1999 (48 page)

Brazil and Mexico illustrate the challenges facing Latin America and also its virtually unlimited potential.

Brazil today has been compared to the United States at the end of the last century. It is a vast, largely unexplored land with a multiracial and -ethnic population of 135 million. It is the fifth-largest country in the world, with the sixth-largest population and the eighth-largest economy. Unfortunately, economic growth has far outpaced political and social development. Brazil has some of the Third World's most magnificent cities surrounded by some of the most notorious slums; a friend once described Rio de Janeiro to me as a beautiful lady with dirty underclothes. Brazil also has the unenviable distinction as being the Third World's largest debtor nation.

If Brazil's current economic crisis can be resolved, its democracy will be strengthened and a brilliant future will be assured. The solutions are free trade, more private enterprise, and a reasonable compromise on the debt issue.

Brazil's economic planners should open their markets and integrate their country further into a world economy where they already compete strongly. But we cannot expect them to do so if we maintain our restrictions on Brazilian imports. The giant of the North and this giant of the South, military allies in World War II, must now become economic allies through reciprocal trade policies that will serve the interests of both countries.

So that Brazil can compete more vigorously in the world economy, the government, which controls almost two thirds of the nation's industry, should reduce its role in the domestic economy by embracing the privatization movement. Brazilians are born entrepreneurs. In 1986 a million people left salaried jobs to create over 200,000 new businesses. The government should leave economic growth to the people and concentrate instead on improving social conditions. Half of all Brazilians are under twenty years old, and half of these get no education. Millions still live in poverty.

The Brazilian debt problem is as much political as economic. The government must not succumb to the populist urge to repudiate its debts or to increase anti–free-market policies. On the other hand, the lending governments and bankers must not dictate such unreasonable terms to Brazil and other debtors that their governments will feel impelled to consider repudiation. This tragic development would undermine stability in the lending nations and the Third World alike.

Today Brazil is going through one of the greatest political and economic crises in recent history. There is a hard road ahead, but also great rewards. Its leaders and people are learning one of freedom's harshest lessons: A system which places no artificial ceiling on success sometimes provides no floor for failure.

I am confident that Brazil will overcome its difficulties, because I have great respect for the political skill of its leadership. Our ambassador to the United Nations, General Vernon A. Walters, probably knows Brazil better than any other American. I vividly remember his telling me thirty years ago, after a communist-led mob attacked our motorcade in Caracas, Venezuela, that the Brazilians' Portuguese background gave them a different outlook from that of their neighbors, whose heritage is predominantly Spanish. “You see the difference when you go to a bullfight,” he said. “The Spanish kill the bull. The Portuguese only tease it.” With equally subtle, discerning leadership that avoids violence and guarantees security without destroying liberty, Brazil will inevitably be an economic superpower in the twenty-first century.

Long before the conflicts in El Salvador and Nicaragua erupted like a Central American volcano, Charles de Gaulle observed, “Central America is but an incident on the road to Mexico.” Our immediate neighbor to the south, with a population of 80 million, is one of the Third World's largest countries. Because of its great human and natural resources, its potential is huge. Its problems are equally as great.

Over ten million American citizens are of Mexican descent, and probably as many Mexicans live here illegally. Our history also overlaps, sometimes in painful ways. Many Mexicans who know that history have not forgiven us. The Mexican–American War in the nineteenth century and the exploitation of Mexico's resources by some American corporations in the early twentieth century were glaring examples of indefensible American imperialism. But it is time for responsible leaders in both countries to recognize that we cannot continue to visit the sins of Latin America's past on its future.

Mexico and the United States have a stake in a cooperative, friendly relationship that would serve the interests of both countries. Above all, Americans must learn to treat Mexicans with the respect that they deserve. When I visited the University of Mexico in 1955, I asked its director, Nabor Carillo Flores, about his academic background. He said that he had a bachelor's degree from the University of Mexico and that for his doctorate he had gone to a younger institution—Harvard! It was a quiet but effective reminder that the United States, in the Mexican's eye, was the new kid on the block. We may not agree with Mexico's neutralist foreign policy nor with its one-party politics, but we should respect its right to chart its own independent course, provided the course is not antagonistic to our interests.

The severe economic crisis in Mexico today obscures the fact that its growth rate of 6 percent a year from 1945 to 1970 was one of the best in the Third World. The oil that was discovered in the 1970s proved to be a blessing and a curse. Mexico's leadership saw the oil boom as the opportunity to borrow and spend profligately; it missed the opportunity to wisely use oil profits to diversify and develop a private-sector economy. Instead, Mexico became overly dependent on oil. By borrowing against anticipated oil revenues, it
increased its international debt from $4 billion to over a $100 billion in just over a decade. When the bottom fell out of oil prices, Mexico was left with one of the largest debts in the Third World and an economy paralyzed by bureaucracy. The government today controls over two thirds of the economy, and government spending is 53 percent of GNP with the usual fallouts of inflation, inefficiency, and corruption. Without further reductions in its harsh import controls and further stimulus for its private secter, Mexico will continue to founder.

Mexico's next President, Carlos Salinas de Gortiari, could provide the kind of leadership Mexico needs in its hour of crisis. He is a topflight economist who thinks and acts pragmatically. If he is to lead the nation rather than merely preside over it and steal from it as have many of his predecessors, he must decide whether Mexico will have a state-dominated economy or a diversified free-enterprise economy.

A leader can be only as great as the problems he must overcome. Salinas de Gortiari could go down as Mexico's greatest President if he breaks Mexico's shackles to the past so that it can reach for the rewards the future holds in store.

After my trip to South America in 1958, I had a fascinating conversation with Luis Muñoz Marín, the gifted governor of Puerto Rico. He expressed his deep regret about the violent demonstrations during several of my stops. He said, “I am very proud of my Latin heritage. We Latins are devoted to our families. We have demonstrated great talents in music, literature, and the arts. We are deeply religious. But I must admit we have never been very good at government.” He went on to say that Latin American nations either had too much government or had too little—either dictatorship or chaos. He concluded, “Too often we simply have not been able to maintain that all-important balance between order and freedom.”

Although most of Latin America gained independence from Spain and Portugal 150 years ago, the spread of democratic government is a far more recent development. Just ten years ago, only a few had democratic governments: Colombia, Costa Rica, the Dominican
Republic, Jamaica, Suriname, and Venezuela. Since then ten more—Argentina, Bolivia, Brazil, Ecuador, El Salvador, Grenada, Guatemala, Honduras, Peru, and Uruguay—have joined their ranks.

While this is reason for great hope, we cannot ignore the dark historical background against which these events are shedding welcome new light. With few exceptions Latin America has suffered four centuries of authoritarianism and chaos. In this century alone there have been over 190 coups and interventions in Latin America and the Caribbean. Over 140 million of the people live in poverty, barely able to feed and house themselves.

Latin America's new democracies have found it difficult to produce greater prosperity or responsible economic policies. The region's total external debt is $400 billion. Inflation in Brazil, Argentina, and Peru is over 100 percent. While many Latin Americans are disenchanted by some of their elected leaders, they do not yet reject their newfound democracy. But if moderate elected leaders do not produce a way out of poverty, voters may choose radical, antidemocratic leaders who promise to do so.

It is fashionable, particularly in intellectual circles, to blame Latin America's poverty on the United States. Some claim that the United States keeps Latin America poor by importing cheap Latin American raw materials and exporting more expensive manufactured goods. These “dependency theorists” blame external factors for Latin America's plight and overlook the internal historical and cultural roots of the problem. The Catholic liberation theologists append to this condescending theory a typically flawed Marxist class analysis of society. These mutually reinforcing myths could create a self-fulfilling prophecy. In suggesting that Latin Americans are too weak to control their own fate and too passive to solve their own problems they perpetuate the direction-lessness and stagnation in which the lethal bacillus of communism thrives.

Those who blame the United States for Latin America's problems should consider what happens when a nation turns to communism instead. For years, Castro's Cuba was hailed as a viable alternative development model for Latin America. That farce is now completely exposed. During most of Castro's dictatorship,
the Cuban GNP has actually declined. If the trend continues, the Cuban model of development will land Cuba among the poorest and most backward nations in Latin America by 1999.

Latin America's poverty is not caused by dependency on the United States, and it will not be solved by communist revolution. It will have sustained economic growth that benefits all of society only by abandoning the legacy of government economic control. Statist economies and their ugly progeny—mismanagement, bureaucracy, and corruption—are stultifying the energies of the people. Nationalized industry, state subsidies, and price and import controls have created inflation, deficits, and uncompetitive, inefficient businesses that squander the region's resources and its future.

There are signs that Latin America is finally responding to the intolerable conditions bred by economic authoritarianism. The cry for economic liberty and reform is loudest from Peru, an exceptionally poor nation trying to preserve its young democracy while grappling with a deadening government bureaucracy and fighting “The Shining Path,” the most brutal communist terrorists in the hemisphere. From the midst of this highly uncertain environment sounds the clarion voice of economist Hernando de Soto, whose book
The Other Path
is a pivotal study of the extraordinary entrepreneurial dynamism of Peru's underground economy. It shows that government has been frustrating the energies of the people instead of liberating them, which it could do by protecting legal property rights and eliminating the tyranny of bureaucracy. De Soto reminds us of the link between political and economic freedom. One reinforces the other. Whenever possible we must support Latin American solutions to Latin American problems, which is why
The Other Path
should be required reading for all American policy-makers dealing with the region and the Third World in general.

To prosper, Latin America needs more trade. The Soviets have recognized the potential for Latin American trade, and this has been a major topic of discussion in their recent diplomatic forays into the region. For political as well as diplomatic reasons Latin America would find it much more preferable to trade with us than with the Soviets. If we seize this opportunity by opening our markets
to Latin goods while encouraging them to open theirs to ours, we stand a chance of seeing the Western Hemisphere develop into one of the most booming free-trade zones in history.