The Penguin History of the World

On a troubled and distracted continent there had fallen, to cap its troubles, the oil crisis of the early 1970s. It sent the foreign debt problems of its oil-importing countries (that is, most of them other than Mexico and Venezuela) out of control. In the next two decades, many economic remedies were to be tried in one country or another, but all turned out to be unworkable or unenforceable. It seemed impossible to deal with runaway inflation, interest charges on external debt, the distortion in resource allocation arising from past bad government, and administrative and cultural shortcomings which nourished corruption. In 1979, the Argentinian government was overthrown by popular unrest, and in the next decade the Argentinians experienced an inflation rate of 20,000 per cent.

Latin America still appeared to be, and perhaps more than ever, an explosive, disturbed continent of nations growing less and less like one another, for all their shared roots, except in their distress. To the layers of differentiation laid down by Indian, slave, colonial and post-colonial experiences, all strongly reflected in differences of economic well-being, had now been added new divisions brought by the arrival in the 1950s and 1960s of the assumptions of developed, high-technology societies, whose benefits were available to the better-off, but not to the poor. Just as in Asia, though it has been less obvious, the strains of the impact of modern civilization on historically deep-rooted societies are now more visible than ever before, even if Latin America has been undergoing some of them since the sixteenth century. But in the 1980s they were expressed additionally through the terrorism displayed by radicals and authoritarians alike, and they continued to threaten civilized and constitutional standards achieved earlier.

In the 1990s, however, there took place what looked like a major restoration of constitutional and democratic government and economic recovery in the major Latin American states. In all of them, military government was formally set aside. Eventually only Cuba was left as an overtly non-democratic regime. This helped to produce better hemisphere relations. Argentina and Brazil both agreed to close their nuclear weapons programmes, while in 1991 they, together with Paraguay and Uruguay, agreed to set up a common market, Mercosur, which at once launched a major tariff-cutting exercise. In 1996, Chile adhered to it. This promising atmosphere was troubled only by a few attempted coups, while economic conditions held up. Unhappily those conditions began to falter continent-wide in the middle of the decade and by the end of it the International Monetary Fund had to mount new operations to rescue both Argentina and Brazil from severe troubles. Ominously, although the former had tied its currency to the United States dollar (itself a source of some of its difficulties), Brazil was again beginning to show the effects of inflation, while Argentina’s debt to foreigners had risen out of control. The international community braced itself to face a repudiation of unprecedented size. As 2001 came to an end, the population of Buenos Aires again took to the streets, and after some bloodshed and the casting out of three presidents in ten days, faced a renewal of deflation and hard times.

The early 2000s showed clearly the winners and losers in the economic growth that was beginning to take hold in most Latin American countries. While the economies of many countries grew more rapidly than they had done since the 1950s, the domestic returns of these advances were unevenly divided among the population. Brazil, for instance, is by most standards the most unequal society on earth. While the most advanced 10 per cent of its 170 million population has a living standard that equals the EU average, the poorest 50 per cent has seen little progress during the 1990s. The elections in many Latin American countries of left-wing governments in the early 2000s reflect a preoccupation with this growing inequality. But even the radical leaders – who spanned from the Venezuelan firebrand populist Hugo Chavez to the moderate socialist presidents Michelle Bachelet in Chile (elected 2006) and Luiz Inácio Lula da Silva in Brazil (elected 2003) – are unwilling to touch the market-oriented reforms of the previous decade, which are widely held to have produced the first economic progress these countries have experienced for more than a generation. It is therefore likely that the contradiction between economic growth and abject poverty will remain the key issue in Latin America’s development for years to come.

3 Crises and Détente