Is South America’s ‘Progressive Cycle’ At an End?

Analysis by Claudio Katz

The year 2015 ended with significant advances of the Right in South America. Mauricio Macri was elected President in Argentina, the opposition gained a majority in the Venezuelan parliament, and Dilma Rousseff is being hounded relentlessly in Brazil. Then there are the conservatives’ campaigns in Ecuador, and it remains to be seen whether Evo Morales will obtain a new mandate in Bolivia.[1]

What is the nature of the period in the region? Has the period of governments taking their distance from neoliberalism come to an end? The answer requires that we describe the particular features of the last decade.

Causes and Effects

The progressive cycle arose in popular rebellions that brought down neoliberal governments (Venezuela, Bolivia, Ecuador, Argentina) or eroded their continuity (Brazil, Uruguay). These uprisings modified the power relations but did not alter South America’s economic insertion in the international division of labour. On the contrary, in a decade of rising prices for raw materials all countries reinforced their status as exporters of primary products.

The right-wing governments (Sebastián Piñera in Chile, Álvaro Uribe-Juan Manuel Santos in Colombia, Vicente Fox-Enrique Peña Nieto in Mexico) used the foreign exchange bonanza to consolidate the model based on openness to free trade and privatizations. The centre-left administrations (Néstor and Cristina Kirchner in Argentina, Inácio Lula da Silva-Dilma Rousseff in Brazil, Tabaré Vázquez-José “Pepe” Mujica in Uruguay, Rafael Correa in Ecuador) promoted increased internal consumption, subsidies to local business owners and social welfare programs. The radical presidents (Hugo Chávez-Nicolás Maduro in Venezuela, Evo Morales in Bolivia) applied models of improved redistribution of income and contended with sharp conflicts with the ruling classes.

The affluence of dollars, the fear of new uprisings and the impact of expansive policies in the region avoided the severe neoliberal adjustments that prevailed in other regions. The classic abuses suffered in the New World were transferred to the Old Continent, Europe. Greece’s surgery has had no parallel in Latin America nor have we suffered the financial agonies visited on Portugal, Iceland or Ireland.

This relief was also an effect of the defeat of the FTAA. The project to create a continental free trade area was suspended and this paved the way for a productive respite and social improvements.[2]

During the decade there was a serious limitation of U.S. interventionism. The Marines and the Fourth Fleet continued to operate but did not carry out the invasions typical of Washington. This restraint was confirmed in the decline of the OAS. That Ministry of Colonies lost influence while new organizations (UNASUR, CELAC) intervened in the major conflicts (as in Colombia).

U.S. recognition of Cuba reflected this new scenario. For 53 years the United States had been unable to vanquish the island. It now opted for negotiations and diplomacy, hoping to restore its image and regain hegemony in the region.

This cautious approach of the State Department contrasts with its virulence in other parts of the world. To note the difference, it is enough to observe the sequence of massacres suffered by the Arab world, where the Pentagon ensures U.S. control of oil, destroying states and upholding governments that crush the democratic springs. This demolition (or the wars of plunder in Africa) were absent in South America.

The progressive cycle allowed democratic conquests and constitutional reforms (Bolivia, Venezuela, Ecuador) introducing rights that had been denied for decades by the ruling elites. And greater tolerance was displayed toward social protest. In this respect, the contrast with the more repressive regimes (Colombia, Peru) or with governments that have used the war on drugs to terrorize people (Mexico) is quite striking.

The progressive period also included the recovery of anti-imperialist ideological traditions. This reappropriation was visible in the commemorations of the independence bicentennials, now updated as the agenda of a Second Independence. In a number of countries this atmosphere contributed to the reappearance of the socialist horizon.

The progressive cycle involved transformations that drew international appreciation from the social movements. South America became a reference for popular agendas. But now the limits of the changes occurring during this stage have surfaced.

Frustrations with Integration

During 2015 Latin American exports declined for the third consecutive year. China’s slower growth, the lesser demand for agrofuels, and the return of speculation in financial assets tend to downgrade the market value of raw materials.

The fall in prices will be reinforced if shale co-exists with traditional oil and other substitute sources are developed for basic resources. This is not the first time that capitalism has developed new techniques to counteract the rise in prices of raw materials. These tendencies tend to seriously undermine all of the Latin American economies tied to agro-mineral exports.

The difficulties in the new situation are confirmed in the reduced growth. Since the public debt is lower than in the past the traditional collapses are not yet cause for concern. But fiscal resources are now declining and the margin for developing policies to reactivate the economy is narrowing.

The progressive cycle has not managed to alter regional vulnerability. This fragility persists in the expansion of raw materials deals to the detriment of integration and productive diversification. The South American association projects have been overcome again through national export activities that promote commercial balkanization and the deterioration of manufacturing processes.

After the defeat of the FTAA many initiatives were taken to forge common structures throughout the area. These included shared industrialization goals, energy loops and communications networks. But those programs have languished year after year.

The regional bank, reserve fund and coordinated currency exchange system have never materialized. Norms to minimize the use of the dollar in commercial transactions as well as priority regional infrastructure projects have remained on the drawing boards.

No concerted protection against the fall in export prices has been set in motion. Each government has opted to negotiate with its own customers, shelving plans to create a regional bloc.

This impotence is synthesized by the freezing of the Bank of the South. It was obstructed in particular by Brazil, which promotes instead its BNDES[3] and even a BRICS bank. The absence of any common financial institution has undermined the programs for exchange convergence and a common currency.

The negotiations with China reveal the same regional fracture. Each government unilaterally signs agreements with the new Asian power which monopolizes purchases of raw materials, sales of manufactured goods, and the granting of credit.

China prioritizes dealings in commodities and is grudging in transferring technology. The asymmetry that it has established with the region is surpassed only by the subordination it imposes in Africa.

The consequences of this inequality began to be noted last year, when China reduced its growth and its acquisitions in Latin America. Furthermore, it began to devalue the yuan in order to increase its exports and adapt its exchange parity to the exigencies of a global currency. Those measures accentuated its position as the source of cheap merchandise in South America.

Up to now China has been expanding without exhibiting geopolitical or military ambitions. Some analysts identify this conduct with friendly policies toward the region. Others see in it a neocolonial strategy of appropriation of natural resources. In any case the result has been a geometric increase in South American dependency on raw materials exports.

Instead of establishing intelligent links with the Asian giant as a counter to U.S. domination, the progressive governments have opted for indebtedness and trade restriction. In UNASUR or CELAC there has never been any discussion on how to negotiate with China as a bloc in order to sign more equitable agreements.

The failures in integration explain the new impetus that has been given to the Trans-Pacific Treaty. The FTAs reappear with an intensity rivalled only by the decline in South American cohesiveness. The United States has objectives that are clearer than they were at the time of the FTAA. It promotes an agreement with Asia (TPP) and another with Europe (TTIP)[4] in order to secure its pre-eminence in strategic activities (research labs, computing, medicine, the military). In the wake of the 2008 collapse it has been promoting free trade with renewed intensity.

South America is a market that is coveted by all transnational enterprises. These companies want treaties with greater labour flexibility and explicit advantages in litigating lawsuits over environmental pollution. The United States and China rival each other in their use of those tools to ease trade restrictions.

Chile, Peru and Colombia have already signed on to the free-trade requirements of the TPP in matters of intellectual property, patents and public procurement. They simply want to obtain better markets for their agro-mineral exports. But the big novelty is the readiness of the new Argentine government to participate in this type of negotiations.

Macri claims he will loosen up the agreement with the European Union and induce Brazil to participate in some way in the Pacific Alliance. He has noted that Dilma’s cabinet includes agribusiness representatives more responsive to trade liberalization than they are to the industrialism of MERCOSUR.

The FTAs will be put to the test in the bargaining over another deal being negotiated in secret by 50 countries, which contains far-reaching provisions for liberalization of services (the TISA, or Trade in Services Agreement). This initiative has already been rejected in Uruguay, but there are continuing attempts. The progressive cycle is directly threatened by the avalanche of free trade sponsored by the Empire.

-Read full article and references at Global Research

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