Belt-Tightening Reaches A Limit in Latin America

The election of a firebrand populist as president of Ecuador is the strongest signal to date of growing impatience across Latin America with market-oriented economic reform.

One of the principal targets in the July 7 come-from-behind victory by three-time presidential candidate Abdala Bucaram was Equador's stiff economic-adjustment policies. In Ecuador and across Latin America such policies have begun to reduce the role of the state in national economies, state employment, and antipoverty programs while they're opening the regional economy to first-world standards of competitiveness.

Mr. Bucaram, the mercurial former mayor of Ecuador's largest city, Guayaquil, campaigned as the champion of Ecuador's poor and faltering middle class - the victims, he said, of outgoing President Sixto Duran-Ballen's economic-adjustment policies.

He also labeled his rival, Social Christian Party candidate Jaime Nebot, the "candidate of the rich," even though the conservative Mr. Nebot also criticized the effect of current policy on the poor.

Bucaram's victory serves as a wake-up call to the United States, which has been a chief advocate of Latin America's economic reforms, but which over the last year has retreated from a more active engagement in the "integration of the Americas" as other international issues and the domestic presidential campaign have shunted Latin America aside.

"Bucaram could be a harbinger of more recycled populists to come in Latin America" in the wake of reaction to unpopular belt-tightening economic programs, says Gustavo Gorriti, associate editor of Panama City's daily La Prensa and a former Latin American specialist at the University of Miami.

"The pendulum could be swinging back," says Mr. Gorriti. He says that Latin Americans, generally more comfortable with state-directed economies, only accepted "neoliberal" reforms when leaders implemented them as a means to control the region's hyperinflation.

Bucaram may have simply caught a wave already crashing on the Latin shore.

In Chile, considered Latin America's leading economic example for its high growth under an advanced reform process, striking workers in the country's important mining sector are protesting government plans to make the industry more efficient. Chilean President Eduardo Frei Ruiz-Tagle warns regularly that the economic model Latin America has embraced could be endangered if growth doesn't start filtering to the region's poor and that segment of the middle class buffeted by falling public-sector employment.

In Mexico, streets have been clogged with increasingly violent demonstrations against President Ernesto Zedillo Ponce de Len's skimpy spending to overcome the country's economic crisis. At the same time, groups ranging from the populist and proconsumer El Barzon to the Zapatista rebels in Chiapas call for abandoning the market-oriented policies - called neoliberalismo in Latin America - that reached full speed under once hugely popular but now roundly rejected former President Carlos Salinas de Gortari.

In Brazil, the sell-off of state-owned companies in South America's largest economy has been slowed in part by public resistance in a country with one of the world's worst income distributions. A recent United Nations report notes that Brazil's richest 10 percent earns 30 times more than the poorest 40 percent - compared with five times as much in Europe, or even the 10 times as much earned by Argentina's wealthiest.

In response to these trends, even the World Bank, one of the prime promoters of the economic-adjustment programs, has recently begun encouraging countries in Latin America to spend more on social programs.

"In various countries, modest progress [in economic recovery] is generating impatience and disillusion in the reform process," declared a recent World Bank report on Latin America.

Many observers see the shift in the World Bank's approach not as a signal that Latin America is pining for return to state-run, bureaucratic economies that dominated before the late 1980s, but rather as a "correction."

More attention must be paid to effective social policy - and purse strings will have to be loosened, analysts like Gorriti say - if economic reform is to proceed.