Latin America: A New Developmental Welfare State Model in the Making? [1] 

Diverse times along the same tectonic fault

Emerging from a century of tectonic transformation out of its traditional agrarian self, LA still seems to be in full transition, when considered as a whole. According to a CELADE [2] classification of demographic transition, about 10% of the population is still in early or moderate stages, while 75% is in full transition. Only the remaining 15% has already achieved an advanced level in this process (CELADE, 1998). Moreover, when multiple other indicators are displayed alongside population data, they seem to suggest that this classification captures much more than demographic transition. In most cases, it may well be a quite precise indicator of the current state of evolution of the overarching socio-economic transformation process. Countries in the latter group, for example, show levels of per capita productivity, and public social expenditures, which are five times, and fourteen times higher, respectively, than those observed in the first group. In the case of public expenditure in social security, this relation rises to over thirty times (see tables 1-5 in appendix) (Draibe & Riesco, Chapter 1, 2007). The region harbours two of the largest four urban centres in the world, each of them approaching twenty million inhabitants, and several in the ten million range. However, over 42% of the population are still peasants, according to the most recent WB estimates (World Bank, 2004).

The same day under the sun may still witness people living and working in ways that resemble almost every social formation recorded in history. They range from the high-qualified professionals employed by large LA private multinationals, one of whose owners is the second richest man in the world, to indigenous American peasants caring after their alpacas in the magnificent Andean highlands, and even aboriginals in the deep of Amazonian rain forests. The vast majority, however, early before sunrise, will descend by the tens of millions into packed metros, or ride for hours clamped in noisy buses that inch through the tortured traffic of congested streets, in their way to salaried jobs, somewhere in the huge factories that bustling LA cities have become. They will work long straining hours, even during Saturdays, Sundays and fiestas de guardar[3], mostly in small or medium sized private shops and firms, increasingly in the service sector.

Moreover, their jobs are extremely short termed, and they are constantly forced to cross the quite porous boundaries between formal and informal employment – no Chinese wall stands in between both categories -, with periods of unemployment in the meantime. In Chile, for example, excellent statistics constantly track the individual job histories of the entire workforce, being this perhaps the only undisputed positive outcome of the renowned AFP[4] pension system. 96.5% declare themselves salaried workers and contribute forcefully as such while they are hired. However, only 11% contribute regularly, every month. Meanwhile, two thirds will contribute less than one month in every two, a third less than one in five, and one fifth less than one in ten, on the average. In the case of women, the density of contributions is even scarcer.

Only a tenuous atmosphere seems to enclose the workforce as well, especially in the case of women. The number of them who hold AFP accounts – each identified by name and RUT, the Chilean unique ID number, and most have contributed in recent years -, exceeds the official INE[5] estimate of the female workforce by almost one third, suggesting that they are also constantly moving in and out of the workforce (INP, 2004).

Many roads lead to Rome

Seen from the outside, or even from the inside of each country, LA seems to present one single, easily identifiably, face. However, a careful listener will distinguish a rich variety of tonalities in the Iberic tongues spoken by all – which popular continent-wide TV soap operas have not been able yet to erase. In the same way, its peoples have traversed along quite diverse historical paths – huellas y chaquiñañes as Andean trails are called - towards their rather astoundingly different modernities (Therborn, 1995). The fertile valleys and highlands of the Andes, from Mexico to Peru and Bolivia, have harboured most of the indigenous American population along the millennia, and they still predominate there, vastly, up to this day. Their hands forged the golden magnificence of ancient American empires, as well as the classical colonial, and latifundia, periods. The architectural remains of all these epochs witness to the greatness of each one (Lipschutz, 1955). It seems not at all improbable that when these regions finally complete their ongoing, massive, fast, painful, and sometimes chaotic, transition to contemporary times, their deep roots, rich cultures and complex structures (Anderson, 1974), may perhaps also cradle the distinctive richness of authentic American modernity. However, that is yet to come, perhaps some decades into the 21-century, although some of it may be already surfacing in modern Mexico.

On the opposite side, the rich shores of Rio de la Plata witnessed the massive immigration that flooded the area by 1900, which created the twin cities of Buenos Aires and Montevideo, one of the very few million-strong metropolises of the world of the time. Railroads and the army expanded into the pampas all the way south to Patagonia, in a pincer movement that virtually exterminated the scarce and nomadic indigenous population – in a way not at all dissimilar to what was taking place in the conquest of the North American West, around the same time. These early developers created then the most advanced LA social formation, which still is, although other zones are catching up quickly.

Brazil is a unique pattern by itself, out of sheer hugeness, which encompasses one fourth of the surface, and about one third of population, GDP, and practically everything else that may be found in LA. In addition, slavery played a predominant role in this country, as well as in Cuba. Brazil accounted for about 40% of total slave imports from Africa along four centuries, and both countries held almost all those remaining in the world by the last decades of the 19-century (Blackburn, 1997).

Finally, countries that lay on the meagre fringes of the ancient American empires, such as Costa Rica and Chile, never in the past were able to sustain anything more than peasants and very modest lordships. The poor Spanish settlers established there since the 16-century, even in the middle of the 20, could well have passed for the butlers of their seigniorial counterparts in the richer regions, as their remaining mansions and churches from the colonial and latifundia periods may still witness. Nevertheless, they conformed tight-knit elites that built relatively strong states, rather early. Still today, after several mutations, these families lie in the core of the aggressive emergent bourgeoisies that have grown up in their respective countries (Jocelyn-Holt, 1999).

It is interesting to note that these transition categories, and historical patterns, not only seem to predominate in one country or the other, but also are seemingly present within each. This is quite evident in the larger countries, which harbour all levels and patterns within themselves. However, small Ecuador, for example, looks quite like three different countries whether in the Pacific coast, the Andes, or the Amazonia, to the east, which resembles none of the above described (Draibe & Riesco, Chapter 1, 2007).

States Led the Way by Two Successive Strategies

LA States led transition following two successive development strategies along the past century. Both were violent conflicting, but seem to conform a unity as well, in the backdrop of ongoing socio-economic transformation. Starting around the mid 1920s, but especially after the Great Depression, many of them explicitly assumed the twin challenge of bringing both economic and social progress to their societies – by then quite backward, agrarian. State developmentalism was forced to replicate what had already been created in advanced countries by the early emergence there of the actors that LA lacked by that time; and incubate those actors in the process.

It shows quite impressive achievements in both counts, at least in the main countries. By the end of the period, many had built basic institutions, infrastructure, and industries, and achieved significant an sometimes spectacular economic growth. Most important, they were remarkably active in changing the region’s social structures, teaching millions of peasants how to read and write, improving their health, and accompanying their massive migration to the cities. Social policies played an essential role for this purpose. This has frequently been overlooked (UNRISD, 2003a), and seems to justify the usefulness of the concept of developmentalist welfare States in LA (Draibe & Riesco, Introduction, 2007; Kwon, 2005).

The block in power was led by State bureaucracies – where the military played a central role in many countries -, and supported by urban middle classes, including nascent bourgeoisies, workers and poor, as well as peasants in the final phase. However, there were many flavours of developmentalism. Many started through progressive military coups, although two of them had epic revolutionary origins. Some started decades before others. More than one reached their climax as well under military rule, this time conservative, as in Brazil. In others, such as Chile, democratic governments of all flavours pursued this strategy quite relentlessly, after being primed by the military. In the remarkable case of Mexico, the civil bureaucracy that consolidated out of revolution and civil war presided throughout this whole period, in a lasting alliance with entrepreneurs, peasants, and workers. Moreover, it also led the phase that would follow.

Everywhere, this block increasingly confronted traditional LA landed elites, sometimes quite violently, especially as developmentalism reached its climax towards the middle part of the second half of the century. In certain countries, it climaxed in full-blown revolutions that rapidly, drastically, massively[6] and irreversibly wiped out old agrarian relations. It does not seem at all surprising that – based on the progressive legacy of developmentalism - these precise countries seemed to leap ahead of the pack, miraculously, during the period that was to follow.

By the last two decades of the century, throughout the region, States adopted what would later be accepted as the Washington Consensus. As a strategy, it is little more than a short list of simple rules, emphasizing the importance of markets in the framework of openness to globalization (Williamson, 2002). In practice, they were applied quite unilaterally in the interest of emergent local capitalists, and especially foreign investors, together with their reduced, high-income, entourage. Many times, it resulted in severe dismantling of State institutions, especially in the realm of social policy, as a frenzy of privatization and tariff reduction took hold of LA elites. Some, benefited considerably from it, especially foreign multinationals but local capital as well, as they grabbed many privatized state companies for themselves, at a bargain. New, segmented, private services, including social services, were made available to those who could afford to pay. Everybody more or less enjoyed the flood of better quality and lower price imported goods; except those who lost their jobs and many times their companies when s were lowered in a rush.

On the average, the affluent 10% secured for themselves over 40% of income. They were the happy few. Meanwhile, the poorest 40% had to get along with no more than 10% of income. The middle half got their corresponding share of income, but about half of that went to the upper 10% within this segment that are fairly well off. Some countries are even worse, such as Brazil, Chile, and Colombia. Meanwhile, three constitute notable positive exceptions in this respect: Cuba, Uruguay and Costa Rica (table 6 in appendix) (Draibe & Riesco, Chapter 1, 2007)). Furthermore, the dismantling of public social policy affected the middle sectors the most, as they were left largely unprotected, at the same time their jobs got precarious and their lives more insecure in the face of globalization. Meanwhile, a reduced public social spending was targeted in the extreme poor, alleviating their horrible conditions a bit, or at least keeping them from deteriorating further (UNDP, 2002).

However, the degree of unilateralism varied widely, mainly in dependence to the kind of government that implemented these “reforms,” and the timing of the same. A first wave was pioneered in a few countries, during the late 1970s and 1980s, in the midst of a severe economic crisis, a decade or more before consensus was reached in Washington[7]. Murderous military dictatorships imposed them. They seemed to plague the region around that time, and were sponsored by local elites and the US on the grounds of counter-revolution or counter-insurgence. In some countries young emergent entrepreneurial classes supported Neoliberal “reforms” with a vengeance, as they were full of hatred against the successful State-led reforms of the previous period, mostly performed against their landowner forefathers. In countries that had no experienced significant developmentalism, this wave of “reforms” was reluctantly pushed by decadent and terrified landed oligarchies, sometimes in the midst of civil wars.

The second wave of “structural reforms” was implemented during the generally expansive 1990s by the democratic governments that replaced dictatorships almost everywhere. They were rather moderate, quite light in fact in some countries, and took place in the backdrop of an expansion in per capita public social spending that averaged 40% during the decade (UNDP, 2002). Nevertheless, some degree of State dismantling, more or less severe, took place anyway, although now under the influence of “third wave” ideologues, who made damaging efforts to transform public institutions into service providers to citizens they conceptualized as consumers (Suleiman, 2004).

The massive and rapid social transformation that had been taking place in LA under developmentalism, which was then so effectively both stimulated and made more humane by its public social policy, continued in full during the Neoliberal period. It even reached new heights, although this time in a rather ruthless manner.

Alphabetization, sanitary, and housing policies on the one hand, and agrarian reform on the other, had been the main instruments of social change under developmentalism. During the Neoliberal period, they were replaced by violent culmination of agrarian reform processes that did not reposition latifundia, but forcefully expelled hundreds of thousands of peasants into the roads. This same effect was the result of cruel, open, and protracted, civil wars, which resulted in massive peasant migration to the cities, and to the North, especially in Central America and Colombia. Massive economic displacements induced by severe economic crisis, and globalization, played not a small part as well.

As a result, peasant migration that had doubled in speed towards the mid 20-century, and tripled again during the height of developmentalism in the 1970s, maintained that frantic pace all through the 1980s, only to decline in the 1990s (CENDA, 2007). However, in the zones where this process has taken place later, it is still ongoing in full, and probably even accelerating in some countries.

On the other hand, Neoliberal privatization of State enterprises, social services and pension funds, replaced tariffs and credit policies used by developmentalism as the main ways to promote local capitalists. These policies induced the growth of some into huge conglomerates. In some cases, they attained this status without disbursing a penny of their own – which they did not posses in advance, in any case -, as functionaries in charge of privatizing public enterprises and utilities kept them for themselves (Illanes & Riesco, 2007).

Why did the Washington Consensus replace developmentalist strategies in LA? A sober, data supported, assessment, will probably contradict the usual slogans about it. It did not seem to happen because of stagnant growth, because the developmentalist period shows still unparalleled record in this aspect, especially as it approached its climax. The 1980s crisis affected extreme Neoliberal Chile the most, and pragmatic or “unorthodox” Costa Rica the least. Neither due to “big State,” because public expenditures has always been very low in LA by international developed standards, especially concerning social policies, and regulations have always been rather slack. It seems difficult as well to blame “populist monetary irresponsibility,” (Dornbusch, 1991) because although developmentalism was generally expansive, the worst episodes of hyperinflation in fact took place under Neoliberal ministers. Conspiracy theories blaming the BWI seem also difficult to swallow, as the main cause of such a wide and overarching phenomena, although evidently they promoted it in all their might.

Perhaps, it was just that the success of developmentalism in modernizing social structures that made it redundant in the end, becoming a hurdle, especially in some of its economic aspects. State developmentalism put in place the initial conditions, the essential although rarely mentioned premise for the takeoff of modern markets: the previous existence of masses of fairly educated and healthy workers, mostly urban but in any case freed from the bondages of traditional peasantry. Maybe it created its own gravediggers.

Another Turn of the Rudder?

An unambiguous shift of direction away from Neoliberalism – as formulated by The Economist assessing Lula’s election -, has been taking place in LA since the 1997 economic crisis. Throughout the region, wide coalitions have appeared, sometimes out of the unexpected, which have gained access to political power in many countries, or barely missed doing so in others. Neoliberal thinking is still strong and dominates within academia, government cadres, and holds its own in their still mostly impregnable citadels of Finance Ministries and Central Banks. However, it seems clearly on the defensive, and even right wing parties no longer campaign under its slogans. The current world crisis has reinforced this tendency considerably.

A new development strategy seems to be in the making, which repositions the State as the leading actor, although this time it may rely on the modern actors of civil society that have come of age out of the two previous periods. Social policy once again moves centre stage, as the new strategy offers an explicit Rooseveltian New Deal to the massive urban salariat that is emerging in the region’s booming cities, and renews its commitment both with the urban poor, and peasants who continue their migration in huge numbers, especially in some countries.

Although subject to serious criticism from the left, and certainly controversial, the case may be argued that President Lula pioneers the new LA development. Based on PT, a highly structured and experienced, mass worker-based, party and movement, which has been characterized as essentially non co-opt, Lula has managed to assemble an impressive alliance, while still maintaining unprecedented popular support. President Kirchner and his wife Cristina have been able to reshuffle the Peronist party once again in Argentine. Through decisive state intervention they rescued the economy from the catastrophic collapse of neoliberal policies in 2002 and continued to push for a version of the emerging model. As in the case of Lula, their popular support remains overwhelming, even though they have faced strong opposition from the powerful Argentinean conservative forces.

Even in Neoliberal Chile, President Michelle Bachelet has expressed a desire for change, and although her government has not made significant breaks form the prevailing model, she is partially overhauling the privatized pension[8] and education[9] systems.   

A good example of how the current crisis has empowered the new tendencies is the current re-nationalization of privatised pensions by the Argentinean government, on ground of the massive losses of the funds. The probable outcome is that all privatised pension systems will be re-nationalised throughout Latin America before the crisis is over.

All the above events are taking place in South American countries that have attained advanced stages in the transition process, and in giant Brazil. In a different scenario, paramount events are taking place in Bolivia, and changes are taking place as well in Nicaragua and other countries that are still in early or moderate stages of socio-economic transition, as well as in Venezuela and Ecuador, which are still in full transition. In all these countries, movements have surged to power, which question the Neoliberal model in a generally radical manner. Their achievements are considerable, especially in recovering ground rent from natural resources [10] and improving the incomes and participation of the poor, which in turn have voted them overwhelmingly in successive democratic elections.

It must be emphasized that although both versions of the emerging strategy coalesce under the same “change the model” slogan, the latter processes are different in nature from the ones described above, which take place in the relatively more advanced countries. Perhaps no better way to show this difference than to mention that the main social actor in these countries are peasants or recent rural immigrants, which in turn have been reduced to a relatively small number in those described earlier.

In this sense, the two versions of the emerging strategy are not competitive but complementary. The stroke of a magician could interchange presidents Lula and Morales, for example, only to find out that both would probably continue roughly with the policy of the other in their respective countries. For this reason, Brazil and Argentina, and even Chile, have consistently supported the processes in the less developed countries. Especially, in the face of aggressive intervention against them by the Bush administration, which has been utterly irresponsible in promoting regional separatism in countries whose governments it doesn’t like, which could easily create havoc throughout the region. Europeans have also showed a marked tendency to demonise the latter group of countries, especially those that have nationalised multinationals of that origin.

In addition, both versions fully coincide in what seems to be the main feature of the emerging model: regional integration.

A Young Giant in the Making?

A new developmentalist welfare State model seems to be in the making in LA. Its outlined design, and the kind of social structure in background, bear strong resemblances to what Western Europe, the US, and other developed countries experienced around the time of 20-century Golden Age. In this sense, the new relevant questions for LA seem to be: Will the emerging strategy remain confined within the national borders of the different countries? Or will it evolve over the wider space of an increasingly integrated LA? If so, what might be the role of regional social policy in this construction?

Modern nation building seems to be compelled by an underlying tendency that pushes towards sovereign spaces of adequate dimensions. During the 19-century these may have more or less coincided with the order of magnitude of GB, the leader at the time. The emergence of the US during the 20-century, a new leader with continental dimensions, and the Soviet Union on the other side, may have prompted the forming the European Union in its original form. Strategic planners and informed public opinion have recently been assessing the consequences of the emergence of China and India, which potentially may in the near future surpass the order of magnitude of the US. Certainly, this phenomenon weights in the minds of those who have been pushing to elevate the sovereign status of the EU and enlarge it even more. As the current crisis has once again affirmed in the minds of policymakers, modern markets and sovereign States have developed in inextricable unity, as the hen and the egg.

Rapidly modernizing LA face challenges that seemingly exceed the dimensions of its present republics by far, even the largest. Achieving a basic level of autonomy and competitiveness in science and technology, energy provision, land and information communications networks, complex industries such as aerospace and defence, and many other areas, does not seem possible within their current dimensions, for most countries at least.  Conforming a market of the adequate size and degree of sovereignty to compete in the 21-century seems to be their main challenge facing LA. Strategic planners should be giving more thought to this matter, and some seem to have done so (Pinheiro Guimarães, 2007)

The region appears a natural space over which such institutional construction may take place. Its total area is twice China. Its inhabitants are approaching 600 million today, will reach 700 million within two decades and near one billion by mid century, well within the order of magnitude of the world leaders. They will no longer be ignorant subservient peasants, as they were in their overwhelming majority at the turn of the 19-century, or even masses in full transition as they are at the turn of the 20-century. In two or three decades at most the vast majority of LA population will have achieved the status of citizens, with decent health standards, basic and secondary education of reasonable quality, and high numbers having completed tertiary level as well. Even today because of its more advanced urbanization, per capita GDP adjusted by purchasing power in LA is almost twice that of China, according to the 2007 ranking by the World Bank. The economic projection of the emergence of these huge concentrations of market-oriented workers is paramount [11]. They seem to constitute a sound base for an economic market in the major leagues; if in addition, LA manages to acquire some degree of sovereign power – certainly a big “if” ^{(CENDA, 2004)}.

A long and winding road

The idea of integration is as old as LA independence, which is why it is called Bolivar’s dream. Frustrated, stagnant, or ineffectual initiatives abound (Ffrench-Davis & Devlin, 1998). However, the exhaustive list of successive integration initiatives duly updated by the Inter American Development Bank (IDB) (INTAL, 2008) shows an impressively consistent and rapidly accelerating activity in the matter (see , Figure 1 and Table 1 below, and Tables 6-8 in appendix).

Source: (INTAL, 2008) Table 9 in Appendix

Source: (INTAL, 2008) Table 9 in Appendix

The figures show that in spite of the high profile FTA between the US and LA it has been intra-regional trade and integration agreements that have been in the centre of LA foreign policy all along. Extra regional schemes appeared only in the 1990s and have been important in the 2000s. Meanwhile, LA integration efforts have been adding up consistently along half a century and have vastly predominated during the last two decades as well.

The first integration initiative is registered in 1951 in the Carta de San Salvador (Letter of San Salvador) that inaugurates the activity towards what is now called Mercado Común Centroamericano -Sistema de la Integración Centroamericana (SICA) (central American Common Market – System of Central American Integration) , scheme that is both the earliest and the longest standing. The start of trade agreement negotiations with the EU in October 2007 was its 44^th mayor agreement along five decades of consistent development, which includes a common market and development bank (1960s), regional parliament (1980s), and court of justice (1990s).  The Caribbean countries have built their own integration process in CARICOM (1968), reinforced by Asociación de Estados del Caribe (Caribbean States Association) (1994). Both schemes have been very active up to the present day.

The most ambitious initiative was promoted by developmentalism in its climax. The Treaty of Montevideo signed on February 18, 1960 created the Asociación Latinoamericana de Libre Comercio (Latin American Association of Free Trade), ALALC. Later ALADI, it embraced all the main countries from Río Grande to Patagonia. It managed to function during a decade, applied several barrier reductions, and built a secretariat, following the EU model. ECLAC, inspired by Prebisch, and Chile led by Frei Montalva and then by Allende, were active promoters of ALALC-ALADI, together with progressive governments throughout the region, certainly including Mexico in the opposite end. It is still the widest legal framework for LA integration. Cuba adhered in 1999, and when MERCOSUR signed a pact in 2004 with three CAN countries, Venezuela, Colombia, and Ecuador, they asked ALADI to protocol it.

In 1966, after conservative military governments had taken power in Brazil and Argentina, progressive governments in Chile, Perú, Bolivia, Ecuador Colombia and Venezuela started working towards the more advanced Acuerdo de Cartagena (Agreement of Cartagena). Signed in May 26 1969, it created the Comunidad Andina de Naciones (Andean Community of Nations)(CAN) as a temporary second best. The structures of ALALC were transplanted to CAN and still operate in this realm from large and modern headquarters in Lima. The latter include the well-funded Corporación Andina de Fomento (1968), and Banco Andino de Fomento (1969), and a regional parliament (1979), among other institutions.

The evolution of CAN has certainly not been problem-free. Chile withdrew in 1976, after the Pinochet coup. Peru withdrew partially under Fujimori but reinserted itself in 1997. Venezuela withdrew in 2006 in protest of the signing of FTA with the US by Colombia and Peru; rightly denouncing such pacts as contrary to LA integration. In a quite evident countermove Chile rejoined this pact one month later. However, at the same time, the newly elected governments of Presidents Morales and Correa, in Bolivia and Ecuador, two of the Andean Pact’s long standing members, are signalling their adherence to the main integration strategy, led by Mercosur, which Venezuela has already joined (INTAL, 2008).

The creation of Mercosur by the treaty of Asunción, signed by Brazil, Argentine, Uruguay, and Paraguay, in May 26, 1991, was a major milestone in the LA integration process. Mercosur is the highest expression of integration efforts in LA up to now. With the inclusion of Venezuela in April 2006, it now encompasses 256 million inhabitants (2005) and a GDP of almost two trillion dollars (ppp[12], 2002), which represent 46% and 50% of the respective figures of the LA region as a whole (Draibe & Riesco, Chapter 1, 2007). Not only has Mercosur advanced consistently in the economic front, surmounting severe economic and political crisis in its relevant partners, but also has a complex and growing institutions. The latest addition is Parlamento del Mercosur, officially inaugurated in May 7, 2007 and initially conformed by 18 members from each member country, selected by the respective parliaments, which in 2010 will hold its first universal election. The countries associated to Mercosur, Mexico, Bolivia, Chile, Colombia, Ecuador, and Peru, may send non-voting observers.

Mercosur-led integration strategy is presently focused in the convergence of all of South America in a common initiative (Pinheiro Guimarães, 2007). The Comunidad Sudamericana de Naciones was created in September 9, 2005, signed by all LA countries, and coordinating the existing structures of both Mercosur and CAN, with the concurrence of the remains of ALADI, as well as the sub regional initiative that unites Caribbean nations, CARICOM. This process received an important boost during the Presidential Meeting of Cochabamba, in September 12, 2006. The final declaration of this meeting creates a coordinating secretariat for the Comunidad Sudamericana, and advanced in integration projects, mainly in the area of energy[13].

Mexico and Panama have signed as observers to UNASUR, as its now called, which certainly represents a real alternative for the other regional giant, in the case it may opt to look more towards the south, as it did during the height of the developmentalist period.

In parallel, Venezuela is leading a sub regional effort that has more a more ambitious timetable, the Acuerdo para la aplicación de la alternativa Bolivariana para los pueblos de nuestra América y el Tratado de Comercio de los Pueblos, ALBA, and the Tratado de Comercio de los Pueblos (Agreement for the application of the Bolivarian Alternative for the Peooples of America, ALBA, and the Treaty of Commerce of the Peoples), which also includes Cuba, Bolivia, Ecuador and Nicaragua. The first three countries signed this pact in April 29, 2006, and the last adhered in January 2007.

Regional social policy

Social policy has not been a major component of LA integration schemes until now, in practice. However, it has been present in the wording of all of them since their initial conception, and has taken some significant steps, mostly related to labour rights, education, migration, and assistance to backward regions, among many others.

CAN, for example, has signed specific agreements on the matter, such as the “Integración Educativa en el Acuerdo de Cartagena” (Educational integration in the agreement of Cartagena) (1970), “Integración Sanitaria en el Acuerdo de Cartagena” (Sanitary Integration in the Agreement of Cartagena) (1976), “Integración Sociolaboral en el Acuerdo de Cartagena” (Socio-labour in the Agreement of Cartagena) pact (1976), and created the Foro de debate, participación y coordinación para temas sociolaborales” Debate, participation and coordination Forum for socio-labour matters) (2001), and established a Plan Integrado de Desarrollo Social (Integral plan for social development) (2003) (INTAL, 2008).

The Alianza para el Desarrollo Ostensible de Centroamérica (Alliance for the Sustainable Development of Central America) (ALIDES), signed in 1994 by the presidents of Central American republics, is probably the most comprehensive agreement signed in the region, states that “we have materialized a national and regional strategy that is integral, considering political, moral, economic, social and ecological aspects.”

Mercosur is probably the scheme that has advanced the most in this matter, and represents a good example of both the advances and limitations of regional social policies in LA. The former have been considerable in educational agreements, and include the mutual partial recognition of titles even in the most sensitive professions such as medicine and engineering. However, it is labour policies that show interesting advances, especially regarding its institutional schemes, and the early installation of tripartite commissions – government, business and labour – which specifically have to review and approve all matters related to social policy.

The structure of Mercosur includes regular cabinet ministers meetings, and in some cases permanent groups, in areas such as education, health (SGT Nº11), social development, social security and labour (SGT Nº10). In addition, there is a task force for the creation of Instituto Social del Mercosur (Mercosur Social institute) (GISM), and social policy is indirectly addressed in two other high level task forces, the Grupo Alto Nivel Estrategia Mercosur de Crecimiento del Empleo (High level group for the strategy of Mercosur on employment increase (GANEMPLE), and Grupo de Trabajo Ad Hoc para Superación de Asimetrías en el Mercosur (Ad-hoc workgroup for the superation of assimetries of Mercosur) (GTASM). There is also a tripartite Foro Consultivo Economic Social (Socioeconomic Consultation Forum) (Figure 3 in appendix).

From the very start, Mercosur signed an educational protocol that declared its intention to: “be a regional space that delivers and guarantees education with equity and quality, characterized by mutual knowledge, interculturalism, respect to diversity, solidarity cooperation, with shared values that contribute to the improvement and democratization of educational systems in the region and generate favourable conditions for peace, by means of sustainable social, economic and human development.” It established three main purposes 1) Promoting a favourable disposition to the integration process in citizens’ consciences, 2) form human resources to contribute to development and, 3) harmonisation of educational systems. The same protocol established the above-mentioned regular Ministerial meeting and a permanent regional coordination committee (CCR), as well as action plans (4 at the moment) to promote these objectives. The present plan explicitly tries to address the inequity and dissymmetry of the educational system in Mercosur.

According to its own assessment (MINEDUCC, 2007)), the main achievement is the continuity of such efforts, notwithstanding “oscillations and slow steps in the framework of severe economic and political crisis of member states and instabilities of Mercosur.”  It underlines important advances regarding its relations with civil society and NGOs. It mentions several significant protocols and agreements already signed, some of which are: educational integration and mutual recognition of titles and diplomas in basic and medium level, integration for post graduate studies and acceptance of students in this level, mutual recognition of titles for academic purposes. There is also a project of statistical indicators for Mercosur and another for bordering schools, among others.

The plan 2006-2010 establishes detailed targets along these lines. One program that seems interesting to highlight is the interchange of students, teachers, and headmasters, both in pre grad – this one with financial support of the EU - and post grad levels. An experimental scheme of accreditation of university careers has also been established, for Mercosur, Bolivia and Chile. It has already listed over 50 careers, in Agronomy, Engineering and Medicine (MINEDUCC, 2007).

In health, there are several intergovernmental commissions working in areas such as AIDS, Dengue, tobacco control, health in the workplace, and sexual health. There is a permanent Commission on Health and Development, and four additional ad-hoc committees/programs, in areas such as medicines, bank for medicine prices, international sanitary norms, and vigilance on transmissible illness (figure 3 in appendix).

In labour policies, Mercosur has a general and ambitious goal: “promoting economic growth, the widening of internal and regional markets, and implement active policies that stimulate employment growth, to elevate the life standards and correct social and regional” (Article 14 of Declaración Sociolaboral del MERCOSUR) (Mercosur, 2008). There is a Mercosur labour legal framework in construction, made up of a number of international labour conventions ratified by all Mercosur member states, the Mercosur Social and Labour Declaration (a charter of fundamental labour rights that is increasingly applied by courts in member states), the Mercosur Multilateral Social Security Treaty, the repertory of practical recommendations on vocational training, as well as some instances of regional collective bargaining and the statements of the Mercosur Social and Labour Commission (Ermida Uriarte, 2007). There is also an especial meeting on women’s rights.

A very interesting new development in Mercosur is the creation in 2008 of the Universidade Federal da Integração Latino-Americana (Federal University of Latin-American Integration) (UNILA). Its aim is to have 10.000 students in undergraduate and postgraduate courses, who will become specialists in Latin America and with a “Latin-American conscience.”

Gravitational pull from the huge mass to the North

The new State led development strategy that seems to be in the making probably will only make sense over the larger and increasingly integrated LA space. However, there are plenty of obstacles to surmount, not least the above-described wide differences in socioeconomic, historical, and institutional, evolution of the different countries.

However, the main hurdle to LA integration is the powerful attraction from its massive neighbour to the north, which constantly pulls the individual countries into its orbit. The imbalance of powers is huge. Just considering their economies, LA GDP (ppp) as a whole adds up to around 40% of the US; Brazil, the largest country, is about a third of that, meaning it is about 15% of the US economy at present. In other aspects, the abyss in their relative State power is even more overwhelming. It seems out of the question that the US would ever consider surrendering even a minimal degree of sovereignty in the benefit of building an integrated zone in more or less equal terms. Quite on the contrary, their explicit State policy promotes the continued balkanisation of LA and the subordination of individual countries.

In 2001, President George H. Bush launched the FTAA, “an economic free zone extending all the way from Alaska to Tierra del Fuego.” However, the evidently imbalanced approach of the US to “free trade” in favour of its own interests has all but buried FTAA for the time being.[14] Mercosur led by Brazil did not accept unilateral opening to trade and investment, government procurements, and TRIPS,[15] because the US would not even consider lowering its farm subsidies, or non-tariff barriers, among other aspects. In turn, the LA countries that have been adhering to individual FTA, led by Mexico and Chile, have accepted these impositions. These are more restricted version of FTAA that the US has been pushing throughout the region as a second best, after the failure of the larger initiative (CENDA, 2004; INTAL, 2008).

The LA desk of the US foreign office is in constant vigil to take initiatives that are more concrete. A notorious example happened when Chilean President Ricardo Lagos embraced his close friend Fernando Henrique Cardoso, then Brazilian President, in PlanAlto palace during his first State visit, shortly after his election in 2000. A socialist and lifelong promoter of LA integration, Lagos made the formal promise that Chile would become full member of Mercosur within few months. However, his enthusiasm damped quickly when he received a telephone call from then President Clinton, who offered a FTA for Chile if Lagos withdrew this compromise. Which he quickly did, moreover, without even giving a call to his friend Cardoso before rushing to make the public announcement of FTA with the US and delayed Mercosur membership. This has not been forgotten in PlanAlto, and especially in Itamarati, the highly professionalized Brazilian Foreign Ministry that has been the most consistent promoter of LA integration (Pinheiro Guimarães, 2007).

Constant activity by other dependencies of the US government that operate more discretely, are perhaps even more effective in spraying sand in the gears of the integration process. For example, the main newspapers of the region are organized in Group de Diaries América (GDA), which leans towards US policy regarding LA. The so-called “serious” press regularly publishes headlines, news, and commentaries, reproduced by this syndicate [16], which highlight the multitude problems confronting LA integration, while muting or disdaining its advances. In this way the overwhelming perception of LA public on the matter is so far removed from the actual state of the process, that even the enumeration of the constant activity regarding integration along half a century, such as was presented above, would come as a deep surprise even in learned circles.

However, formidable as these obstacles may seem, it does not seem reasonable to assert beforehand that they are insurmountable. Especially, because they pale in comparison to the paramount complexity of uniting the myriad peoples, languages, cultures, histories, and relative levels of development, during the successful process of nation building in Western European during the 19h century, or those that have been surmounted along the road to EU.

Powerful godfathers

Powerful, motivated, and committed actors, operating under a more or less coordinated long-term State strategy, are necessary to overcome the difficulties confronting LA integration. This requisite is consistent with the requirement of a new block in power that has been mentioned in reference to the emerging development strategy. Are these actors in place today? Are they authoritative enough? Do they have a strategy? Are they riding favourable winds and currents? The answers to these questions do not seem overly pessimistic concerning the chances of the process. Moreover, regional social policy could become a key factor to affix at least two of these potential actors firmly to the integrated development strategy, much in the same manner as Bismarck envisioned it over a century ago.

LA State Bureaucracies

Professional LA bureaucracies have been a primary actor in the region along over a century, especially during developmentalism as has been highlighted. They conform by far the largest, better structured, and stably employed, group in any country. Especially, the branch that is most powerful, autonomous, and strategically aware: the military. They are now are important sponsors of LA integration. Even the commander in chief of the Chilean army has recently declared that not only should Chile join Mercosur as a full member, but also this association should advance rapidly from economic to political union[17]. This example has an especial significance, coming from the army of a country that under Pinochet notoriously withdrew from integration efforts.[18]

LA foreign services have also been a systematically consistent key driving force behind the integration process, since at least a couple of decades. Itamarati has assumed the leading role during years and throughout governments of otherwise quite diverging political stances (Pinheiro Guimarães, 2007).[19]

EU Capitals

The EU has been a driving force regarding LA integration, in several ways. Probably, following their own strategic considerations that could reflect the aspect of rivalry in their long-term relation with the US. Quite evidently, the influence of the EU vis-a-vis the US in LA only seems to gain out of the integration of the latter. Especially if the alternative is individual countries subordinated to their northern neighbour or, even worst, collective subordinated in the framework of FTAA.

However, a more pressing factor behind this interest is the quite extraordinary surge of Spanish direct investment in LA. EU countries other than Spain have also increased theirs, but much less significantly. Spanish capital has displaced all other direct foreign investors in LA, including the US, in just a few years. A virtual armada of modern Spanish conquerors landed in LA in the 1990s. Large Spanish conglomerates spearheaded it, private, recently privatized, and even public ones. Amazingly fast, they acquired a dominant role throughout the whole region in banking, energy, and telecommunications, as well as public services under private concession, such as water and infrastructure. They have attained significant stakes in several other relevant industries as well.

This was stimulated by the simultaneous occurrence of a first-ever outpour of Spanish foreign direct investment (FDI) in general, on the one side, and the privatization and market openings in LA, on the other. Both situations seem to be rooted as well in the late-coming but swift socio-economic change that has been taking place in one as well as the other.[20]  It seems only natural that swelling Spanish FDI would look towards LA.

The long-term impact of this business invasion on LA integration process may have been under-estimated, and is certainly quite under-researched. In the future, it will probably be considered as a key detonator of the process. Much in the same way as British capital was a relevant factor in the US “conquest of the west,” during the second part of the 19-century.

Just as their ancestors had during the conquest of America, the new Spanish conquerors view the region as a whole as they move swiftly across it. It has always been mind-blowing how descubridores and conquistadores covered the entire span of what today is LA in just a few years – quite on foot most of the time[21].

To be fair, LA retained a remarkable unity under Spanish dominance. The same may be said of the independence movement, which took place quite simultaneously throughout the region. In an impressive demonstration of continental vision and reach, Bolivar and San Martin led the victorious march of their liberation armies from what today are Venezuela and Argentina, respectively, to their final embrace in Ayacucho, exactly in the heart of South America.

However, in the wake of independence, LA republics behaved in a way that was no different to the early indigenous inhabitants. After evidencing an incredible drive to cover the whole continent, the communities they established turned into almost complete isolation, which lasted centuries in one case, and millennia in the other. This isolation is evident in different intonations of the present Iberic languages, and also in the quite different structures of the Native American dialects.

The new conquistadores have behaved like later day Pizarros. The triumphant LA forays of Banco Santander and BBVA, Endesa and Repsol, or Telefonica, during the 1990s are well known. However, these large Spanish fragatas were followed, and sometimes preceded, by a swarm of young, enthusiastic, small and medium entrepreneurs. [22]

Evidently, foreign direct investors view the region as a whole, and operate accordingly, usually from headquarters located in one of the main LA capitals. They follow a comprehensive LA business plan, and use standardized procedures, centralized services, procurement, outsourcing, and publicity, for the whole region. On the other hand, in order to be successful, they are forced to quickly master the subtleties of each country. They share all this experience with the highly qualified professional cadres that manage their operations, jumping from one capital to the other just as any EU or US executive does within their respective territories.

Spaniards have the great advantage of the common peninsular language and cultural origins, so they move in LA quite like fish in the water. However, most of these cadres are in fact native LA. In this way, Spanish capital is becoming an extraordinarily effective business school for those that, quite probably in the end, will end up jumping ahead of them as the main economic unifying force of regional integration: LA business.

LA Big Business

“Se pasan de giles (they behave like fools),” declared Horst Paulman, owner of the giant Chilean-Argentinean Jumbo retail chain, in reference to businesspersons of the former who do not invest in the latter. He knows what he is talking bout, as his company now controls a significant part of the market in both countries. He has profited hugely from investing in one profits reaped in the other, taking advantage of frequently alternating economic and foreign exchange cycles in both countries during recent decades.

Mostly since 1990, Chilean big business has started pouring out foreign direct investment (FDI) for the first time ever. Large Chilean companies have directly invested around 40 billion US$ dollar abroad, about a third of 2006 Chilean GDP. Most of it has gone into energy, forestry, and retail, but in several other industries as well. Over half (52%) of the accumulated total is concentrated in Argentine, indicating they are not “giles,” and most of the rest is distributed in Brazil (16%), Peru (16%) and Bolivia (8%). Practically all the remaining FDI is also in other LA countries (CENDA, 2004).

Large local entrepreneurs in the most advanced LA countries may tell a similar story. Perhaps the most notorious example is Mexican billionaire Carlos Slim, at the same time the richest person the region and the world, according to the 2007 Fortune estimate. The son of a modest Lebanese immigrant, Slim has built an empire around beer, and privatized cement and telephone monopolies - he owns Corona, CEMEX, and Telmex, among many other industry leaders -, which now includes banks, and media. Even though he does not refrain to enter the US market, where he has made notorious acquisitions, at the same time he is highly critical of NAFTA. He invests heavily in LA, especially in South America, from Venezuela all the way down to Chile.

In 2003, Slim conveyed in his sprawling mansion in Veracruz what was probably the first summit of emergent LA large private conglomerates. All the family heads of LA largest private conglomerates attended the meeting, together with their heirs in waiting. It is not known what they talked about during their weeklong strait, but it is not probable that planning of regional joint ventures were to be completely overshadowed by more pleasurable activities in which these guys are know to indulge.

Intellectuals, civil society organisations, and artists

Traditionally a very important parts of LA bureaucracy, its intellectuals – which were mostly harboured in universities and other public academic institutions - have always played a hugely progressive role in LA strategic development. The climatic moment of developmentalism may perhaps de dated in November 29, 1971, when President Fidel Castro – at the moment the guest of President Salvador Allende – visited the new, beautiful, and imposing circular central auditorium of ECLAC in Santiago, to address one of the most illustrious gatherings of LA intellectuals ever, chaired by non other than Dr. Raul Prebisch himself. 

Fidel delivered a formidable speech, showing how revolutionary Cuba had implemented ECLAC’s program in nutrition, health, education, industrialization, energy, etc. He concluded with a vibrant allegation in favour of LA integration. After mentioning the giants of the moment, USA, the Soviet Union, and the EU, and emphasizing how the latter had managed to unite the territory of “ferocious wars, which during the last five centuries have been killing each other systematically, and where each speaks his own very different language.” He called to overcome “balkanization, the weakened position of peoples that have so much in common as our LA peoples, which will have no chance to survive in the future but the closest economic union and, consequently, also in the future the closest political union, to conform a new community that in 30 years time would reach 600 million inhabitants (APPLAUSE). However, even in that condition we would need to make huge efforts to occupy a place in the world of tomorrow.”

After each assertion, he paused and searched approval from Raul Prebisch, seated beside him. “Isn’t it true, Dr. Prebisch? Yes, Mr. President - once and again answered the founder of ECLAC and main inspirational force behind LA developmentalism -– it is true” (Castro, 1971). That 20-century LA’s most formidable political figure came to render exam to its most illustrious intellectual, in the site of perhaps its highest academic institutional creation, is a symbol of the importance of the latter in defining the region’s autonomous strategy during the developmentalist period.

However, it must be reckoned that this is not happening today, at least concerning LA integration. Even ECLAC hardly studies integration any more, and certainly is not behind it as a driving force, as it was until three, or even two decades ago. The little-analyzed privatization of LA intellectuals during recent decades, as well as the systematic cooptation of public universities and other academic institutions by Neoliberal way of thinking, has probably played not a small part in this decline.

The US strategy to block or delay LA integration and subordinate individual countries to their hegemony not only follows grand schemes such as NAFTA, FTAA or FTA. It must be noted that not a minor part of US strategy in this aspect has consisted in co-opting LA intellectuals, mainly its economists, to an abstract and non-strategic view of this problem, such as promoted by Neoliberalism, for which these considerations simply do not exist, as opening up markets is always beneficial, in the long run. They have played a subtle and intelligent game of networking these cadres, and promoting them through a long chain of institutions, in the top of which sits the BWI, but where “independent” central banks and semi-autonomous finance ministries play a key role at the country level. Universities also play an important role in this kind of networking, as well as other international organizations.

The BWI institutions – and the complex network they have built and lead -, may certainly take a lot of credit for this shift, as well as other US agencies, such as the ones that sponsored the seminal agreement between the University of Chicago and the Catholic University of Chile (Pontificia Universidad Católica, PUC), in 1955, which produced the “Chicago Boys.”  Since the 1980s, PUC has implemented a one and two year course[23], where governmental cadres of all over LA come to study the elementary concepts of the Neoliberal model, financed by their respective governments, which maintain their salaries, and by IDB and other BWI grants.

The even less studied role of donor agencies – including prominent European donors - that assumed a significant role in financing intellectual activity in LA during the 1980s and 1990, and shaping their agenda in the process, has played a significant role as well in this shift.

Certainly, however, the main cause of the decline of LA intellectuals, as a driving force behind LA integration and other strategic aspects of development, should be searched within LA societies.  Intellectuals usually belong to the middle classes, which were in good part co-opted as such in support of the Washington consensus model, especially the more moderate “third-way” versions. Some States abandoned in part their deliberate efforts to maintain important concentrations of academics in universities and other centres, which was the base of the distinguished traditional intellectual drive behind LA developmentalism. This was another negative consequence of the unilateral and in some cases extreme course followed by the second State strategy adopted during past decades, especially, when this took place under right wing dictatorships. The regrouping of LA intellectuals, mainly within the realm of a reconstructed and reinforced modern LA public university system – process that probably needs seminal efforts similar in a way to the PUC-University of Chicago 1955 agreement - seems quite an imperative today.

However, there has been a significant private reaction of progressive intellectuals to the partial dismantling of public academic centres, or their co-option by Neoliberal way of thinking. Hundreds of private intellectual centres sprung throughout LA, which assumed a critical stance regarding mainstream policies. Many times they grew under the protection of the social movement, both the traditional workers movement but also new expressions of civil society such as women, environmentalists, landless peasants, indigenous peoples and many others. The human rights movement, which surged in response to the right wing dictatorships, played a significant role and many times were protected by the Catholic Church and other religious institutions. International donors supported this network, although some times this meant introducing certain biases in their agenda. As a result of these movements, there are several networks of NGOs that span the whole LA region, which have played an important role in critiquing the Neoliberal and US-led strategies regarding regional integration, and promoting alternatives[24]. The anti-FTAA movement has been on of its main expressions, and the LA version of the World Social Forum its most important overall organisation.

Finally, even though this is not the appropriate place to treat the matter in extenso, a mention must be made to artists as one of the relevant forces behind this process. This is quite clear to anyone who listens to the beautiful “Canción para todos,” true hymn of LA integration, which is usual to be sung by artists and public in small and large musical events throughout the continent (Isella & Tejada Gómez, Junio 1996).

Salaried Workers, Peasants and Urban Poor

No integration process whatsoever will be possible if it is not able to seduce the region’s emerging social force that is overwhelmingly massive: the new urban salaried middle sectors. In the present social scenery of LA as a whole, and especially in the countries that are in the more advanced phases of transition, any progressive strategy, and certainly regional integration, must include this emerging force as a basic part of the power block required to promote it to success.

In this sense, the situation of LA today is not entirely different to the one confronted during the second part of the 19-century by Western European regions that were relative late comers to the process of national unification. As then, the leading States were already in place and thriving, and in order to catch up, it seemed necessary to build some sovereign spaces of a similar order of magnitude. On the other hand, the underlying socio-economic conditions within the latecomer regions had matured up to a point where it seemed possible to be successful in the intent. Especially, a massive modern salariat had emerged, which then as today is fundamental premise of such a possibility.

How to seduce it into supporting a political block that may realize this strategy? The Iron Chancellor found the way to do it. Perhaps, the driving agents behind today’s process in LA should give him a second reading. The emerging progressive LA coalitions already have made an explicit revival in their political programs of the other towering figure behind the building of progressive modern coalitions in this continent: he who offered a New Deal to the masses of American salaried workers in the wake of the Great depression, and got advice from Lord Keynes. In this way, it is possible that under the unlikely pair of portraits of Roosevelt and Bismarck hanging in the background, LA integration may move ahead towards integration under the auspices of a New Deal where regional social policy becomes the basic binding material for this building.

It has been noted above that the emerging development and integration strategies presently follows two quite distinctive and complementary paths. Both follow the same “cambiar el modelo Neoliberal” slogan, but are quite different in nature. It has also been noted that their socio-economic background is strikingly dissimilar, and that it is basically the presence or relative absence of one actor in one or the other that makes all the difference: peasants, or rather peasants and recently immigrated urban poor, to be more precise. The integration of LA must consider this most important actor if it is to succeed. It still represents almost half of the overall population when recently immigrant urban poor are taken into account into this category. If it is relatively easy to incite separatist, nationalistic, and xenophobic, self-destructive, sentiments even among urban salaried workers, this is much easier in the case of peasants – the same happens with urban petit bourgeoisie -, as is well known. Tragic historical experiences well prove this point.

It seems that the pressing need of building huge cross border developmentalist projects, and the sheer need to build a modern market of 21-century dimensions, could perhaps be enough to incite business into allowing frontiers to be opened to regional trade, investment, and labour mobility. Maybe, the strategic minded general staffs of LA bureaucracies are already somewhat convinced about the need to partially cede their now rather ineffective national level sovereignty in the benefit of sharing a more effective regional stature. However, it is difficult that salaried workers may be enthusiastic about such a move if it is not associated with potent signals regarding their rights, and smaller scale[25] but more concrete measures of regional social policy in their direct benefit.

Furthermore, in the case of vast masses of LA peasants and urban poor, concrete regional social policy measures seem indispensable to motivate their support for integration. Minimum regional livelihood guarantees could be set, for example, that are quite feasible from an economic or financial point of view. Lula’s political success in Brazil seems to prove this overall point. This huge country is like a slightly reduced version of LA, and contains within itself almost everything that is present in the larger region – and in similar proportions, although its history of slavery is peculiar. It has been noted that Lula’s direct cash transfers to the poor have been a relevant element in his political successful first term in office, and that those policies are indeed quite cheap. In the larger region, it seems possible to argue that similar policies associated to a regional integration process may well include peasants and urban poor into the emerging political power blocs that are needed to promote the new LA developmentalist welfare that may be in the making.