The Economic Policies of the Latin American Left in Government

1. Justification

After dominating the Latin American political scene for more than a decade, the
governments most committed to and clearly identified with the application of neoliberal
policies have been replaced one by one by political projects claiming to be
progressive in general, and leftist in particular.

The political forces that have assumed national government have done so, in general, on
the basis of a resistance to and denunciation of neo-liberal policies and their effects,
and in articulation with a broad and varied coalition of movements and social sectors affected by those policies.

It is worth emphasising that the long period of neo-liberal dominance occurred
as much in the ideological-cultural sphere – attempting to establish the idea that
"there are no alternatives" to existing policies – as in the sphere of ‘facts,’ producing
a veritable reformulation (via so-called ‘structural reforms’) of the functional bases
(social and economic actors, ‘rules of the game,’ and institutions) and dynamic of
political, social, and economic life.

In this context, the ascendance of progressive and/or leftist forces poses the
challenge of the design and implementation of an alternative ensemble of public
policies, and of economic policies in particular.

More precisely, in the economic field, the challenge consists of the discussion,
elaboration, and implementation of alternative ‘structural changes’ and ‘rules of the
game’ (with respect to those promoted during the 1990s), and of a management of the
state apparatus and of economic policy, that will make it possible to ensure significant
and rising levels of autonomy and equity, both domestically and internationally.

The consensus in relation to the resounding condemnation of the most
negative aspects of the ‘received inheritance’ has nevertheless not produced a similar
consensus with respect to alternative government actions once progressive political
forces have come to power via popular will expressed through constitutional means.

Faced with the large expectations for general change, the reversal of the
serious social panorama has been slow in coming. In this aspect, the proposed
research is concerned with the validity and depth of the options that, in each national
framework, have been realised. The enquiry must take into account the
characteristics, as well as the foundation, of the adopted policies. In particular, it is
important to know the magnitude of the economic and financial vulnerabilities and
weaknesses that the new governments confront.

On many occasions and on a variety of topics, the discourse and theoretical
orientation characteristic of the neo-liberal period have persisted, and both the public
policies in the economic sphere and government practice itself have in many cases
exhibited an important degree of continuity with that which preceded them.

Even more serious, in many cases it is possible to dispute whether the new
governments are really moving toward a transformation of the bases and the political-economic-social operation of the left. And beyond the permanent renewal and
capacity for innovation characteristic of the leftist identity, there have been no few
occasions on which both the very discourse and practice of progressive governments
have brought into question the identity of the leftist project itself.

It is also necessary to recognise that the policies carried out by progressive
and/or leftist governments have been frequently and roundly criticised from positions
that, also claiming to be leftist, tend to ignore, minimise, or simplify the magnitude
and complexity of the constraints, obstacles, and challenges that the new governments
confront, as well as the severity of the vulnerabilities that they have inherited.

It is possible to affirm that Latin America faces a significant historical
conjuncture: on the one hand, leftist or progressive political forces have been elected
to national government proposing a profound transformation of society; while, on the
other hand, their political ascendance has occurred following the electoral defeat of a
neo-liberal option that, despite plunging the majority of the population into a deep
economic, social, and financial crisis, nonetheless succeeded in altering the structural
foundation of the economy.

In short, the objective of the research project is to investigate the economic
policies of those governments claiming to be progressive or leftist: Argentina,
Bolivia, Brazil, Chile, Uruguay, and Venezuela. More precisely, the proposed
research agenda seeks to identify, compare, and problematise the ‘official’
foundations and objectives of the economic policies, including their characteristics
and results, as well as the obstacles and vulnerabilities that they confront. In this
sense, each national report will make use of a common framework of topics and
research questions. It is also a matter of relating those policies to the transformative
goals of the left’s political project. In each national case and for each topic, we will
seek to deepen our understanding of the principal dilemmas and tensions confronted
by the political project of the left, the principal critiques from counter-hegemonic
perspectives, and the proposed alternatives.

2. Content and methodology

To carry out the research, an initial survey of the academic work and relevant studies
on the topics in question will be undertaken. We also propose to conduct interviews
with representatives of the major social, political and economic forces that have
influenced the design and execution of government policies in each country.

There will be a principal investigator responsible for each country (Argentina,
Bolivia, Brazil, Chile, Uruguay, and Venezuela), who, if he or she should decide to do
so, will be able to convene other researchers.

Two months following the initiation of the project, a team of two researchers
will carry out a short tour of the six countries in order to gain impressions of the
progress of the joint study. They will also conduct a series of interviews (co-ordinated
in advance with the principal investigator in each country) on the topics in question
with political, union, and social leaders, high-ranking government officials, and
academics and independent researchers. This team will also prepare the international
conference, which, on the basis of materials produced by the research, will take place
in November 2006.

The country reports will be based on a common structure, which is presented
below.

2.1. Characterization of the ‘official discourse’

Each national report will begin with an overall presentation of the ‘official discourse,’
identifying the fundamental bases of economic policy from the perspective of the
government. The reports will present the objectives and the means through which they
are to be achieved, as well as the ‘official’ interpretation prevailing within the
government in general, and within the economic team in particular, regarding the
principal problems, obstacles, and vulnerabilities confronted by the national economy.
They will establish the link, from the ‘official’ perspective, between the orientation of
economic policy and the progressive or leftist transformative project.

The reports will also identify, where appropriate, the existence of distinct
‘stages’ in the official discourse, as well as the orientation prevailing in each. It is also important to identify the existence and characteristics of those positions and/or
orientations that, despite responding to ‘officialist’ sectors, are minority positions
within each government.

At the same time, the reports will present those proposals that, from a leftist
perspective, offer a distinct vision to that prevailing within the government, with
respect to objectives, instruments and/or what is viewed as the best way to confront
the economy’s principal ‘problems.’

2.2. Social and economic actors

The second section will present a panorama of the principal social and economic
actors that influence the government’s economic policies in each country. The
analysis will focus on each sector’s principal interests, ‘agendas,’ and capacities to
influence government actions, including the concrete results obtained. It will also
examine the evolution in the relationship between the government, social movements,
and political forces of the left.

2.3. Analytical Framework

The third and most extensive section will be dedicated to a detailed analysis of the
economic policies of each of the governments. Toward that end, a double-entry
matrix will be used as analytical framework, considering on the one hand a series of
areas of analysis and on the other a series of topics or issues.

2.3.1. Areas of analysis

The following areas of analysis will be taken into account for each topic to be
considered:

1. Point of departure at the beginning of each leftist government. Overall
   description; presentation of the principal policies implemented to date;
   discussion of the most relevant constraints, vulnerabilities, and consequences.
2. Initiatives of the progressive government. Overall summary; justification for
   the adopted policies; policy objectives and instruments.
3. Results and projections.
4. Support and alliances; alternatives and critiques. Survey of the proposals put
   forward by social movements, other political forces of the left, and/or other
   relevant sectors of opinion that express a leftist or progressive perspective (for example, proposals coming from universities or independent think-tanks)
   coinciding with the economic policies designed and implemented by the
   government. Principal critiques of the adopted policy and their foundations.
5. Perspectives. Dilemmas and tensions that present themselves in relation to the
   adopted policies, their results, and the effect and completion of the leftist
   project. In particular, the survey of the principal dilemmas and tensions that
   take place among the government, the political forces of the left, and social
   movements.

The goal of the proposed framework is to organise and reconcile the research
areas so as to make possible a comparative analysis of the economic policies of the
progressive and leftist governments. In this way, the issues can be treated in a flexible
manner that considers the particulars of each country.

2.3.3. Topics of analysis

Fiscal policy

• Public expenditure policy
  Taking into account the five proposed areas of analysis, the study will analyse, in
  particular, the level of public spending (as a percentage of GDP), the composition of
  spending (for example, with respect to social spending, public investment, and
  interest payments), and the evolution of spending – in absolute and distributive terms
  – in comparison to previous governments.
• Public revenue policy
  Considering the five proposed areas of analysis, the study will analyse the most
  relevant characteristics of the tax system. It will consider the types and the
  significance of direct and indirect taxation and, in particular, the characteristics and
  importance of personal and corporate income taxes, as well as the contribution of
  each social sector – measured by income deciles – to fiscal revenue. The report will
  also analyse the size and nature of the fiscal deficit or the fiscal surplus and the
  importance it is given in the more general context of economic policy.

Capital-labour relations

• Rules of the game and institutions in matters of labour relations
  Taking into account the five proposed areas of analysis, the study will analyse the
  existence and characteristics of the principal labour rights in general and union rights
  in particular, the national minimum wage, collective bargaining in the public and
  private sectors, and the level of workers’ participation in the direction and
  management of public and private firms.
• Investment promotion policy and the ‘business climate’
  Taking into account the five proposed areas of analysis, the project will examine the
  existence and characteristics of policies seeking to promote private investment in
  general, and foreign investment in particular. More specifically, it will study
  government policy in relation to foreign capital. It will also examine the
  characteristics of policies aimed at stimulating the national business class (protection,
  subsidies, credits, regulations in the area of state purchasing, and others). The project will also consider the existence, characteristics, and functioning (scope and capacity
  to influence the public agenda) of ‘Economic Councils’ or other instances of
  discussion of national ‘compromises’ (or ‘accords’).

State intervention in the economy

• State-owned enterprises and public services
  Taking into account the five proposed areas of analysis, the project will consider the
  size, characteristics, and objectives of state-owned enterprises, the forms of public
  service provision, the existence of subsidies with social criteria, and the regulation of
  public and – in particular – private firms providing public services. It will also address
  the existence and characteristics of processes of privatisation (or re-nationalisation)
  and the modalities of concession and/or private participation in the public sector
  (processes of public-private association).
• Sectoral public policies
  Taking into account the five proposed areas of analysis, the project will study the
  room for manoeuvre available to the sectoral ministries (Industry, Agriculture,
  Tourism, and the ‘productive’ ministries in general) with respect to the policy
  orientations coming from the Ministries of Economy and Finances. It will also
  examine the existence and characteristics of policies of promotion and subsidy in
  specific sectors.
• Role of the state as conductor of economic activity
  Taking into account the five proposed areas of analysis, the project will discuss the
  use of tax instruments (taxes/exemptions), credit, subsidies, foreign trade, regulation,
  or others aimed at achieving certain economic (control of inflation, promotion of a
  ‘competitive’ exchange rate, or others), productive (promotion of particular sectors
  and/or activities), or social objectives. It will study, in particular, the existence and
  characteristics of policies of land distribution, as well as policies aimed at promoting
  small and medium size enterprises.

Financial system

Taking into account the five proposed areas of analysis, the project will analyse the
characteristics of the financial system, the role and relative weight of the public and
private (both foreign and domestic) banking sector, access to credit by small and
medium-sized enterprises, the treatment of indebted firms in payment difficulties, the
real interest rate, and, in general, the profitability of the financial sector.

Monetary policy and inflation

Taking into account the five proposed areas of analysis, the project will consider the
characteristics of monetary policy and the role of the Central Bank with respect to the
objectives of inflation control, economic growth, exchange rates, and employment, as
well as the existence of price controls.

Institutional framework

Taking into account the five proposed areas of analysis, the project will analyse the
existence and characteristics of regulatory entities, the institutional and regulatory
framework under which the Central Bank operates (its degree of autonomy and
responsibility with respect to monetary policy and the regulation of the banking
system), and the capacity for organised citizens’ participation in the direction and
functioning of public firms and regulatory organisms. It will also study the existence
and relevance of anti-monopoly and pro-competition laws, as well as the forms of
bankruptcy laws and the eventual ‘recovery’ (management) of viable enterprises on
the part of workers. At the same time, it will analyse the existence of institutional
innovations tending to increase transparency of and the participation of social actors
in the direction and management of public firms and the state apparatus.

Non-profit and ‘solidary’ economy

Taking into account the five proposed areas of analysis, the project will observe the
significance of co-operatives (in the areas of production, consumption, financial
intermediation, and others) and other forms of non-profit socio-economic enterprises.

Relationship with international financial institutions (IFIs) and the ‘markets’

Taking into account the five proposed areas of analysis, the project will analyse the
weight of public debt (in terms of stock, debt commitments and their importance with
respect to exports, social budget, etc.), the existence of IFI agreements and their most
relevant characteristics, the nature of the relationship with the IFIs in general, and the
characteristics of the negotiation and supervision of the national economy.

Regional and global integration

Taking into account the five proposed areas of analysis, the project will study the
participation in (and degree of commitment to) processes of regional integration, the
characteristics of commercial and financial opening, the existence and characteristics
of bilateral (‘free’) trade and investment agreements, and/or with extra-regional
countries or blocs (in particular, the United States and the European Union), as well
as the modes of participation in multi-lateral negotiations in the framework of the
WTO and other global institutions.

3. Timetable

Madison Dialogue Co-ordinating Team:
Patrick Barrett – Daniel Chavez – Gabriel Papa – César Rodríguez
April 2006