Friday, May 26, 2006

South America at the Crossroads

Sunday's presidential election is critically important, not only for the future of Colombia, but also for the future of South America. The last several years have seen a shifting of popular support toward the left in several major notable situations. What began in Venezuela, continued in Bolivia. The continent's largest economy, Brazil, already has a left of center government and there's a very real possibility that Peru could be next.

What is clear, is that Colombia will not follow the trend toward the left. Uribe will definitely win the election and it's very likely that a runoff will not be necessary. (Colombia is surprisingly progressive - if a candidate wins with less than 50%, the top two have a runoff.)

This is very good for US interests, and likely for the continent's interests. What's obvious, however, is that certain members of the American left will never see the vast importance of a US-leaning Colombia. When you remove the lense of Plan Colombia, the benefits are fairly obvious.

First, when discussing the future of South America, the elephant in the room is Chavez-led Venezuela. As is often the case with far left leaning governments, Chavez entered office on a wave of popular support. On a continent with roughly 26 million people in poverty, years of support for one political affiliation can easily swing the other way. This latest round of leftist politics specifically appeals to the poorest of the poor because of the initial rounds of benefits that populist leaders bring to the people. Venezuela, for example, buys off the public with artifically low gas prices. A tank of gas in Caracas costs, roughly, about a dollar.

This doesn't mean that the Chavez led government is without tangible benefits to the population. The spike in oil prices has enabled Chavez to allocate resources for education, health care, and other social services. All of these are directly benefiting his people.

The problem, of course, is that those types of gains, while certainly enjoyable do very little to alleviate the long term causes of poverty. In fact, there is a host of evidence that poverty and crime are actually increasing in Venezuela. Long term poverty alleviation differs by country, but the general prescription calls for the development of domestic industries, foreign investment, and the (relatively) free flow of trade between nations, both regionally and the far abroad. At least that's the liberal economic wager that the world economy has been based on since the conclusion of World War II.

Chavez has not only alienated himself from his biggest trading partner, the US, but has actively worked to undermine the system of free trade that has existed in South America for decades. His decision to pull out of the Andean Community Trade Bloc and focus on MERCOSUR, a left leaning trade bloc that includes Argentina and Uruguay is a telling example of just how leftist politics can be misguided or even dangerous. Chavez sees affiliation as zero-sum, thus his response to the US-Colombian Free Trade agreement was to abandon a system that had facilitated the free exchange of goods for decades.

Having a staunch US ally means having an ally for the global free trade system and liberal economics. Colombia just signed a free trade agreement with the US and has great potential to positively influence Ecuador and Peru. Critical to the US strategy in South America is free trade agreements across the continent. Obviously that won't be forthcoming with Veneuela or Bolivia, but having Colombia on board furthers that goal.

Of course, the other benefit of a right-leaning Colombia is that it gives the US more influence in South America. Colombia does have influence over Ecuador and Peru, as well as an important relationship with Brazil. The US having a foothold in one of the stronger South American countries is an important counterbalance to the dogmatic, leftist Chavez.

In the end, we don't know if liberal economics is the key to eliminating extreme poverty. It's the big gamble that the world embarked on 5 decades ago, a gamble that played large, but vastly uneven benefits. But we know that the politics of the extreme left (much like the politics of the extreme right) lead to economic stagnation and worsening poverty. Governments that take populist decisions, while democratic (the Holy Grail of international political buzzwords), correlate with short term gains and long term difficulties.


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