LATIN AMERICA REMAINS FRAGILE

From Washington's Point Of View A Lot Has Improved In Its "Backyard" But
It's Too Early To Start Celebrating

US President George W. Bush, the world now realizes, was born with a silver
spoon in his mouth.

World events, everything from the political composition of the US Supreme
Court, from terrorism to the US economy seem to have a preordained way of
working in his electoral favor. Again it is happening with Latin America.
By rights the chickens should be coming home to roost as Bush girds up for
his visit to Mexico, Peru and Central America but, in fact, Argentina
apart, the tides, both political and economic, appear to be working in his
favor. Just the other day the IMF issued a report saying that Latin America
was "set for recovery," likely to benefit from lower financing costs,
higher commodities and an expected rebound in the US economy, with a
projected growth by the end of the year of 4 percent (excluding Argentina).

For the last five years the region has taken something of a battering:
commodity prices fell by a quarter and access to external financing was
sharply restricted, portfolio flows dried up and capital inflows slowed down.

On the political front there has been severe turbulence in many of the
countries that most matter. Argentina entered an almost insuperable crisis
of both economics and governance. Peru went through the destabilizing
business of driving into exile Alberto Fujimori who had turned an elected
victory into a quasi dictatorship. Venezuela voted into power Hugo Chavez,
who immediately set about policies that have curtailed democratic rights
whilst frightening away investors. And Colombia has appeared to enter a new
phase of self-destructiveness to add to a past that is the most violent of
any country on the southern continent.

But despite this, from Bush's perspective, it must seem that on balance
rather nice progress is being made.

Peru now has a democratically elected president and one set on combating
the country's endemic and corroding corruption. In Colombia it looks
increasingly likely that a rightist candidate will win the forthcoming
election and gear up the army's war against the leftist guerrillas and the
drug traffickers in the all-out way the US wants. Even in Venezuela it
appear as if Chavez is no longer quite so firmly in the saddle and this
vigorous critic of the US may find he is out on his ear at the next election.

Moreover, despite recurrent crises, Latin America's turn to democracy in
the late 1970s has managed for the most part to sustain itself. Before 1975
military dictatorships ran every country apart from Mexico, Venezuela and
Colombia. Today, when there has been no successful military coup since the
early 1980s, when the ex-president of Chile Augusto Pinochet spends most of
his time housebound and disgraced, when Argentina and Uruguay have
imprisoned their old military dictators and Mexico has finally overthrown
the straitjacket of its corrupted one-party rule, the political atmosphere
could not be more different than 20 years ago.

To add to the positive list there are the accomplishments, limited and
insufficient but still very important, for following the "Washington
consensus" during the 1990s, the rulebook of the then orthodoxy of the IMF,
the World Bank and the US Treasury that argued that these economies would
never progress unless they liberalized and opened themselves up to the
forces of globalization. The inflation prevalent in the late 1980s and
early 1990s when prices were increasing at several thousand percent a year
has now been squashed, an outcome which benefits poorer people more than
any other group.

Privatization has also got rid of some of the price gouging of the old
monopolies, bringing in better service in areas such as power delivery and
telecommunications. Not least, some countries, Mexico and Chile in
particular, have at last made real progress in developing an alert
manufacturing export sector.

Radical leftism that at one time swept the continent with its struggle for
revolutionary change is contained.

The nearest it comes to being in power is in the persona of Venezuela's
Chavez. But he has sidelined the trade unions and been cautious in economic
management. In Brazil, the Workers' Party candidate, Inacio Luiz da Silva,
is in with a chance at the forthcoming presidential election, but the
record of the party's achievement in local government where it controls
seven of the largest cities has been imaginative but certainly not
destabilizing.

Yet, if surveying the scene Bush is complacent he may well be president for
long enough for it to come back and haunt him.

Two hundred million Latin Americans have an income inadequate to meet basic
human needs and 70 million have insufficient food. Little progress has been
made since 1980. Latin America, always the most unequal of the world's
continents, is more unequal today than it was 15 years ago. And despite the
promises of the Washington consensus, none of the Latin American countries,
with the exception of Chile and Mexico, have found a way at attaining
regular annual growth rates of 5 percent, the minimum necessary to make a
significant dent in reducing unemployment and poverty. (And even Chile does
so no longer.)

The trouble with the Washington consensus is that it didn't deliver
liberalization in the three areas that really matter -- with immigration
into the US, with trade where the barriers against a range of exports from
poultry to grains to manufactures are formidable and, not least, with drugs.

Only the legalization of drugs in the US would pull the carpet from under
the criminal gangs and guerrillas that are tearing at the political and
social fabric of Peru, Bolivia and Colombia. Until the US soberly confronts
its hypocrisy on these three counts the progress seemingly made in Latin
America will all too quickly disappear.