Latin America is lagging due to faulty policies

As a longtime commentator on Latin America, I'm used to getting yelled at, but when Venezuelan President Hugo Chavez recently labelled me an enemy of the revolution on national TV, it was more than my usual dose of venom. I never imagined that Chavez would mention my name six times in an angry speech, accusing me and other "big intellectuals" of undermining his leftist programmes.

Nor did I imagine that I would be demonised by many seemingly calmer, less radical Latin American officials and their friends in the business world. But the publication of the Spanish-language edition of my new book about Latin America's malaise, Saving the Americas, had turned me into a punching bag for people across the political spectrum.

My sin was becoming a party pooper - arguing that Latin America is falling behind at a time when the commodity-rich region is going through its biggest boom in decades. Granted, I got far nicer reactions from Costa Rican President Oscar Arias, a Nobel laureate, and former Brazilian president Fernando Henrique Cardoso, but their praise was drowned out by those denouncing me as a spoiler.

So what caused the stir, which helped sell more than 200,000 copies of the book's Spanish edition? Basically, it was my observation that the region is suffering from peripheral blindness: It fails to see that it is falling behind the rest of the developing world.

To be sure, Latin American governments and international financial institutions have good grounds to celebrate these days. The region's economy has been putting in its best performance in 40 years, according to the United Nations. Some countries, such as Venezuela and Argentina, have been growing at rates around a whopping 9 per cent. A record $65 billion per year has been flooding back home in family remittances from Latin American migrants in the United States and Europe, offering a new source of income to millions of the region's poor. And soaring world prices of oil, soybeans, copper and other commodities - alongside China's emergence as a major buyer of the region's goods - have resulted in a regional export bonanza.

Not surprisingly, Latin American leaders have been jubilant. Venezuela's Chavez crowed that his oil-rich country was growing not only economically but "socially, morally, even spiritually". Former Argentine president Nestor Kirchner assured his country that the whole world was marvelling at Argentina's impressive economic recovery. Mexico's then-president, Vicente Fox, asserted that Mexico was growing "like a locomotive that after taking off, starts picking up speed".

External factors

The only trouble is that Latin America is growing economically almost exclusively because of external factors, especially a growing world economy and high commodity prices, rather than because it has its own house in order. And those outside boosts won't last forever.

What was my heresy? As Latin American leaders were strutting, I argued that their claims that the region was entering a new era of prosperity were fairy tales. (My book's Spanish title was Cuentos Chinos, and in Portuguese, it was Contos do Vigario, both of which translate roughly as "Tall Tales.") And so they are. Latin America's economy has grown at a 5 per cent rate for the past five years, but China's has been growing at 10 per cent rates for nearly three decades, India's at about 8 per cent rates for a decade, and Eastern European economies have been expanding at near 6 per cent annual rates. Even Africa has recently grown at 6 per cent rates. In fact, measured against other parts of the developing world, Latin America's economy is growing at the slowest rate.

If you consider poverty reduction, the contrast is even starker. While Asia cut poverty from 50 per cent of its population in 1970 to 19 per cent nowadays, Latin America barely reduced poverty from 43 per cent of its population to 36 per cent over the same period, UN figures show.

So what, I asked, are Asians doing that Latin Americans aren't? For one, I argued, many Asian countries are guided by pragmatism and obsessed with the future, while many Latin American countries are guided by ideology and obsessed with the past.

Ironically, while communist-ruled China is going out of its way to woo foreign investors, several nominally capitalist Latin American countries seem to be trying to keep investors away. But the most troubling trend for Latin America is its stagnation in education, science and technology. While Asians and Eastern Europeans are creating increasingly highly skilled labour forces, most Latin American countries have barely modified their outdated education systems.

My favourite example: Of each cup of Latin American-grown coffee that American consumers buy at any US cafeteria, less than 3 per cent of the price goes to the region's farmers. The remaining 97 per cent goes to those involved in the genetic engineering, processing, branding, marketing and other knowledge-based activities that help produce a cup of java, most of which are based outside the region.

Depressing statistics

Despite these depressing statistics, I'm still optimistic about Latin America. The region is also experiencing several encouraging trends, including more democracy and political and economic stability.

Brazil, Mexico, Chile, Colombia and Peru, among others, are breaking away from Latin America's age-old curse of extreme political swings, which led to instability, capital flight and ever-growing poverty. These and other countries have bet on economic continuity, which is beginning to draw growing domestic and foreign investments. In several cases, shrewd economic moves have been made by a new breed of economically responsible leftist governments.

Granted, US officials and most of us in the media focus on Chavez and his allies in Bolivia, Ecuador and Nicaragua, who reliably get big headlines with their calls for socialist revolution. But Venezuela and its friends don't account for more than 8 per cent of Latin America's gross domestic product. Latin America's real story is being written elsewhere in the region - and it may still have a happy ending.

Andres Oppenheimer is a syndicated columnist for the Miami Herald and the author of 'Saving the Americas: The Dangerous Decline of Latin America and What the US Must Do'.