Latin America

Two countries have stood out in their respective regions as economically progressive policy successes in the last ten years. In Europe, Spain along with Ireland have seen much of the positive development and economic growth when the rest of the EU has been wrestling with high unemployment rates and drastic changes in governments. In Latin America, Brazil under Lula and under the former Cardoso Administration have grown at a steady positive rate, breaking the traditional Latin American plague of economic collapses and large booms that seem to be commonplace in almost all South American economies to date. With success, the importance of Spain and Brazil have taken on a new form in their regions and abroad. Traditionally the place of the United States, these emerging regional powers now seem to be inheriting some of America’s traditional problems.

Brazil has always been a country of immigration. The population of Brazil, while taking in only some immigrants from Asia, Africa and Europe in the last few years, was one of the countries that absorbed much of the world’s immigration since the 1880s. This open policy remained, and while economic problems and changes from populist, to military, to democratic governments took shape since the 1930s, immigration remained strong as long as there were jobs to be done in one of the world’s largest countries. With traditional economic instability and some recent success, many Brazilians have chosen to go abroad to either find more work or utilize their assets to enjoy life abroad. In Spain, this emigration from Brazil has taken a foothold with both emigrants coming and living illegally for work or working in legal low paying jobs, as well as those upper middle class Brazilians coming to make a life and career in Spain as professionals and entrepreneurs.

While the general impression of Brazilians in Spain is a positive one, there have been some problems against immigrants at the main Spanish airports and in society as a whole. Many immigrants, including many Brazilians often enter Spain and stay illegally. This has been a problem one many fronts, as many Latin Americans, Africans and other Europeans do not go through the normal procedures to live and work in Spain but come as temporary workers or as refugees or simply pass through the border and disappear. With Spain having some economic expansion and the closing off of the US to many immigrants, the Spanish immigration system has become overwhelmed. Since 2006, the number of Brazilians coming into Spain has nearly “tripled or quadrupled”, while at the same time in Spain eight Brazilians a day are deported.

The solution to the Brazil-Spain situation needs to be addressed by both countries. Brazil needs to reform its immigration to fit with its position as an emerging power in the world. With 3-4 millions Brazilians living abroad, Lula will have the responsibility to create and international Brazil without losing all of the most talented to other countries and still maintain funds coming from those emigrants abroad. Spain will also have to accept Brazilians and the diversity of the Brazilian social strata now living throughout the Iberian Peninsula. It will take a long time to adapt the infrastructure to treat foreigners in a respectful fashion, but attempts need to begin immediately. Brazilians and others will be challenged living in Spain in becoming Spanish. While it might be easier from some, it is doubtful that those migrants to Spain who are not seen in a positive light will be so easily welcomed in the near future.

I was happy to read a clever article called: Linking NAFTA and Immigration by Ted Lewis of the San Diego Tribune as he discusses the campaign issues and how they are being spun to effect the campaign and America’s neighbours in a negative fashion. Lewis suggests that reform in NAFTA and effects on the poorest in the three member states needs to be addressed in a logical fashion, and not via the lens of the complete benefit of free trade or lowbrow electioneering. Addressing poverty and its root causes of increased unemployment in Mexico needs to be addressed in any future NAFTA negotiation. Lewis states that much of the illegal immigration comes from a lack of economic progress in Mexico since the agreement began and has lead to massive amounts of immigration to the US. Lewis also mentions that the electioneering between Obama and Clinton creates arguments against free trade, and in my impression creates intentional dissent in the US against Canada and Mexico. While Obama was blamed for not being serious in changing NAFTA, Clinton has used this small scandal to re-ignite her campaign. Ironically, the alienation of friendly foreign governments was always something linked with Bush, but support for the next Clinton Presidency may rest on the backs of Canadians and Mexicans alike if it continues to hurt Obama.

With much of the support for the Clinton campaign coming from the blue collar democrats in the northern states and America’s traditional industrial heartland, it makes sense that Clinton would use Canada and Mexico to blame for poor US policy in the past, much of which came under her husband’s term in office. In reality, the Mexican economy has purged its traditional weaknesses since 1994 and has maintained a solidly valued Peso, growth in the long run and even produced a more equitable government with the PRI dominated Presidency toppling a few years after NAFTA came into effect. The reality is that Mexico is a developing nation in many ways and has problems which 10 years of trade policy could never resolve in its best performance. To end poverty and develop a country a generation is needed to end generations of poverty and inequality. Targeted anti-poverty policy is needed to help remove the 30% of Mexicans who live in poverty and have always lived in poverty. Economic progress in Mexico has created such negative results because the flow of money often reaches the poorest last. This is the trend in almost every country where poverty dominated the political agenda. No one has addressed this in the Obama camp, and with the Clinton campaign it seems that immigration and NAFTA come second to embarrassing Obama as much as possible.

While poverty and success in Mexico’s economy can always be debated, the main issue of concern is that anti-immigrant and anti-NAFTA effects of running a negative campaign. It seems apparent that even though NAFTA is a mixed blessing, the current concerns with China seems to be targeted towards America’s neighbours. While China has a right to progress economically and diversify its society as it wishes, Americans need to debate how they want to proceed with their neighbours and China in a logical, fair and respectful manner and choose where they wish to take America in the future. No country can live in a vacuum, but every country has the ability to take measured and fair responses to grow its own economy and produce trade and development to assist its own people, create a net benefit in jobs and reduce poverty.

In a response to one of the FPA’s blogs, a candidate for Congress in the US claimed the wholly negative effects of NAFTA and America as losing its sovereignty over NAFTA. I responded in kind in order to dispel myths which seek to create straw man arguments of America’s friends and neighbours. I encourage readers to read the responses to the blog and address their concerns in kind. All fair points of view are respected and I encourage open debate. The response is noted in the FPA’s Latin America Blog: Paranoia on the Frontier: NAFTA and the US Election

A tradition has formed in economic thought since the 1960s in comparing two regions with similar levels of poverty and inequality. Both regions have traditionally been open to economic measures to promote growth and achieve the level of development of North America and Europe. Asia and Latin America are both regions which have suffered historical economic problems and large structural reforms, and in the 1960s were considered at the beginning of new forms of development. While many Asian countries set off to promote trade and investment and increase Foreign Direct Investment in their economies, Latin America sought to follow the trend started by Raul Prebisch, by raising tariffs and trade barriers and producing their own products internally and keeping investment inside their own individual economies. The independence of Latin America from the industrialized world would take its form in Import Substitution Industrialisation policy for the region. The exception to the rule in Asia was China. A Communist system left China locked into trade with other Communist countries and limited trade with the West. Upon the onset of problems between China and the Soviet Union in the 1970s, some moves towards greater trade with the West came after Nixon’s trip to open relations with China. Since then the progressive growth and eventual acceptance of China into the WTO has made China the world’s next Superpower, or at least the country that manufactures everything for the world’s current Superpower.

With economic progress came inequality. In Latin America economic success could always be measures by the percentage of people that benefitted or were lifted out of poverty by a boom in any of the Latin American economies. Boom and Bust cycles dominated Latin America well into the 1990s and beyond into Argentina’s financial collapse in 2001. This debate dominated the World Bank, as neo-liberal ideas were debated comparing Latin America’s failures to East Asia’s successes in the report on The East Asian Economic Miracle, giving credit to reduced barriers and increased trade as the reason for East Asia’s success. Dissent came from the head of the World Bank itself when Joseph Stiglitz published Rethinking the East Asian Miracle after the financial turmoil of many of the Asian Tigers at the time and clear collapse of Argentina later on. Equality was still an issue as 30-40% of Latin Americans remained in poverty, East Asia reorganized and China slowly started to rise as an economic giant.

Lessons learned from the World Bank’s debates and the past economic crisis in Latin America and Asia showed that fast growth often promotes cultures of decadence for those who benefit from it and marginalize other parts of a society which do not have the means to raise themselves out of poverty. Systemic poverty among rapid growth was often the result, and became entrenched in the society in the long run.

In an article this week in FT.com, China is advised by the author to take lessons from Brazil in dealing with inequality while managing an economic boom. Not until the late 1990’s did progressive governments in Brazil seek to challenge the country’s historical inequality while absorbing slow positive growth and attacking poverty in a country of over 170 million people. Brazil’s past reflected much of that of Latin America’s with short periods of growth followed by economic collapse which left the impoverished in Brazil in constant chaos. While China does have a large amount of savings as opposed to those nations in East Asia and Latin America in the 60s, poverty still must be challenged in China as not to create an underclass in society. Economic booms have always been used to justify economic policies, but in almost every case the boom eventually turns to bust as economic cycles often do. Past policies to absorb the gains of booms are not put into addressing social problems that are often historical and require time and money to resolve past the boom cycle. While China is not Brazil, these two giants could learn a lot from each other. Both economies are considered to be economic miracles in their own right, but stability and long term growth are only truly successful if it benefits all citizens to a greater degree over a long period of time. While poverty is a constant reality in all countries, the plague of poverty inherited or created can be helped by proper economic and social policy during times of prosperity. With proper economic policy, the trend of inequality with growth do not have to be the result of economic progress.