Reports from the Regional Workshops
Democracy Forum 2000

Chapter 3: Latin America

Workshop was held in Quito, Ecuador on 25-26th April, 2000
Partners: UNDP, CEPAL, BID and CORDES

Introductory session

Daniel Zovatto from International IDEA emphasized that although democracy has advanced much in Latin America over the past two decades, reduction of poverty has not followed - particularly when viewed in terms of narrowing the gap between the rich and the poor. Latin America continues to be the most unequal region in the world. This is the context in which democracy should be called upon as collective action to attain general wellbeing and common good for all.

Democracy, Social Inclusion and Poverty Eradication: Squaring the Circle

Dr. Rolando Franco from CEPAL presented his essay on democracy, poverty and social exclusion in Latin America. Social policy expenditures are higher than ever, yet, the range of relative inequalities is widening in Latin America. Apparently, much is being spent, but not in the right way. Globalization is the new economic framework within which poverty issues should be faced today. Any country unable to integrate in the global economy will hardly have enough economic potential to incorporate the bulk of the population to the flow of economic and social development.

A model of "growth with equity" should be pursued, although the connection between these two terms is not easy to reconcile. Control of inflation, employment creation and education will be critical to this growth model and the reduction of inequality. Inflation increases poverty and brings political instability. Current unemployment numbers are high in comparison with historical records.

The role of political institutions and governments should be recognized in the struggle against the ongoing social dislocation, which followed economic liberalization. Democracy should go beyond elections. For example, the rule of law should be strengthened in order to adequately protect human rights. There is no democracy without a state and neither can social equality be effectively pursued without government interventions to economy. International cooperation can strengthen governmental capacity, and subsequently improve the legitimacy of the government.

The two main commentators praised the quality of Mr. Franco’s presentation and essay and considered it as a good starting point for deepening the discussion on democracy and poverty.

Discussion

The first commentator connected the relationship between democracy and poverty to the quality of democracy and to its operationalisation. Reference was made to the relevance of developing broader democracy assessment frameworks. One such example is the Democracy Audit for Costa Rica with the support of Sweden and BID (a democracy assessment conducted by a panel of 40 nationals assessing some 33 democratic aspirations along 10 thematic domains, broken into 138 variables and 230 indicators). The commentary emphasized the following:

1. Poverty denies citizenship from large parts of the populations. In Guatemala, for example, 40% of the people are born with a life expectancy of 40 years or lower.
2. A certain antagonism between democracy and the market cannot be denied. The commentator argued, differently from the presentation, that in countries with large poor populations a priority should be given to state building and the fighting of poverty before getting concerned about public money being spent in a cost-beneficial way.
3. Some lessons learned on good governance and its relationship with economic and social factors are pertinent. Firstly, acute social conflict and civil war are the worst of contexts. Nicaragua, El Salvador and Guatemala needed from 20 to 30 years to achieve the production level of previous to the armed conflict. Secondly, democracies are at least as efficient as authoritarian regimes to foster economic growth. The difference is that they are better equipped to face economic and social crises. Finally, growing public expenditure, which is not supported by adequate fiscal policy, will lead to severe social tensions with equally serious political consequences.

The second discussant linked the concept of poverty beyond a strictly economic dimension to vulnerability and powerlessness. Reference was made to the World Bank survey Voices of the Poor – Can Anyone Hear Us? The commentator said also that there is a need to make democratic institutions to improve the living of the citizens. The justification of the state comes from the rule of law: equality of all citizens before the law. Main emphases of the commentary centered on the following:

1. Social rights have taken precedence over political rights in Latin America. This was referred to as "pathology of inequality".
2. Democratization has largely succeeded until now, but failure of governments to address the basic needs of the people is posing a threat to the legitimacy of democracy and its institutions. Governments have surrendered to economy and democratic institutions have weakened.
3. Hence, the recovery of democratic politics should start with an increasingly popular control of political institutions. Politics is to be envisioned as a structurally independent variable that should improve people’s lives. Fernando Cardoso has recently said "the best way to privatize the state is to make it public again". Improving the quality of democratic institutions is tantamount to improving the content of politics. A high quality of democratic politics would therefore be functional for a sustainable economy.

Discussion

Discussion of poverty should be based on empirical knowledge, say, differentiating levels of poverty and degrees of relative inequality (by Gini's index or other). In Latin America relative inequality has widened while poverty has varied: poverty increased in the 1980´s, then decreased in the early and mid 1990´s, and worsened again after 1997.

1. Latin American region ranks medium on economic development, which helps to explain why inequality is higher than in other regions. It is partly due to higher income inputs into the system.
2. Democracy gives voice to the voiceless so that the excluded may legitimately denounce the system under which exclusion takes place. Thus, democracy improves the possibility of maintaining the social contract by allowing for successive peaceful changes.
3. Reform proposals should take into consideration the social base for their viability. Voluntarism and wishful thinking should be avoided.
4. Although employment and education can be considered long term policy goals, they are susceptible to be desegregated and assessed on a yearly basis. Therefor it is possible to assess whether the right direction of development is being maintained.
5. The welfare state does not exist in Latin America. Measures of social protection have always been addressed to the non-poor, for instance to the corporately organized middle class.

Some Critical Issues for the Health of Democracy

The Panel:

1. There is an intrinsic tension between democracy and inequality. Capitalism enhances inequalities, and yet there cannot be democracy without the market. Democracy is connected to the market society and state bureaucracy. The wave of democratization has brought more freedom to Latin America, but it has also been accompanied by more inequality. However, the situation might be still worse without democracy. It is to be noted that: a) democracy does not reach all sectors of society; b) democracy is in practice a combination of different regimes operating simultaneously under the vest of electoral system giving legitimacy to a mix of bureaucracy, oligarchy, technocracy, partitocracy, and corporatism; c) democracy is more liberal than popular, focusing on rights and freedoms and aiming at popular sovereignty and social equality, as well as more defensive (guarantee oriented) than pro-active (pushing for change).
2. Reliable statistics on criminal activities are scant in Latin America. Better quality statistics are needed if it were only for the purpose of policy design and a more rational use of resources. Rising crime rates - particularly violent behavior reflected in homicide rates - mirror increasing inequality of income distribution. All available evidence leads to the belief that crime rates are much higher than in OECD countries. This cannot be considered positive for democracy.
3. Citizenship should not be dissociated from demographics. Birth rates are higher among the lower social classes, therefore increasing the number of the poor. Birth control has been removed from the political agenda becoming politically non-correct. Secondly, the concept of citizenship bears a purely political connotation in Latin America. The societal connotation is less strong: one person has one vote, but inequality, together with economic differentials, taints the social side of citizenship.

Discussion

One view holds that recent crisis in Venezuela, Ecuador and Peru show that Latin American democracies are approaching a "negative cycle" of covered and constitutional coups as well as fraudulent elections. Latin American governments have failed to protest against the negative developments, whereas the US and EU have been critical. There is minimal risk for a coup in countries that have suffered dictatorship recently. Non-democratic solutions to pressing problems are more likely to occur in countries where experience with dictatorship is further back in history. The basic tenets of democracy, such as universal free and secret ballot, non-reelection of presidents, shall be fought for once again.

Another view suggests that now is the time to build up democracy. Optimism arises from dramatic diminishing of human right violations and the rising protagonism of the mass media as democracy advocates. In spite of the crisis of political parties, the bulk of citizens are quite active. Current governments are sensitive about the media and street demonstrations.

The Role of External Actors

The four panellists represented the IDB, UNDP-New York, IMF, and Corporación Andina de Fomento (CAF) in Ecuador.

1. IDB´s mandate focuses on economic and social development. The bank targets poverty, but its capacity can be very limited by the absence of serious commitment from individual countries. While the bank is challenged with the task of enhancing civil society participation in its economic and social development programs, it is the national governments that decide which programs the bank should support. It was stressed that 40% of the IDB portfolio in the region is devoted to social programs in which direct involvement by civil society organizations is enhanced. The rationale here is that: a) these programs should be administered by their main beneficiaries in the civil society, and b) social participation is mandated as a substitute for a missing public sector in areas where the government had previously been active.
2. The UNDP has two main priorities in the area of democracy and poverty. Firstly, the improvement of methodologies that measure living conditions in general, and poverty in particular. The second is to assist governments in policy design aimed at reducing poverty. Ongoing research sponsored by the UNDP in 15 countries involving 49 macroeconomic policy cases shows that: a) liberalization economic policies has clearly had an impact in increasing social inequality, but the effect on poverty levels is not that clear; b) changing macroeconomic policies helps explain changes on poverty levels in 94% of cases; c) macroeconomic policies constitute the most powerful instrument in poverty alleviation (not comparable in any sense with, for example, "safety net" undertakings), and it can be rapidly effective (8-15 month period); d) both anti-inflationary and minimum wage policies have a very significant effect on the reduction of poverty; e) and yet there are no general recipes as a same economic policy may produce different results in different countries. (Research of reference covers 15 countries including 90% of the population and 90% of the domestic product of the region: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Ecuador, El Salvador, Jamaica, Mexico, Nicaragua, Paraguay, Peru, and Dominican Republic).
3. Studies by IMF also show that it is the poor that are mostly hurt by inflation, as it can be considered as a tax which is avoidable by the rich, but mandatory to the poor. Research further indicates that political stability and economic growth over a number of years are main factors for the reduction of poverty. Sustainable growth and anti-inflationary policies are therefor the two main policy objectives to be recommended by the IMF. Success by IMF is almost guaranteed when a given program is owned by the country and social participation included (80% of success measured), but then opposite tends to happen in case of imposed programs (80% of failure). On the other hand, IMF has increasingly recognized that: a) adjustment policies can imply certain social costs, and there is a need to include safety nets in view of protecting the most vulnerable public in face of each specific program; b) social investment programs are also necessary, specially in the fields of health and education.
4. Main objectives of the Corporación Andina de Fomento (Andean Development Corporation) are economic development and regional economic integration as factors favoring employment. From this perspective poverty should be mainly fought against employment policy. A formidable, even impossible, challenge is that of improving the quality of democracy with more and better jobs. The government should stay where it is most needed: i.e. playing a stronger role in those areas where citizens need more of the state (i.e. security, health, basic services); and also coming closer to those people in the business sector who are more sensitive to social needs and ready to engage in the implementation of employment programs.

Discussion on the floor stressed two main points. First, no lineal relationship has been found between having a certain political regime (democratic or authoritarian) and economic growth and/or reduction of poverty. Democracy and rule of law should be considered as of high political value by themselves; the point being that of finding out the potential of a democratic regime for the alleviation of poverty while preserving freedoms and rights. Second, the following combination of objective and subjective realities is to be invoked for a proper understanding of today’s malaise among intellectuals, politicians and civil society activists –if not by the general public-- with regard to issues of poverty and inequality: a) the widening gap of social inequalities, although the condition of the poor does not seem to deteriorate in absolute terms; b) a growing awareness that things could go better and should improve. These two factors combined would give wide space for "relative deprivation" or the frustrating concern that what can be expected from society and government is falling too short from the aspirations to development. Historically, an environment with widening relative deprivation has accompanied all main social upheavals and revolutions (people would most likely not rebel when they are in a bad situation, but rather when they feel entitled to a better one).

Accountable Government

The three panelists-discussants were politicians: two former presidents and one standing minister of education.

1. Participants were reminded that not too long ago the fight was for democracy. Now the discussion is on the value of democracy as a solution of problems like poverty and inequality. Indeed this is extremely important for the consolidation of the democratic system and the rule of law. If democracy cannot help with poverty, then other alternatives will be looked for by the populace, although a better alternative for poverty alleviation than democracy simply does not exist. Finally, democracy as a moral value should be strengthened in order to curb corruption practices, which hardly undermine the legitimacy of democratic politics.
2. The role of politics and politicians is emphasized in making economic growth, the markets and social justice compatible. Free competition may harm the society, but politics should compensate the flaws of the market; therefore social justice becomes an undeniable value. In spite of the crisis of political parties and the low prestige of party politicians, consolidation of democracy is of the utmost importance in face of the new challenges of development. On this latter domain, it was pointed out that: a) information is essential for policy definition, and better statistics should therefore be developed; b) the informational society and information revolution should also reach the poor if a country is to be fully incorporated into the global economy.
3. Two main points were brought into discussion: one dealing with macroeconomic development policies, the other with the failure of social policies in reducing poverty. From a governmental perspective, a combat against poverty is to be delivered by both fighting inflation and creating employment. Moreover, political stability should be considered a main independent variable assisting in economic growth and poverty alleviation. The history of the region’s more successful countries is very clear in this respect - Colombia, Costa Rica or Chile. On the contrary, countries like Ecuador and Bolivia may be counted among the more politically unstable yet they also have larger numbers of poor people. It is that, among other factors, political stability foster legal security, and both of these enhance saving and investment (saving and investment rates are determinant to economic growth). Finally, today non-populist political parties and a working party system should be considered crucial factors in enhancing political stability. All of these are well-known realities, but they should be brought to discussion so that they are not forgotten. With regard to social policy, the following question was asked: why has increasing social expenditure not been accompanied by poverty reduction? Two main reasons are given: a) social policies are target to the middle classes and not the poor; b) public institutions in charge of social policy implementation are weak (public schools at all levels, for example, are of poor quality); and c) other institutions outside the social policy domain have negatively contributed to poverty alleviation by their sheer mal-functioning and corruption (i.e. finance control bodies in Ecuador, which contributed to the bank crisis affecting over 20% of the GDP; a tax administration unable to curb tax evasion, and take its share for income redistribution).

Discussion

1. It is important to have better statistics on a wide variety of variables beyond poverty. Some participants expressed the view that there is an over diagnosis on socioeconomic issues, and that more action is needed. Contrarily others believed that some over diagnosis may exist among intellectuals and experts, but that such is not the case among politicians and social activists. The latter needing more and better knowledge regarding social and economic realities.
2. Corruption is a matter of degree. However, it certainly poses a major problem to the legitimacy of democratic regimes. It was also noted that although it is difficult to control corruption at both national and international levels more concerted effort is required.
3. Some recommendations were made, among which were: a) recovery of politics as a utopia (in the 1970´s and 1980´s, people were led to believe that everything could be done without politics, and this was a bad recipe); b) the need to be humble as 20 years of transitions have taught that not much is known on what kind of political changes are needed in order to induce changes in the economic and social spheres; c) two social pacts are pending --education and fiscal— with which more effective employment policies will be facilitated; d) horizontal cooperation between countries and/or people engaging on successful experiences in this domain.

Unions and Business

This session’s discussants were a trade union leader, a leader of indigenous organization, and a representative of a business association.

1. From the CACIF of Guatemala, globalization and informal economy were pointed out as main challenges of this time, as the largest flow of capital investment comes from external sources, and informal economy raises as a strong competitor to the official one. In this context, the importance of social actors is to be stressed: not only political parties are to be recovered as pillars of democracy, but also business organizations and trade unions are to be strengthened. As regarding to poverty alleviation, and in addition to health, education, and housing policies, there are other three instruments to consider: a) reforming the labor market facilitating the creation of stable, productive, well-paid and freely-chosen jobs; b) using the government in order to produce public employment of the productive kind; c) reforming social security so as to guarantee health protection and retirement pensions to the workers. The business sectors are clearly in support of constitutional government today. This is to be promoted and enhanced for the following reasons: a) the positive attitude towards business; b) the need of social dialogue; c) a need for strategic alliances by identifying spaces where public sector, business and poverty striven communities can come together in development projects; d) business, fiscal and trade codes of conduct, which would de-emphasize –among other behavior— the search for quick short term profits and promote long term development.
2. From the CIDOB of Bolivia, a story of successful struggling for the rights to land by indigenous organizations was presented. In less than two decades, through dialogue and negotiations, they were able to evolve from a protest movement into a situation where they could affect legislation and a vice-ministerial position was created to deal with indigenous issues. Main point here is that two worlds apart –indigenous and non-indigenous, rich and poor—had managed to defend their respective interests through dialogue and negotiation, which was made possible by the rules of democracy. Indigenous people aspire to keep a peaceful living, with equal opportunities rather than in a state of poverty imposed by others, and also have the possibility of maintaining their own culture and life styles.
3. From the CEOSL of Ecuador, the challenges of globalization and employment are emphasized. Neither of them can be faced in isolation by a specific country. Regional cooperation, hopefully integration, is needed at all levels (government, business and unions). A revindication of the importance of social dialogue and the role of unions is made, and a criticism to the way the government and business have dealt with unions in Ecuador in the last few years (social dialogue failing because government would openly favor business, and so letting unions in a weak position). These are to be proposed among desirable reforms: a) the labor market to facilitate employment; b) an inclusive system of social protection; c) more efficient fighting against corruption; d) caring for environmental damage; e) an international regulatory framework and a new financial order, which would be better able to deal with speculative practices.

The discussion on the floor revolved around the necessity of enhancing social dialogue among government, business, and unions and other social forces as a key instrument of socioeconomic policy making and democracy building. In historical international terms, this negotiating mechanism may be considered one of the few great innovations of modern times as it stands at the center of the functioning of the more stable democracies in industrial societies. No element has been identified in the recipe that would make it unadvisable for its use in developing countries and consolidating democracies.

Participation and Civil Society

A standing cabinet minister of Guatemala, a senior parliamentary official from Ecuador and a leading social activist from Paraguay were the discussants of this session.

1. The first discussant argued that cultural policy is filled with contradictions nationally and internationally. On one hand, there is globalization of finance and trade, communications, states, civil society, human rights, and culture. On the other hand, there is new geopolitical fragmentation and an upsurge of threatened cultural identities. Furthermore, the global world is being strained by political discontent, most frequently related to the negative social effects of privatization and adjustment policies. Hence, democratic values deserve to be revindicated as bridges between conflicting sectors and conceptions of economy, society and culture.
2. Some recent positive efforts to accommodate cultural diversity were reported in Guatemala where a non-partisan Maya woman was appointed Minister of Culture and Sports. She decided to hire an indigenous woman for each of her ministry units. Before, there were only 8 indigenous people among a staff of 3000, which illustrates poor social integration and cultural tolerance.
3. Representative of Poder Ciudadano y Parlamento Joven talked about hope, ethics and the youth in reference to recent evolutionary trends in Paraguay. In March 1999, 12 000 peasants and some 2000 young people were able to stop the dictatorship. Unfortunately, the ensuing new government soon became more corrupt than the previous one. Today 1% of landowners have 80% of the land the rule of the day remains one of economic inequalities, social and cultural discrimination (170 thousand indigenous people are discriminated against by other 5 million nationals), and international subservience (Paraguay represents 1% of the trade within Mercosur dominated by big Argentina and Brazil). Notwithstanding, hope in the future is to be maintained and the self-esteem of Paraguayans enhanced if it were only because 50% of the population is younger than 16. But this youth is largely subject to poor education and high poverty. Both of these obstacles to development should be overcome. In very practical terms, the above-mentioned civil society organizations are aimed to strengthening citizenship by building new political groups, which would be able to perform in the electoral and parliamentary arenas.
4. Although there were some recent democratic reforms in Ecuador (i.e. enfranchisement of the illiterate, the rights of indigenous populations, popular election of "juntas parroquiales" or local committees empowered for planning and development programs), serious limits exist for the functioning of democracy, which urgently require a remedy. These are: a) constitution favors the President to the detriment of the Congress; b) extremely unequal income distribution as the Sucre de-valued 400% in one year without the government taking any compensatory measures; c) a breakdown of the financial system as the government took over 75% of bankrupt private banks. Strengthening of democracy requires power sharing in order to agree upon and implement viable development policies. Political stability is required for economic development, and it cannot be achieved under the condition of political exclusion.