Commentary Magazine

Latin American Crack-Up?

Roughly two decades have passed since most of Latin America turned away from authoritarian regimes, typically dominated by military institutions, and turned toward electoral democracy The shift was drastic and in many ways historically unprecedented. With the notable exception of Castro's Cuba, every country in the region has now been governed by civilians chosen through universal suffrage.

Yet this long season of democratic renewal has left a bitter taste in the mouths of many Latin American citizens. In a recent region-wide survey, nearly 55 percent responded that they would support a return to dictatorship if doing so would solve their personal economic problems. This finding is all the more striking when one takes into account the parlous economic record of most military governments in the world over the past half-century.

At the same time, there has been a strong reaction against market-based economic reforms, or “neo-liberalism” as its critics like to call it. Along with nostalgia for strongmen decked out in epaulettes and brandishing swords, the dream of a nationalist-corporatist state—one that owns and controls much of the “commanding heights” of the economy—has likewise begun to reappear. As a corollary, much resentment is expressed against the United States, free trade, and foreign investment—the three being regarded as one and the same thing. Indeed, Washington's current project for a hemispheric free-trade area is treated in many quarters not as an opportunity to create new markets and new employment opportunities but as a dark plot to seduce and exploit the innocent Latins. Lately, there has been much talk (particularly in Argentina) of creating regional or sub-regional blocs as a solution to Latin American economic and social problems—as if clever diplomatic strategies or new political alignments could somehow permit whole countries to leapfrog over the stark facts of poverty, illiteracy, corruption, and plain mismanagement.

All of these currents are evident in many parts of Latin America, but the experience of two countries casts them in particularly unflattering relief. One is Venezuela, the other Bolivia.

At first blush it would seem that no two South American nations have less in common. Until recently, Venezuela had the highest per-capita income on the continent, Bolivia the lowest. Venezuela is a mixed-race society that faces the Caribbean and is strongly influenced by U.S. (and particularly South Florida) culture, while Bolivia, secreted behind the high Andean cordillera, is largely Indian with an intensely inward-looking perspective. Venezuela is strongly linked to the United States as a major source of imported oil. Bolivia's historic exports—silver and industrial metals—have been in decline for more than a half-century; today its major exports (apart from illicit materials used to process cocaine) are oil and gas, sold largely to its neighbors, Chile, Argentina, and Brazil. Until 1998 Venezuela was something of a model for Latin American democracy, boasting 40 years of uninterrupted civilian governments. For its part, Bolivia until very recently could count more presidents than years of independence.

Yet these two nations, different in so many ways, are moving in roughly similar directions—toward social conflict, political chaos, cultural decomposition, and very possibly civil war. In that large sense, both of them define the crisis of Latin American democracy today, a crisis that, especially in the case of petroleum-rich Venezuela, has unsettling implications for the United States.


Venezuela is a country at once blessed and cursed by its superabundance of oil. For many years, this made possible a society in which the military could be bribed to stay out of politics by means of high salaries and luxurious fringe benefits, while the state could use the royalties from petroleum exports to purchase broad political consensus at home. Venezuelan democracy was far from perfect, but for nearly four decades it stood in pleasant contrast to the often repressive regimes to its north and south. Unfortunately, at some point in the early 1980's the world price of oil declined sharply, and remained depressed for the rest of the decade. Suddenly the state found itself in reduced circumstances, sharpening the inherent contradictions of the system and ultimately serving to destroy its stability.

The current beneficiary of this by now long-lasting condition is the ultimate outsider, Hugo Chávez: a cashiered ex-army colonel who first came to the attention of his countrymen when he failed to overthrow President Carlos Andrés Pérez in 1992. Released from prison by Pérez's fatuous successor, Rafael Caldera, Chávez entered political life as a civilian. He gained the presidency in 1998 in what may turn out to have been his country's last truly competitive election for some years to come.

To understand the Chávez phenomenon, one needs to bear in mind three points. First, even in its best years, Venezuelan pluralism was highly limited. An accord reached among the three major parties as far back as 1958 had established a prearranged system of patronage. Instead of winner-take-all, the spoils of victory—in this case, government jobs, subsidies, contracts, and so forth—would henceforth be divided according to the electoral score achieved by each party. Even as the arrangement secured a remarkable degree of social and political peace, it acutely circumscribed political debate—with less up for grabs, there was correspondingly less incentive for the opposition to engage in a hard-hitting critique of any incumbent administration. Meanwhile, fourth or fifth parties were largely marginalized. Without serious competition, Venezuela eventually sank into a mire of corruption, widening the gap between the political elite and the populace.

The second point is this: Venezuelans are rightly persuaded that theirs is a rich country—in natural resources, that is. It has oil, gold, diamonds, bauxite, and minerals of all kinds. From this indisputable fact, however, Venezuelans erroneously conclude that if they are not doing well, it must be wholly the fault of those who govern them and who have robbed them of their patrimony. But this quite common conviction, which one hears expressed by people of the most varied social classes, is at best half-true. Yes, the politicians have robbed, and a state that manages too much of the economy is inefficient and wasteful (not to mention the invitation it offers to jobbery and dipping into the public till). But if oil prices had remained high in the 1980's, one probably would have heard nothing of it.

By an ironic twist of fate, oil prices in the period since Chávez took office in early 1999 have suddenly reversed course and headed for heights not seen since the early 1970's. Thanks to mismanagement and corruption, however, general welfare has not much improved. Far from it: by some estimates, as much as 80 percent of the Venezuelan population languishes in poverty. According to one recent report, fully 60 percent of all small and medium-sized enterprises—some 30,000 companies in all—have closed in the last four years. This complex of contradictions explains at once Chávez's rise to power, his persistent hold on a core constituency of about 30 percent of Venezuelans, and the burgeoning opposition to him that has been fueled largely by his failure to deliver the goods.

Thirdly, although Venezuela had once been one of the more socially integrated Latin American nations, it was then and is still now hampered by a great deal of unconfessed racism. Venezuelans tend to be an ethnic mix of Spanish, Indian, and African elements, but the business and old political elites are largely descended from aristocratic families dating back to the Spanish conquest plus more recent immigrants from Italy, Germany, and Portugal. With his obvious African and Indian inheritance, Chávez “looks” like Venezuela, much more so than any of his recent predecessors, and his railing against the “oligarchy” touches a deep chord in the slums of Caracas and small towns of the plains where people do not in the least resemble the elegant society figures one sees in the Sunday supplements or on television. On the other hand, there are limits to racial resentment as a political tool, and by deploying it, especially in the absence of concrete economic benefits, Chávez has invited an equally vitriolic reaction from his opponents.


In many ways Hugo Chávez should provoke contempt as much as alarm. He is a sad copy of the young Juan Perón, of the early Fidel Castro, of Nasser, Qaddafi, and the whole range of populist-nationalist figures who have disfigured the landscape of Third World politics since the close of World War II. Like them, the Venezuelan strongman is afflicted by the delusion that he is a great revolutionary figure, even though, after five years in office, it is impossible to point to any “revolutionary” achievement.

Venezuelan oil was nationalized a quarter-century ago; the state Chávez inherited already dominated much of the economy; it was nonaligned in foreign policy and had correct and even cordial relations with Castro's Cuba. In each of these areas, Chávez has merely preserved and extended the status quo. Instead, his greatest innovation has been rhetorical. Every Sunday, the president takes to the airwaves to deploy barroom language against his opponents and to discourse grandly on the luminous future awaiting his country. Also, increasingly, he denounces the United States—even as Venezuela continues to provide the U.S. with oil. (It could hardly do otherwise, since PDVSA, the country's state oil company, owns no fewer than 10,000 gas stations here.)

Another way in which Chávez differs from his Venezuelan predecessors is that he finds the country far too small a stage for the role he feels called upon by history to play. Almost from the beginning, he began to dabble in the politics of other countries. It is an open secret that he has financed anti-establishment and radical indigenous movements in the Andean nations, and provided safe haven for Colombian guerrillas on Venezuela's poorly policed borders. He is keeping Cuba's Castro afloat with shipments of oil, in “payment” for which the island dictator dispatches to Venezuela doctors, sports trainers—and intelligence officers. To enhance his international standing, Chávez travels incessantly (he made more than 50 trips abroad during his first year in office) to deliver his message of anti-globalization and anti-Americanism. He even finances foreign books and “documentary” films about himself. With more than $20 billion in oil revenues at his disposal each year, he is in a position to do all of these things and more.

The biggest difference between Chávez and his predecessors, however, is that he sees himself destined to reshape Venezuelan politics according to an explicitly authoritarian template. He has already effectively turned the armed forces into a political party of his own, purging officers who object to turning the military into a partisan organization and buying the loyalty of flag ranks with off-budget appropriations. Plans have been announced to create “popular militias” if the military should prove less than loyal in a pinch. The supreme court, the electoral tribunal, and even the central bank have lost their independence, and Chávez's lawyers are toying with legislation to limit or end freedom of the press and independent electronic media.

For months now, the Venezuelan opposition—a wide range of elements from Left to Right—has been grasping at the one alternative permitted them: namely, a provision in the constitution ratified in 2000 that allows a recall referendum midway through any president's term. Earlier this year, they managed to pass the enormously high hurdle of collecting a sufficient number of signatures, and submitted their petitions to the proper authorities. After a series of delaying tactics—which included statements by Chávez that, come what may, the referendum would never be held—the electoral court validated the signatures in early June. The president's attitude is hardly surprising; although the opposition is itself deeply fractured, it is extraordinarily broad, and according to most surveys it would probably win by somewhere between 55 and 60 percentage points, perhaps even more.


Many Venezuelans—and some outsiders—think their country is about to emerge as a continental version of Cuba. No doubt that is the way Chávez himself sees the future—indeed, he has said as much. But despite the obvious similarities, there are also many differences, and they should not be minimized.

Unlike Castro, Chávez did not lead a victorious revolution against a hated dictator and does not enjoy the kind of unlimited legitimacy that such an event confers, at least temporarily. The United States has never occupied Venezuela, and is not and has not been a focus of hatred and resentment.1

There is no local equivalent in Venezuela to United Fruit or any of the other dominant U.S. corporations that provided Castro with a convenient political target. Although Miami has suddenly become the venue of choice for Venezuelan professionals who can obtain a visa, the United States is unlikely to take the entire middle class off the Venezuelan president's hands as it so obligingly did for Castro. Finally Venezuelans grew up under a democratic system and are accustomed to the legitimacy of opposition and debate, however limited. Such a political culture cannot be erased or forgotten overnight.

Whatever the outcome, Venezuelan politics appears to be on a collision course. If, in spite of the decision of the electoral court, Chávez in one way or another manages to avoid or postpone the referendum, the opposition will have no reason to continue operating within a peaceful framework. While Chávez controls the armed forces and police, weapons are very widespread. One incident might be sufficient to ignite a general conflagration.

But even if the referendum is held, and even if the opposition were to win, Chávez out of office would remain the most important single politician in the country. And those who succeed him would have no choice but to do demonstrably better than he. It is still far from clear that Venezuela's traditional parties understand where they failed in the first place, and new democratic forces—though widespread—have yet to provide a vision for the future or to capture the popular imagination.

It is, to say the least, an unenviable dilemma—and not just for Venezuela. Chávez in power is an unpleasant reality for the geostrategic interests of the United States, but civil war in Venezuela—with a politically uncertain outcome and the prospect of an actual interruption in the flow of oil, roughly 17 percent of our imports—is arguably worse.


A thousand miles south lies Bolivia, perhaps the least favored of all South American republics. Established in 1825 by one of Bolívar's generals who wanted a country for himself, it is a curious mixture of regions—tropical jungle, high Andean plateau, semi-tropical lowlands. Though roughly the size of Texas and California combined, it is home to only eight million people, seven million of whom are Indians, mostly Quechua or Aymara.

These contradictions of geography and culture have rendered Bolivia perennially unstable. It is true that, since 1982, the country has enjoyed for the first time in its history a succession of democratically-elected presidents. But only one of these attained office with much more than 20 percent of the vote, which means that the most important event every five years has been not the election of the president but the subsequent horse-trading in congress to select a winner. Virtually the sole currency of Bolivian politics is patronage, with too many contenders struggling for a slice of a very small pie. Meanwhile, issues of relevance to the welfare of the populace—education, health services, roads, and so forth—have been perennially ignored.

For much of Bolivia's history, the principal industry has been mining: silver in the colonial period, tin, wolfram, and other industrial metals thereafter. The mines were located on the high Andean plateau, and the labor force was recruited from Indian communities, first on the basis of a corvée and subsequently through cash payments or scrip. Today, by contrast, although the country continues to produce some minerals, the center of economic gravity has shifted to the lowlands as the result of the discovery of huge reserves of oil and natural gas.

In order to exploit these new resources effectively, the government has been compelled to offer incentives to outside investors, and a wide range of foreign enterprises has sunk billions of dollars into the country. The future relationship between the companies and the Bolivian state is, however, not clear, and under the current government it is far from certain with whom, or under what rules, foreign investors will soon be dealing.

Two major developments threaten Bolivia's future. The first is a backlash against the entire political class for its failure to improve the lot of ordinary people—particularly in light of the enormous sums paid by foreign energy companies in the form of royalties amounting to $560 million last year alone. In October 2003, riots in the capital, La Paz, destroyed the headquarters of the political parties supporting the government and forced the president, Gonzalo Sánchez de Lozada, to abdicate in favor of his vice-president, Carlos Mesa, and flee the country. The backlash has sent politicians scurrying for external scapegoats—in this case, neighboring Chile and the foreign energy companies themselves.

The quarrel with Chile is of long duration, dating back to the latter's victory in the War of the Pacific (1879-1883) and its annexation of Bolivia's outlet to the Pacific. Although successive Chilean governments have offered tax-free docking and storage facilities at Arica, the nearest Pacific port, Bolivia considers unsatisfactory any arrangement short of Chile's yielding of full political sovereignty. In the aftermath of the October events, President Mesa decided to shore up his shaky legitimacy by capitalizing on anti-Chile sentiment: he forbade Argentina, a major customer for Bolivian natural gas, to resell the product to Chile. The effect is bound to be devastating to Chile as the only nontropical country in South America, where winters can often be unusually harsh. Whatever one may think of the president's act, it has won praise from all sectors of Bolivian political life, including the most left-wing.

Meanwhile, the government has turned on the international energy companies, raising doubts as to whether, and under what conditions, it will continue to export natural gas at all. In highland Bolivia, where the poor have failed over the centuries to profit from the extraction of metals, there is considerable sentiment in favor of keeping the natural gas at home, lest Bolivia run out. (By most estimates, the country has enough under the ground to last for centuries to come.) This puts the populous high Andean plateau at some political distance from the tropical lowlands, where many people are beginning to wonder why they should allow La Paz and the highlands to consign them to economic oblivion. In the lowland department of Santa Cruz one hears talk of actual secession, perhaps in conjunction with departments to the immediate north and south.

Mesa and his associates are attempting to purchase national consensus at the expense of the foreign companies. During the first administration of President de Lozada (1992-1997), in exchange for 30-year operating contracts, massive amounts of foreign capital and expertise were attracted to the hydrocarbons sector. Now, however, Mesa has proposed revoking the existing contracts and replacing their graduated tax structure with a flat, 50-percent tax on all oil and gas fields regardless of when and by whom they were first developed. He admits that this would saddle the country with perhaps as much as $4.5 billion in certified claims for breach of contract, but, fearful of a repetition of the October riots, he appears to feel he has no choice. A referendum with five carefully-phrased questions, scheduled for July, is intended to give him the necessary authority.

It remains to be seen whether this referendum will indeed confer upon Bolivia's political class the legitimacy it signally lacks. What is certain is that it will isolate the country from foreign capital and investment for years to come—a terrible fate in a society for which development through domestic savings is a virtual impossibility.


This brings us to the second development threatening the country's future. If, in many ways, Bolivia is strangling in the vines of its own history, it is also being buffeted by the winds of new, destructive ideologies imported from Western Europe and the United States.

In recent years, many Indian communities—often egged on and financed by Scandinavian nongovernmental organizations, with additional funding from such places as Libya and Chávez's Venezuela—have raised the idea of creating a new republic to be known as Kollasuyo, with Quechua and Aymara as its officially recognized languages. In its most exaggerated form, this Inca nationalism proposes to repeal 400 years of Bolivian history, re-nationalizing everything in sight and cutting the country's tenuous links with the outside world.

It is self-evident that Bolivia's Indian majority has been badly used and neglected for centuries, first by the Spaniards and then by a succession of governments drawn from the “white” and cholo (mixed-race) elite. But it is inconceivable that race war or enforced economic isolation will improve the Indians' lot. Quite apart from the catastrophic economic consequences, such an act would separate the highlands both culturally and linguistically from the tropical lowlands where the population is mixed-race and Spanish-speaking, raising serious questions about whether the two halves of the country have enough in common to continue within the same boundaries.

There is an economic dimension to the new identity politics as well. As mining has fallen into decline, the most reliable source of income for many Indians is the cultivation of the coca leaf, which provides the raw material for cocaine. For some years now, successive Bolivian governments have cooperated with the U.S. in efforts to suppress coca cultivation. By way of reaction, this has created a major new political force—the cocaleros—and their charismatic leader, Evo Morales, one of four indigenous members of the Bolivian congress, whose party goes under the somewhat inappropriate name of the Movement Toward Socialism.

Morales, a new darling of European socialists, certainly sounds radical enough: he favors turning Bolivia into “another Cuba” and hauling President George W. Bush before the World Court for crimes of “economic genocide” and “lèse-humanité.” But Morales is a moderate compared with his associate Felipe Quispe, another indigenous congressman. As Quispe told me in his La Paz office in late April, “all the white people will have to leave” the new Kollasuyo, and that specifically includes cholos.

Perhaps the best that can be hoped for, then, is a peaceful division of Bolivia in which each successor republic would go its own way—the tropical lowlands as part of the legitimate world economy, the Andean highlands as a component of the illicit drug network and some marginal mining activities. The first of these would stand some chance of becoming a “normal” Latin America country; the other would be transformed into a destination for narco-traffickers and radical foreign tourists. What seems unlikely is that the two halves of an incoherent geographical expression can be permanently held together simply at the behest of outsiders.


If there is one lesson to be learned from the experience of Latin America over the past twenty years, it is that while elections are a necessary condition for democracy, in and of themselves they are insufficient. No doubt this should have been evident from the very beginning, but in fact it was not. The terrible result is that the wretched performance of the elected leadership in much of the region has tarnished the whole notion of democratic governance.

The cases of Venezuela and Bolivia are merely extreme examples. One could cite Peru, where the president's wife, within weeks of her husband's inauguration, was discovered to be receiving $10,000 a month as a “consultant” to a European bank. Or Argentina, where we now know that every one of the ministers in the cabinet of President Carlos Menem (1989-1999) was receiving $50,000 a month as an additional, unreported bonus. Or Alfonso Portillo, until recently president of Guatemala, accused of embezzlement and other crimes while in office and now hoping to avoid extradition in Mexico. Dozens if not hundreds of smaller-time politicians are getting away with similar offenses by hiding behind the fiction of parliamentary immunity.2

In short, it is not “neo-liberalism” or the disciplines of the International Monetary Fund that can explain why the citizens of these countries lack adequate services. It is, rather, the tendency of the political classes to treat government service as nothing more than an opportunity to enrich themselves and their immediate families. The obvious contrast is Chile, where a member of congress recently accused of taking a $30,000 bribe caused a national scandal leading to a full court investigation.

To be sure, Chile is one of the few Latin American countries with a truly independent judiciary and a strong respect for the rules of the democratic game. Not coincidentally, it also has one of the most dynamic economies in the region—indeed, in the entire Third World. Chile's neighbors—or, rather, their political classes—fail to connect the dots; perhaps they have their reasons. What is tragic is that the lesson offered by Chile has not made a broader impression on the Latin American public. As long as that is the case, the particular label given to a political regime will remain close to meaningless.


Latin Americans have a long-seated habit of blaming the United States for everything that goes wrong in their countries, as if they had no responsibility whatsoever for outcomes. As an American diplomat once described this attitude to me, “I've got a problem; what are you going to do about it?” During the authoritarian decades, the fons et origo of the region's problems was held to be military governments allegedly installed or (as the media coyly preferred) “supported” by the United States. What, then, of governments freely elected by universal suffrage? The region is running out of excuses for its failures.

To be sure, the United States can take little consolation in these developments. Though declining in global economic importance, Latin America is still, for the United States at least, a major market, a major venue of investment, a major source of human capital and labor, and in the case of Mexico and Venezuela a major source of energy. Some countries are uncomfortably close to us geographically. To support the democratic renaissance in the region was the right thing to do—right for the Latins, and right for the United States. But beyond that there is little we can do but wish and hope for a better performance from the emergent political class, and for governments worthier of the people that elect them.



1 In a recent survey of public opinion concerning the U.S., Venezuela was found to be one of the most favorably disposed countries in the world, and in Latin America the most favorably disposed.

2 See Andrés Barreto and Judd Kessler, “Latin Leaders' Escape Hatch,” Washington Post, May 23, 2004.


About the Author

Mark Falcoff is resident scholar emeritus at the American Enterprise Institute in Washington.

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