Radical left at crossroads in Latin America

April 22, 2012 11:37 pm0 commentsViews:

by Juan Forero

Washington Post

 

BOGOTA, Colombia — Quite suddenly, whether intentional or not, Argentine President Cristina Fernandez de Kirchner became the standard-bearer of populist nationalism in Latin America when her country seized a Spanish oil company last week.

The takeover of YPF enthralled Argentines and drew praise from nationalists as far away as Venezuela, even as the radical political left in Latin America struggles with questions about its future.
The region’s most bombastic leader, Venezuelan President Hugo Chavez, who says his self-styled revolution should replace what he calls “savage capitalism,” is so ill with cancer that he has taken to pleading with God in public to spare his life. And in Cuba, the 53-year-old Castro government is resorting to reforms to keep a moribund economy afloat.
So Argentina’s announcement last week, complete with a defiant speech by Fernandez and the unceremonious removal of YPF executives from their Buenos Aires office, bolstered those who firmly believe that the state trumps the interests of private companies in Latin America.

“It’s the correct position,” Rafael Ramirez, Venezuela’s mining and oil minister, told reporters. “You cannot permit that a country with important internal consumption and with Argentina’s growth projections watches as transnational companies exploit and take away oil while not investing to increase production capacities.”

But even as Argentina’s senate prepared to approve the expropriation this

week, Fernandez’s move underscored the gulf that exists between a group of nationalist countries led by charismatic populists and the economic centrists who govern much of the rest of the region, most notably in Brazil.

Locked out of world financial markets for defaulting on $100 billion in debt a decade ago, Argentina restricts imports, imposes currency and price controls, and has used a nationalized pension system and central bank reserves to pay off debt.

With the nationalization of YPF, the country has come to look increasingly like the state-interventionist model of the fiery general Juan Peron, who remains a guiding light for the current government 60 years after his first turn at ruling.

Indeed, Argentina has more in common with a group of four other Latin American countries, led by Chavez, that have centralized power in the executive while taking greater control of institutions such as the courts and employing state power to weaken the press.

Venezuela’s economy has become increasingly dependent on oil under Chavez, private investment has dried up and power shortages are the norm. In Ecuador, President Rafael Correa’s government focuses much of its attention on corralling the press, with the president filing libel suits against reporters he accuses of subverting his rule.

And Bolivia and Nicaragua — led respectively by Evo Morales, an Aymara Indian, and Daniel Ortega, a former guerrilla — remain two of the hemisphere’s poorest countries.

“Populism is running out of gas in Latin America,” said Arturo Porzecanski, a Uruguayan economist who teaches finance at American University in Washington. “The most ambitious charismatic personalities are fading because of age and health reasons, but their possible successors have their hands full dealing with their domestic problems and are not in position to take the mantle to develop a regional agenda, let alone pay for it.”

A shift to the center

The model that has instead started to take hold across Latin America is one cited by President Obama at a summit of regional leaders last weekend in Carta­gena, Colombia. Seated at a forum with the presidents of Brazil and Colombia, Obama gushed about how “a lot of the old arguments on the left and the right no longer apply” as governments focus instead on strengthening institutions and generating growth.

“You do business well when you know that it’s a well-functioning society and that there’s a legitimate government in place that is going to be looking out for its people,” he said.

The model Obama referred to is one that also includes Chile, Mexico, Peru and Uruguay, all led by presidents who are largely centrist ideologically, orthodox in their approach to economics but attuned to social needs. All also believe in sustaining strong ties with Washington and Europe, even if they diverge on such prickly themes as how to deal with Cuba.

“They have all been moving in the direction of insertion into the broader international economic sphere,” said Claudio Loser, an Argentine and former International Monetary Fund economist consulting in Washington.

Indeed, Brazil, whose president was a 1960s-era guerrilla, is privatizing its biggest airports and drawing record levels of foreign investments as it expands oil production and prepares for the 2016 Olympics. And countries such as Colombia and Uruguay recently received investment grade status from credit-rating agencies.

Movement ‘in disarray’

The countries that have taken the other road — among them Argentina — can still record solid growth rates. “As long as commodity prices remain high, there’s a lot of margin for these governments to continue to do what they’re doing,” said Christopher Sabatini, editor of Americas Quarterly.
But the price Argentina may pay in the long run for nationalizing YPF could be high.

The little foreign investment Argentina receives could dry up. And it remained unclear how Argentina, which is short of cash, will come up with the billions of dollars needed to jack up crude production and develop its recent finds of shale oil and gas.

Spain’s prime minister, Mariano Rajoy, on Tuesday warned other investors a the World Economic Forum in Mexico: “What happened yesterday could happen to any other investment.”

Michael Shifter, president of the Inter-American Dialogue in Washington, said Argentina’s move was an effort to scrape the barrel, collect much-needed funding and buy time. It is a process, he said, that has taken place repeatedly in countries such as Venezuela and Ecuador and reflects what he calls a leftist populist movement “in disarray.”

“There’s really no sense of forward movement, there’s no sense of moving toward fulfilling some alternative vision and some utopian ideal,” he said. “There is a sense of just stagnation and just trying to hold on to power, which is really not a very attractive leftist project.”