There is a popular narrative here in Washington and media circles that Latin America’s left-populist turn has finally run its course. It goes something like this: A commodities boom, led by demand from China for Latin American raw materials exports, fueled regional economic growth in the 2000s. This happened to coincide with the election of left governments that were reelected after spending lavishly on handouts to the poor. They alienated foreign investors and their economic policies were unsustainable. Now Chinese growth has slowed, commodity prices have gone south, and with them the fortunes of Latin America’s nationalist, populist left. November’s election of right-wing challenger Mauricio Macri as president of Argentina, the Venezuelan opposition’s landslide congressional win in December, and economic and political crisis in Brazil—including the current effort to remove President Dilma Rousseff—herald the beginning of the end of an era. In this view, the region will continue to elect more right-wing—or, in business-press parlance, “moderate” (and pro-US)—governments that will return to some of the more sensible economic policies of their predecessors.
Is this true? The short answer is no. It is true that Latin America has been affected by the ups and downs of the global economy: The regional economy was basically flat in 2015, and is projected to shrink by 0.5 percent this year. But this is not the main story. To understand what has happened in the 21st century, we must first try to grasp why the left won so many elections that it went from governing no one to governing a majority of the region in less than a decade. The main cause of the “pink tide” was a long-term economic policy failure, not seen for at least a century in the region, in the last two decades of the 20th century. Regional real income per person grew by just 5.7 percent from 1980 to 2000, as compared with more than 90 percent in the previous two decades.
The region’s long-term growth failure was also a period in which Washington exercised a strong influence over economic policy. As late as 2002, when Luiz Inácio Lula da Silva of Brazil’s Workers’ Party was running for president, the International Monetary Fund sat down with him and his opponents to decide what the post-election macroeconomic policy would be for the next couple of years, regardless of who would win the election. But despite being held back at the starting gate, Brazil was able to triple its economic growth per person as compared to the prior government; and reduce poverty by 55 percent, and extreme poverty by 65 percent, by 2014. The real minimum wage was doubled, unemployment hit a record low of 4.8 percent in 2014, and real wages grew substantially for the first time in years.
Bolivia was operating under IMF agreements for nearly 20 consecutive years, until its first indigenous president (in a majority indigenous country), Evo Morales, was elected and took office in 2006. At the time, the country’s per-capita income was less than it had been 27 years earlier. One of the government’s first moves was to renationalize the hydrocarbons industry, which—even more than price increases—helped boost the government’s take nearly sevenfold, from $731 million to $5 billion, over the next eight years. This move, which was impossible when the government did not have economic sovereignty, was the foundation for the remarkable economic and social progress of the past decade.
Politically, the government had to overcome a violent right-wing secessionist movement. It kicked the US ambassador out of the country in 2008, with President Morales accusing him of aiding the violent opposition. At that time, the US State Department was pouring large amounts of money into Bolivia and refusing to disclose where it was going (the United States and Bolivia still do not have ambassadorial relations today). But once stability was achieved in 2009, the economy did very well even during the world recession, boosted by a large increase in public investment.