Latin America's Bad Habits

Article excerpt


GUATEMALA CITY. - After 60 years in power, Paraguay's ruling Colorado Party was pushed aside April 20 by a charismatic former Catholic bishop promising economic and political reform and power to the people.

The election of Fernando Lugo as Paraguay's new president was hailed by an official of America's left-leaning Center for Economic and Policy Research as a sign of the "deep and irreversible... changes sweeping Latin America"

But "change" doesn't always mean change for the better. And only time will tell whether Mr. Lugo will pursue an independent new course that improves conditions in the poverty-stricken nation of 6.5 million, or follow other recent populist politicians who, in the name of change, have curbed individual liberties and strangled their economies.

Paraguay is, importantly, different. Bolivia, Ecuador, Nicaragua and Venezuela, other countries led by populist politicians who promised change, could afford to make mistakes. Their economies are propped up by valuable commodities and natural resources: tin, zinc, oil and natural gas in Bolivia; oil in Ecuador; coffee and gold in Nicaragua; and bauxite and oil in Venezuela. Paraguay enjoys no such riches.

None of this is new. If there's one constant in Latin America it may be this: For every step forward - politically and economically - there's an equivalent step back. How else can one explain the never-ending roller-coaster many Latin American countries seem to ride? Bursts of freedom, energy and progress, followed by periods of inexplicable resentment, regret and regression.

Venezuela and its copy-cat states are not alone on this ride. In Argentina, the government, forever insatiable, has taken advantage of high soy prices by raising taxes on exporters to as much as 44 percent. If you want to kill soy exports that's how to do it.

For five years, Latin American economies have enjoyed a bonanza. The export of raw materials, the region's principal source of hard currency, has increased to meet a growing world demand that, in turn, has fueled higher prices. China's booming economy and the awakening of India, along with the weakness of the dollar, have made the prices of oil, minerals and agricultural products rise almost constantly, often to levels never before reached. …