Protecting Democracy, Freedom, and Growth in the Americas

WASHINGTON, NOVEMBER 7, 2008--Latin America's democracies and market economies today face substantial challenges, former Peruvian president Alejandro Toledo said in a speech at AEI on November 6. Despite the region's strong growth in the past several years, he cited the trinity of "poverty, inequality, and social exclusion" that, if they remain unaddressed, threaten to "undermine democratic government."

Toledo, an economist whose presidency from 2001 to 2006 was marked by political turbulence, first described his "cautious optimism" about Latin American growth. "Before this [financial] crisis, the region has been growing at an average rate of 6 percent" annually, he said--and Peru has been growing at 9 percent, thanks to his democratically elected successor. "We have been able to diversify the internal composition of economic growth," he added, making Peru "less vulnerable to external shocks." (Toledo also pointed out that Ecuador's economy--led by Rafael Correa, an ally of Venezuela's socialist president Hugo Chávez--has grown at only 1.7 percent.)

Another source of Peru's economic growth is its "considerable stock of human capital that is unfortunately in a diaspora around the world," Toledo said. "I'm one of them." He recounted his rise from poverty with the assistance of U.S. Peace Corps members who helped him get an education. He received his Ph.D. in the United States and worked at a number of multilateral organizations before returning to Peru in the 1990s to enter politics.

But economic growth has not improved conditions universally, Toledo said. Thus, the lingering problems of "poverty, inequality, and social exclusion" are "fodder for the expansion of cheap, irresponsible, authoritarian populism." Chávez-style economic populism "is not the cause of poverty, inequality, and social exclusion," Toledo said, "just the consequence." Populist leaders, he added, are "fooling around with the dignity of the poor."

Because Latin American leaders failed to eliminate these three problems when market economies were emerging, the people now question democratic legitimacy. "The continent is impatient, and it's asking, 'What is democracy?' No wonder that in the past twenty-five years, Latin America has gone from euphoria . . . to increasing disillusionment." Democratic governance is increasingly at risk, Toledo added: "Out of thirty-three democratically elected presidents [in Latin America in recent years], sixteen did not conclude their terms . . . and I almost did not conclude mine."

Toledo's message for the United States was that "the time has come not only to rescue the banks. We need the social rescue of Latin America." This would be facilitated, he said, by closer trade ties with the region, such as the U.S.-Peru Trade Promotion Agreement, which Toledo's administration finished negotiating just before leaving office. "The United States cannot take Latin America for granted," he added, "because Iran and Russia are now in Venezuela."

After Toledo's speech, a panel moderated by AEI's Roger F. Noriega discussed development and trade in the Western Hemisphere. Former Bahamian foreign minister Fred Mitchell discussed challenges in the Caribbean with special reference to Haiti. "We're faced now with the downturn in the U.S. economy," he said. "If [Caribbean] economies fail, it will be a security crisis." Adolfo Franco, a former Latin America official at the U.S. Agency for International Development, emphasized the importance of free trade in opening up societies. As for development, "the only thing that works is private-sector investment." AEI's Mauro De Lorenzo, who is researching what several countries have done to make themselves more friendly to foreign investment, explained that Peru's openness to trade and its leaders' commitment to sound development principles have given it "the second-steepest growth curve in Latin America."

--EVAN SPARKS

For video, audio, and more information about this event, visit www.aei.org/event1831/. For more information about AEI scholars' research and writing on the Americas or Latin America, visit www.aei.org/americas/.

For media inquiries, contact Veronique Rodman at vrodman@aei.org or 202.862.4870.

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