CONTENTS
Preface
1: How the South Was Lost
America’s Industrial Decline
Riding the Commodity Boom
The Unrequited States of America
Evo’s Sweater
America’s Addiction
Enter the Dragon
Breaking Away
2: Earthquake in the Andes
America Paralyzed
“Death to the Yankees!”
Chávez’s Parrot
South America Plays Chicken
Next Stop: Ecuador
Continental Shifts
3: Atahualpa’s Ghost
The Burden of History
Plunder and Profits
America’s Backyard
Dirty Business
Kennedy, Castro, and Coups
The Washington Consensus
The End of the Experiment
4: Resource Nationalism
Politics Trumps Economics
A South American Tradition
Defying Count Dracula
Economic Xenophobia
Return of the State
5: Trading Oil, Drugs, and Insults
Petro-Diplomacy
Bankrolling Bolivarianism
Coca Crops and Coups
The War on Drugs
Enter Obama
6: Meet the Street
“The Bomb That Only Kills People”
Chávismo’s Foundation Myth
Washington Contentious
The Social License
The Water War
Evo’s Lesson
7: Evo, Evo Presidente!
In the Hands of Indigenous Peoples
The Invisible
“No One Wants to Be a Cholo”
“Give Them the Belt”
The Outsiders Come In
Rewriting Constitutions
8: “For God and Money”
Fujimori, Montesinos, and the Vladivideos
The Pervasiveness of Corruption
Mind the Capability Gap
The Informal Economy
9: Power to the People
Roadblock Culture
The Permanent Threat
The Challenge of Democracy
Community Power
Bypassing Government
The Revolution, Televised
10: Hugonomics
Production Problems
Divide and Rule
Borrowing Public Health
Popularity and Populism
Viva la Revolución
11: The Curious Death of the Panama Hat
Exporting People
Money Isn’t Jobs
Decoupling
Looking beyond Chávez
12: A Different Vision
The War on Drugs
The Cuba Embargo
Immigration
Between Domestic and Foreign Policy
Tomorrow’s Commodities
Democracy, Policing, and Education
The Meaning of America
An American G4
Acknowledgments
Select Bibliography
Index
Copyright © 2012 by Hal Weitzman. All rights reserved
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and the author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information about our other products and services, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.
Wiley also publishes its books in a variety of electronic formats and by print-on-demand. Some content that appears in standard print versions of this book may not be available in other formats. For more information about Wiley products, visit us at www.wiley.com.
Library of Congress Cataloging-in-Publication Data:
Weitzman, Hal, date.
Latin lessons : How South America stopped listening to the United States and started prospering / Hal Weitzman.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-470-48191-2 (hardback); ISBN 978-1-118-14011-6 (ebk.); ISBN 978-1-118-14012-3 (ebk.); ISBN 978-1-118-14013-0 (ebk.)
1. Latin America—Foreign relations—United States. 2. United States—Foreign relations—Latin America. 3. Latin America—Foreign economic relations— United States. 4. United States—Foreign economic relations—Latin America.
I. Title.
F1418.W323 2012
327.8073—dc23
2011042286
PREFACE
In December 2009, I took a trip from Chicago, where I was the correspondent for the Financial Times, back to Peru, my previous posting for the newspaper. It was not the best of days for the Windy City. The financial crisis had hit hard. The unemployment rate in Chicago exceeded the national average. The city had a $14.5 billion hole in its pension funds and a $650 million budget deficit. On my way to the airport, I drove past apartment complexes half-built and abandoned, haunting reminders of the construction boom that had started to bring buyers back downtown from the suburbs. The Chicago Spire, an ambitious project to build the tallest residential building in the world, on the shore of Lake Michigan, was nothing more than a deserted hole in the ground, having collapsed amid debt, lawsuits, and acrimonious squabbles between the developers. To add insult to injury, two months earlier Chicago had lost its bid to host the 2016 Olympics, which the city had trumpeted as a way to bring investment and development to blighted areas of its south side. Much to the dismay of the assembled crowds watching the voting on giant screens in Daley Plaza, Chicago was eliminated in the first round of voting.
Lima could not have been more different. In many ways it was the same city I had left a couple of years earlier—dirty, chaotic, and sprawling—but where Chicago was struggling, the Peruvian capital was more vibrant than ever. The country had quickly brushed off the global economic downturn, and its economy was growing at a brisk clip. The signs of this activity were everywhere—in the furious shopping, enthusiastic eating, the better quality of cars on the streets, and, most obviously, in the swarms of workers putting up residential buildings at a blistering pace.
I should not have been surprised. The contrast between Lima and Chicago pointed to a much bigger geopolitical trend: Latin America was on the way up and the United States was in relative decline, at least in economic terms. This was nothing like the Great Depression that followed the 1929 Wall Street crash, which had a devastating effect on Latin America. Back then, exports slumped, countries defaulted on their debts, and there was a surge in civil agitation by radical groups; a rash of military coups and attempted coups swept across the region, and a wave of populist nationalism was unleashed. Now Latin America had emerged relatively unscathed from the financial crisis prompted by the collapse of Lehman Brothers, the Wall Street investment bank, in September 2008.
In 2010, the economies of Latin America would grow at an average rate of 6 percent—twice as fast as the United States. Paraguay grew at 10 percent, Uruguay and Peru at 9 percent, while the economies of Brazil and Argentina expanded at a rate of 8 percent. Unemployment across the region fell to about 7.6 percent, while joblessness in the United States hovered near 10 percent. The previous year, the Dow Jones Industrial Average gained 19 percent—a welcome advance considering the losses endured in the prior two years—but positively snail-like next to the 104 percent advance in Argentina’s stock exchange, 101 percent growth in the Peruvian bolsa, and 83 percent growth in Brazil. The International Monetary Fund, which had so often in the past warned Latin America that the end was nigh, even started to fret publicly that the region might be growing a little too fast for comfort. The biggest corporate takeover of 2010 was the $28 billion purchase of Carso Global Telecom, a Mexican telecom company, by América Móvil, an even bigger Mexican telecom company. Money managers in Argentina and Peru ran the year’s best-performing emerging markets funds.
While Peru was a remarkable story, the headline-stealing star of Latin America was Brazil. It had been the last country to enter the Great Recession that began in 2008 and the first to leave it. It was poised to overtake France and the United Kingdom to become the world’s fifth biggest economy. It was the world’s biggest producer of iron ore, and the top global exporter of beef, chicken, orange juice, sugar, coffee, and tobacco. Its companies were transforming themselves into global titans. Vale, headquartered in Rio, was the world’s second biggest mining company. Gerdau, based in Porto Alegre, was the leading producer of long steel—used in construction and infrastructure—in the Americas, with operations across Latin America as well as in the United States, Canada, India, and Spain. Embraer of São José dos Campos was the world’s third biggest aircraft maker. BM&FBovespa of São Paulo had become the second biggest financial exchange in the world. In September 2010, Petrobras, the state oil company, conducted the biggest stock sale in financial history, raising $67 billion from eager investors. Eike Batista, a mining and oil baron once married to a Playboy cover girl, was by 2010 the eighth richest person in the world, with a net worth of $27 billion, according to Forbes. Batista predicted that he would soon be the world’s wealthiest man, an ambition that would see him replacing another Latin American—Carlos Slim, the Mexican telephone tycoon.
Back in the United States, not only was economic growth sluggish, but the world was also growing increasingly concerned about the country’s debt burden. The national debt was nearly $14 trillion—close to the US gross domestic product. The United States showed little stomach for tackling the problem. In 2010, after a bipartisan commission recommended slashing the federal budget, President Barack Obama instead agreed to an $858 billion deal with Republicans to extend the tax cuts put in place under his predecessor, George W. Bush. The following year, the federal government flirted with default because of a political stand-off over how to raise the country’s debt limit. The United States was looking like a country devoid of a long-term plan, putting off the inevitable as long as possible, engaging in the same sort of unsustainable fiscal irresponsibility of which it had long accused other countries—especially those in Latin America.
With the economies of South America growing so fast, you might have thought the United States would be looking to catch a little of the action, to shackle the stuttering engine of its economic growth to the supercharged developing countries of the south. US corporations had long cottoned on to what was happening. Latin America accounted for one-quarter of US exports. While North America continued to grow anemically, the United States’ leading companies funneled investment into countries such as Brazil, where demand was growing much faster. The US government was much slower on the uptake.
For decades, Washington had been lecturing to Latin America how to behave. It had told the region to cut the size of government, to set business free, to lower taxes and burdensome regulation, to open itself up to foreign trade.
In the aftermath of the 2008 recession, not only did the wisdom of that advice look questionable, but the United States was increasingly doing just what it had cautioned Latin American countries not to do. The lack of federal oversight was being blamed for having enabled the financial crisis. George W. Bush, a tax-cutting Republican president, had overseen a vast increase in the national debt. Whereas his predecessor, Bill Clinton, had declared back in 1996 that “the era of big government is over,” the financial crisis and subsequent economic downturn had forced the federal government to throw itself back into the US economy, injecting hundreds of billions of dollars into Wall Street, Detroit, and the national mortgage market. Barack Obama set a decidedly protectionist tone by inserting a “buy American” clause into his $787 billion stimulus package of 2009.
Meanwhile, the biggest Latin American countries were paying off their debts and expanding their ties with the world’s fastest-growing and most exciting market—China. Instead of schooling its southern neighbors, it was starting to look as if the United States might actually have something to learn from them.
As Latin America’s economic might grew, the region was considering what its future role might be in the new geopolitical order. Brazil was starting to flex its muscles on the international stage, showing diplomatic as well as economic ambition. Other South American countries were also extending their international reach. Might that present an opportunity for the United States to engage in some strategic alliance building, to find a new international role as part of a hemispheric coalition that could collectively formulate a vision for the whole of the Americas and a vision of North America’s and Latin America’s joint role in the world?
