December 29, 2003

December 29, 2003 | WebMemo on Latin America

"Tough Love"

President George W. Bush is paying more attention to Latin America these days and, as proof, he will participate in a Special Summit of the Americas in Monterrey, Mexico, on January 12-13, 2004. The purpose of this summit is to welcome the dozen recently elected heads of state in the hemisphere and discuss ways out of the economic slump affecting the region. 

According to U.S. summit planners, instead of joining the usual chorus of leaders recommending more loans and development assistance, President Bush will urge neighboring countries to solve financial woes through greater freedom and market competition. In contrast, back in Washington, Congress is poised to do just the opposite-debating a new bill that would double U.S. loans and development spending in Latin America. 

This should come as no surprise. As often happens, Congress and the White House work at cross-purposes. Unfortunately for Latin American presidents looking for debt relief and a free pass on earlier commitments to reform, the White House-not Congress-has the right idea.

With the exception of countries, such as Chile, that have undertaken profound democratic and free-market reforms, the majority of the region's societies are neither free, nor accountable, nor competitive enough to take advantage of new loans and aid money. 

Congress should join President Bush in pressing Latin American leaders to

  • Establish political freedoms,
  • Adopt market economics, and
  • Strengthen the rule of law. 

If any money is to be spent, it should be focused on promoting these reforms. 

Great Expectations. Multilateral summits are momentous events that portend grand bargains and produce countless promises few countries ever keep. For instance, Argentina is committed to some 250 action items from earlier Americas summits but has made progress on only about 50.   

As a practical matter, presidents cannot enact summit pledges alone. They need public support as well as approval from their national legislatures. They also need the backing of a key but usually invisible force-the economic elites who dominate commerce and influence legislators and cabinet ministers.

Elites usually oppose reforms that might threaten existing monopolies and personal patrimonies. Rather than confronting the status quo and the entrenched interests that maintain it, presidents typically complain that institutional changes cost money their empty treasuries can ill afford. At summits, they plea for debt relief and development assistance to stave off painful decisions oligarchs will not accept. 

A Mixed Message. Despite good intentions, U.S. Representatives Cass Ballenger (R-NC) and Bob Menendez (D-NJ) may be unwitting accomplices in this deception. They introduced legislation in November to authorize $500 million per year in new U.S. development assistance to Latin America for the next five years. This legislation would create two social investment and economic development funds-one administered by the U.S. Agency for International Development (USAID) and the other by the Inter-American Development Bank. The funds would support public-private partnerships, improved quality of life, strengthened rule of law, and efforts to reduce poverty among minority ethnic populations in Latin America. 

But throwing money at problems does not necessarily solve them, particularly when recipients are not willing to help themselves. Congress currently spends close to $300 million a year in Latin America, two-thirds of which goes to stopgap environmental and public-health programs that neighboring countries could pay for on their own-if they wanted to. 

While recent projects promoting democratic reforms and market economies have had modest success according to the U.S. General Accounting Office, they are hobbled by an aid bureaucracy that is more accustomed to running multi-year, big-ticket give-away programs. Clear goals, coordination within the U.S. government, transparent evaluation procedures, and host country communications strategies are lacking. 

In testimony at the November 5 hearings for the bill, J. Michael Waller of the Institute of World Politics declared that it is no wonder that reforms that might produce sustainable societies have yet to scratch the surface of the problems. Corruption remains the same, heavily centralized national bureaucracies dominate government with few checks and balances, international loans buttress crony capitalism, smugglers and terrorists take advantage of weak law enforcement, while rigged business and investment climates drive away investors. 

The Right Message and Support. Until our hemispheric neighbors adopt policies that deepen democratic practice beyond elections, open markets (beyond selling state monopolies to well-connected cronies), and strengthen the administration of justice so that all citizens play by the same rules, assistance used to build fish ponds and health clinics will do little to help such societies become sustainable. 

  1. At the upcoming Special Summit of the Americas, President Bush should make it clear that local initiatives to change fundamental institutions are more important than handouts to prop up a faulty state.

    As an example, he can praise President Vicente Fox for enacting Mexico's first-ever Rapid Business Start-Up System, which cut procedures for starting small enterprises from 50 days to about 48 hours. He could also laud Chile for cutting its own tariffs and aggressively seeking free trade agreements around the globe. 

  2. Congress should support the Administration's message by abandoning the everything-but-the-kitchen-sink approach to international assistance.

    If it is to be provided at all, assistance must help reinforce democratic practices, foster market economies, and help combat criminal and military threats against such institutions. Above all, it should be used sparingly to avoid creating dependencies and should be directed to countries where existing efforts can be leveraged to improve governance and spur growth. 

  3. Some effort should be made to improve the U.S. assistance bureaucracy to ensure that the Administration's priorities and Congressional mandates are respected by USAID mission directors. 

  4. Evaluation procedures should be revised to permit comparisons of effectiveness between programs and over time.

  5. Lastly, public diplomacy strategies to communicate the benefits of reform should be more firmly integrated into U.S. support programs. While talk may be cheap, it can be more effective than misguided spending. 
Stephen Johnson is Senior Policy Analyst for Latin America in the Kathryn and Shelby Cullom Davis Institute for International Studies. 

About the Author

Stephen Johnson Senior Policy Analyst
The Kathryn and Shelby Cullom Davis Institute for National Security and Foreign Policy