years practically all of Latin America has drifted out of the US orbit, some with trumpets and fanfare, like Venezuela of Hugo Chavez, and now Bolivia, others more quietly, like Uruguay or Chile.

Standing slightly aside from this pattern is Brazil, Latin America's largest country. Even with the election of leftist president "Lula" de Silva in late 2002 (whom the Wall Street feared at first), it is following moderate policies, trying not to antagonize the Washington and global financial institutions too much. There are many cases when moderation brings more success than "great leaps forward". Yet Brazil doesn't look like such a case. In fact it is going nowhere. From the late 90's it bounced from one financial crisis to another, on the verge of default in early 1999 and again in late 2002. It is mired in foreign debt, even if its debt-to GDP ratio stabilized recently. Last year its economic growth was measly 1%, despite high prices for its export commodities, and this year it is unlikely to be much better.

I went to Brazil last year for vacation. A couple of days before we flew to Rio de Janeiro, several gunmen shot to death some 30 people in one of its notorious crime-ridden favelas. It was a common knowledge that gunmen were plain-clothed police, getting even with local drug-dealers (and with everybody else who happened to be on the spot). This is a common occurrence in Brazil, only this time the body count was bigger than usual. The story floated in the news for a few days, and was quickly forgotten.

Before going there, we watched a few Brazilian movies, from light fare to hard-edged crime dramas and documentaries. One of them was the "Bus 174" -- an exploration of a real event in 2000 when a homeless, young man with a gun hijacked a bus in the middle of Rio. The SWAT team showed stunning incompetence: even as the hijacker shot at passengers (and missed) and could be taken out almost at any moment (he was frequently sticking his head through the window), the police just let him continue. Eventually he was promised money and a car, and he stepped out of the bus with one hostage. The SWAT team leaped on him, but they botched it totally. One of the policemen managed to miss a shot at a point blank range. The hijacker then fatally shot his remaining hostage, and only then did the SWAT team overpowered this exhausted, lonely druggie. It was really hard to keep in mind that I was watching a documentary, not some weird "Three Stooges" spoof.

In Russia there were horrific cases of mass hostage-taking by hardened Chechen rebels, ending with many deaths. But instances of one or two hostage-takers are considered the chickenfeed for Russian SWAT teams: such cases are invariably resolved with dead or captured hijacker and rarely any harm to hostages. The Russian police force is corrupt and has plenty of other problems, but it is unimaginable to expect such wild incompetence as on Bus 174 in Rio.

My point is not to bad-mouth Brazil. It is a nice country to visit: friendly, beautiful, exotic. Grilled meats in churrascarias are divine - they'd make the best Texas steaks feel like rubber tires. The Amazon is magnificent. The views of Rio from the Sugarloaf or Corcovado are among the world's best. After watching swinging hips and bubble butts on Copacabana and Ipanema, you'd never want to look at the sagging flesh so common to American and European beaches.

And yet Brazil has more problems than many other developing countries. In Russia there are plenty of decaying suburbs, dying alcoholic villages or little dead-end industrial towns. Yet even in poorest places most people take for granted fairly reliable supplies of electricity, gas, running water, and have decent schools. Not in Brazil's endless favelas, where tens of millions of its citizens live, away from tourist's eyes, completely forgotten by the state. Crowds of homeless are everywhere. Whole neighborhoods are completely controlled by drug lords. The level of petty street crime is vastly higher than almost anywhere in the world. On our first day a teenager on a bike tried to rip off my wife's modest necklace, leaving her a nasty scratch. Purses, watches and sunglasses are stolen or snatched by thousands every day.

Brazil is rarely criticized by the US government or media - it is a relatively "nice," inoffensive country, with what seems to be a genuine democracy - a multiparty system, coalition governments, regular elections. It plays along the "globalization" game, more or less.

A similar case is India. It is much poorer than Brazil, with hundreds of millions of illiterate rural masses. It had fairly brisk economic growth in recent years, but it needs much more just to get close to China's development trajectory. And yet it is viewed most benignly by the West. It has most of the trappings of a developed democratic state - elections, parties, changing governments, etc. And yet being "nice" in this respect, as in the case of Brazil or India, proves most detrimental to development, compared to "nastier," more forceful, more authoritarian examples - from Singapore to China, and the latest generation of semi-autocratic models, from Putin's Russia to Thaksin's Thailand and Kirchner's Argentina.

The answer to this paradox is not terribly hard to find. In the "nice," easy-going but poor democracies, these trappings of developed countries remain the plaything of the elites and comfortable upper-middle classes, as well as foreign investors, who are relatively satisfied with things as they are. Huge masses of poor and illiterate, even with the right to vote, are effectively excluded not only from the politics, but even from modest participation in the country's development. It is very likely that Brazil in a few years will have to choose "nastier," more forceful and less cosmopolitan model to give its growth a serious jolt; otherwise it will keep falling behind.

As for the Washington, it just doesn't seem to get it right. During the 80's, when Soviet Union was still around, it spent huge efforts to prevent "Communist encroachment" in Central America - with horrendous brutality and blood-letting. In Guatemala alone it is estimated that around 200,000 people died, mostly at the hands of a thuggish right-wing government supported by Reagan administration. Yet in those days the USSR was involved in the Latin American affairs only half-heartedly (it was more pull than push), compared with its obsession with security in its near-abroad.

But today the Bush administration seems oblivious to its restless backyard. It seems more preoccupied with making an even bigger mess in the Middle East, or installing anti-Russian governments in little post-Soviet banana republics like Georgia, than with the fact that it is losing the whole continent in its backyard. Its stupidity will surely be punished - sooner rather than later, judging by the speed and direction of events occurring under its very nose.

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