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The Past and Future of Neoliberalism in Latin America: An Interview with Alejandro Portes
Csar A. Rodrguez-Garavito* Chicago, April 4, 2003

Alejandro Por tes is Professor and Chair of the Department of Sociology at Princeton Univ ersity. He is a former President of the American Sociologial Association. He is one of the most widely acclaimed scholars in the fields of development, economic sociology, immig ration and urbanization. For more than 30 years, he has conducted research on these and other topics in numerous Latin American and Car ibbean countries. Among his books are The Economic Sociology of Immigration, Immigration and the Future of American Society, and The Informal Economy: Studies in Advanced and Less Developed Countries. In 2004, ILSA will publish in its En Clave de Sur book series the Spanish translation of his most recent essays under the title: El Desarrollo Futuro de Amrica Latina: Neoliberalismo , Clases Sociales y Transnacionalismo.

Csar Rodrguez: Professor Portes, based on your recent work on the consequences of neoliberalism on the structure of social class, inequality and poverty in Latin America, what are the overall lessons left to us by the last two decades of structural adjustment programs? Alejandro Portes: I think that one of the most important lessons is that the idea that countries can be developed from the outside, through market dynamics, has on the whole proven to be an illusion in our countries. There is no alternative to a sustained effort by the national state to modify the situation and, in that sense, efficiently and intelligently insert the country into the global economy. Pure liberalization is problematic. At the same time, as we all know, when left to its own devices, the market can in some cases (yet not in others) be a source of economic growth. What it definitely is, is a source of inevitable social inequality between the market winners and losers. In the case of our countries in Latin America, the problem is that most capital is not endogenous to the region, but rather comes from the outside. Thus, the process of enrichment that the market generates is not necessarily appropriated by the national societies, but is frequently exported. That is, the added value produced by new export industries is appropriated by the center and not by the peripheral areas such as Latin America. Hence, the idea that the market generates wealth for our societies is problematic, and the idea that the market generates development is impossible to believe when it has been proven that, in general, it has been the source of enormous inequality. In this sense, what we see after 20 years of structural adjustment experiments is a loss of power on the part of national states, a loss of control over the situation in those countries, and a growing social inequality between a globalized minority that has broadly benefited from the process of commercial expansion, and a majority that finds itself in an increasingly precarious situation. C.R. Chile, a country that you have studied in depth, is frequently presented as a case of the success of neoliberal programs. Is Chile an exception to the trends that you mentioned, or is it truly a model that can be replicated and followed?
*

ILSA and University of Wisconsin-Madison.

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A.P. Curiously, when Chile tried to implement the neoliberal model in an orthodox way, during the 1970s and the beginning of the 1980s, it completely failed, leading to enormous levels of open unemployment and to situations of extreme poverty previously unknown in that country. It was only after several attemptsmade possible by the existence of a military government, which could fail over and over again without having to pay the consequencesthat at the end of the last model implementednot, of course, by neoliberal economists, but rather in a more pragmatic way by a military officialdid it effectively hit the nail on the head and start to generate sustained economic development. It is undoubtedly true that the Chilean experience was, first of all, relatively successful and, secondly, that it has been presented as an example of the success of the [neoliberal] model. But it was not the model that worked; what worked was an extremely pragmatic approach, after several failures. An approach, for example, that led the Chilean state to create private economic groups that had not existed previously, using industrial resources that were in the hands of the state precisely because they had previously been expropriated by the Socialist government. It also implied the preservation of key instruments of economic management, such as the Copper Corporation [Corporacin del Cobre ], whichin a clear violation of neoliberal preceptswas never sold. Nor did Chile give in to the International Monetary Funds demands that it follow Argentina in dollarizing its economy; it put up strong resistance to the pressure. That is, what we see in the Chilean case is, first and foremost, probably the highest quality of national state on the continent using a series of cutbacks in a very pragmatic way to promote national capital, to attract foreign capital in a way that could be effectively controlled, and to use the market discourse while implementing policies that were more Keyensian, involving relatively successful state intervention into society and markets. To sum up, I attribute the success of the Chilean model first and foremost to the fact that the experimentation process took place under a military dictatorship, which allowed it to make mistakes until it arrived at a pragmatic approach, and second, to the quality of the national state, which was less corrupt and less permeated and penetrated by interests within civil society, and which to a certain extent has been able to do what a national government should do right now, which is to pragmatically combine a situation that is attractive to national and foreign capital with the promotion of strategic interests of the economy and civil society. In this sense, the Chilean case is in clear contrast to the Argentine case, in which it seems that they thought that by simply opening the country to the outside, those outside markets would develop the nation. C.R. Speaking of Argentina, in a recent conference Luis Carlos Bresser Pereira1 affirmed that with Argentina and even before, with the Asian crisis of 1997-1998 and the arrival of the crisis to Brazil, neoliberalism has entered its final crisis and the period of neoliberalism is over. Do you agree? Are we already in a postneoliberal age? A.P. No. Even though neoliberalism has been greatly weakened, I still think that the defense of markets and the policy of allowing the world economy and globalized interests to penetrate countries are not yet over, in part because this is not a policy that simply represents an intellectual consensus. The Washington Consensus is not a consensus of intellectuals. It is a consensus of large, existing interests in the political economy of the core nations. In this sense, even when it says it will, it is very unlikely that the International Monetary Fund will change its recommendations for Latin American countries and modify them to tolerate more proactive action on the part of governments. In each case we see the same recipe that we have witnessed over the past 20 yearsa reduction in state intervention, stable macroeconomic management, lowering inflation at any price; it

Brazilian economist. Former Minister of Public Finance (Hacienda), of Science and Technology, and of Administration and Reform of the state of Brazil. The conference alluded to took place at the Congress of the Latin American Studies Association (LASA) held in Dallas , T e xas, in March 2003.

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still remains dominant. In Brazil, for instance, where Bresser Pereira is from, the expectation of the current center-Left government to implement a more populist policy which is more in defense of national interests, more supportive of Brazilian interests and the Brazilian economythat is, a more Keyensian modelfinds that at every step, the markets close off the path, the markets dictate an anti-inflationary policy to the central bank which is profoundly negative for the promotion of development. There is a struggle within the Brazilian state between the interests of the executive power, which tries to promote an economy more suited to the nations interests and, on the other hand, the market interests represented by the central bank. C.R. Keeping these limitations in mind, and based on your studies of economic development, how much maneuvering room do national and local governments in Latin America still have to promote non-neoliberal public policies? A.P. More than it seems. The way I see it, there is room to maneuver even at the level of local governments. The government of Curitiba is not the same as the government of Sao Paulo; the government of Bogota is not the same as the government of Cali. Therefore, there is room to maneuver even at the local level. The globalized economy is an enormous mechanism that effectively leads to similar situations and options, but the management of those situations and those options depends to a great extent on the quality, astuteness and understanding of national actors. Our countries, like all countries on the peripheryand actually, like all countries that have developed, depend on a fundamental actor, the state, to manage their economies, and the ability to maneuver is much broader than it sometimes seems. For example, to cite a few cases, Brazil and Chile resisted the pressure and the demands of the International Monetary Fund that they follow Argentina, when Argentina appeared to be the great Latin American model in the early 1990s. If one had a mechanistic view of history and economics, they would say that Brazil and Chile had to adopt the same policies, but they didnt. That is, the national state can refuse to do it. And we have already clearly seen that the recommendations and recipes of the International Monetary Fund can lead to disaster. Hence, there is no one who can act more effectively to promote national development than a state that is competent and committed to its country. Obviously, often this has not happened in Latin America because those with decision-making power have been more concerned with their own individual, short-term interests than those of the nation. Yet when the interests of the nation are kept in mind, it is possible to act within the context of the limitations of a globalized economy to privilege areas of strategic development, to educate the population such that their level of human capital is sufficient to function and create high-tech companies, to create an environment in which it is not just Korean or Chinese companies searching for the cheapest possible labor force that are attracted to the country, but rather high technology companies that are not only looking to cut costs but, precisely because of their level of competence, are also looking to transfer technology and create bases for economic development. These differences can be seen in the Central American case. One can see that a country like Guatemala or the Dominican Republic is fundamentally a source of cheap labor; of the kind of valueadded, export-oriented industrial production that concentrates on cheap labor and has little ability to transfer technology. This is in contrast to the example of Costa Rica, which has recently learned how to attract enormous investments in high-tech computing (Intel, etc.), which could not have occurred if the Costa Rican state had not spent many years investing in the improvement of human capital within the population. In that sense, I am optimistic and feel that to the extent that our countries mature and the national state improves, we will have a much greater ability to maneuver than it would seem from looking at the world system theories formulated in the core countries, in which the peripheral countries seem to be mere puppets guided by the logic of international capital. C.R. To add one last piece to this institutional and economic set: if approved, what effects do you think the Free Trade Area of the Americas (FTAA) will have on the states ability to manage the economy?

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A.P. I think it depends on the type of agreement that emerges from the FTAA negotiations. In general, I view the possibility of an inter-American treaty dominated by the United States with some skepticism, due to the enormous asymmetry that exists between the United States and the other countries. On the other hand, a Latin American version of the integrated market could have a positive effect, as Mercosur had during much of its existence. Mercosur only had problems after Argentina decided to completely open its markets, breaking the model and risking the viability of Mercosur as a regional agreement. Clearly, to the extent that our countries industrialize, the possibilities for increased interpenetration, along with greater market expansion, are promising. In that sense, I believe that it is worthwhile to study these agreements in more depth. The Mexican case is unique because Mexico has already entered into a free trade agreement with the U.S. and Canada (NAFTA), which notably distances it from Latin America. We will see whether this proves to be a viable route for Mexico in the future, or whether eventually it will return to [a system of] Latin American cooperation. However, for the rest of Latin America, up until now the process of integration has been more beneficial than harmful[for example,] the Common Andean Market, Mercosurand it would make sense to expand that process. C.R. Well end with a question that has to do with the most recent political events in Latin America, which have a direct impact on economics. In several Latin American countries, Leftist parties and movements have made important advances, in part by channeling the popular discontent generated by the effects of neoliberalism. What is your impression of this trend? What does the resurgence of the Left mean for the future of neoliberalism in the region? A.P. In general, it seems clear to me that the Latin American electorates are looking for alternatives. They are not pleased with the neoliberal model and its social consequences. The model has repeatedly proven unpopular, and so that is why it is losing in the ballot boxes. Nonetheless, up until now, the weakness of national states and international pressure have been such that over and over again on our continent we have seen the election of candidates with a progressive or populist platform who, once in power, make a 180 degree turn to comply with the dictates of the markets and international agencies. We can cite the cases of Fujimori in Peru, Fox in Mexico, Menem in Argentina, Lucio Gutirrez in Ecuador, and we are about to see what happens with Lula in the most important country on the continent. This has almost become a generalized trend. That is, first there is a populist, anti-International Monetary Fund and anti-neoliberal electoral agitation, but then, once in power, [there is] a notable shift towards fulfilling existing commitments. In this sense, the Left appears to be quite weakened by the fall of the more coherent Leftist parties of the past, which is in turn due to the weakening of the formal proletariat. That is, it could be said that, while the neoliberal agenda has not had economic success, it has had political success in weakening its adversaries and those who could implement a coherent alternative agenda. It seems to me that part of this question has to do with the fact that, although the current model is seen as unpopular and inefficient, up until now we have been unable to come up with alternatives. Many of these parties and candidates dont have a very clear idea of what the alternative might be and are very suspicious of what has occurred in the pastthat is, of prior populism. But I think we are maturing. Clearly there is a growing perception on our continent that we should move towards a neo-Keyensian model that recovers and revalues the role of the state to intervene in the economy and society [and involves] a state that is able to dialogue with foreign interests [and] a model that combines some important aspects that we have learned during this period of neoliberalism (such as macro-structural balance) with proactive action by national states. The Argentine case is very funny in this sense, because after the debacle clearly promoted by the neoliberal model, out of simple necessity, the post-De la Ra, post-Cavallo government implemented a series of initiatives that the country should have implemented long ago: monetary adjustment to make their currency competitive, support for national industry, promotion of tourism, soli-

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darity and strengthening of Mercosur. All of these things were abandoned for the sake of the neoliberal ideology which lead Argentina from a path of sustained development to one of generalized poverty. What is currently happening in Argentina, as well as Brazils efforts to not enact a populist-style policy, but instead a responsible policy of supporting national industry and the most depressed social sectorsall of this is where we should be heading. The way I see it, this clearly will imply the abandonment of the Washington Consensus in the mid-term. I dont think that its right to say that we have already abandoned neoliberalism, but I do think we are moving in that direction.

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