State and Nation Making in Latin America and Spain: The Neoliberal State and Beyond 9781108836906, 1108836909

Table of contents :
Cover
State and Nation Making in Latin America and Spain
Dedication
Contents
Notes on Contributors
Preface
Part I. INTRODUCTION
1. The Neoliberal State in Latin America
Part II. ECONOMIC AND TERRITORIAL POWER
2. The Chilean Neoliberal State: Origins, Evolution, and Contestation, 1973–2020
3. State, Society, and the Neoliberal Turn in Mexico, c. 1980–c. 2000
4. Rise of the Neoliberal State in Spain? Fiscal Shortcomings of a Popular Narrative
5. Guatemala: States and Homicidal Ecologies
Part III. INFRASTRUCTURAL POWER: REFORM STRATEGIES
6. Two Roads of Neoliberal Reform in Higher Education: Past Policy Decisions Establishing Today’s Type of Reforms in Peru and Chile
7. Reinvented Governments in Latin America: Reform Waves and Diverging Outcomes
8. The Devil Hides in the Details: Variations of Conditional Cash Transfers Programs in Latin America
9. Neoliberal Reform of Transport Institutions in Brazil, Argentina, and Chile: The Tortoise Beats the Hare
10. The End Game of Social Policy in a Context of Enduring Inequalities: Assessing “Post-neoliberalism” in Latin America
Part IV. SYMBOLIC POWER: IDENTITIES AND SOCIAL PROTEST
11. Women Are the Social Face of the State: Gender and the Social Uprising in Neoliberal Chile, 2019–2021
12. Europeanization Effects: Statehood and Contentious Politics
13. Redefining Labor Organizing: Coalitions between Labor Unions and Social Movements of Outsider Workers
14. Locating Neoliberalism in Abiayala: A View from Indigenous Studies
15. Resisting Neoliberalism? Territorial Autonomy Movements in the Iberian World
Part V. Conclusions
16. Internal Structure of the Neoliberal State: Power and Public Policy in Latin America and Spain, 1973–2020
Index

Citation preview

State and Nation Making in Latin America and Spain Neoliberalism is often studied as a political ideology, a government program, and even as a pattern of cultural identities. However, less attention has been paid to the specific institutional resources employed by neoliberal administrations, which have resulted in the configuration of a neoliberal state model. This accessible volume compiles original essays on the neoliberal era in Latin America and Spain, exploring subjects such as neoliberal public policies, power strategies, institutional resources, popular support, and social protest. The book focuses on neoliberalism as a state model: a configuration of public power designed to implement radical policy proposals. This is the third volume in the State and Nation Making in Latin America and Spain series, which aims to complete and advance research and knowledge about national state institutions in Latin America and Spain. Miguel A. Centeno is Professor of Sociology and International Affairs at Princeton University. He has taught at Princeton for over 25 years and is well known for his work on Latin America, state capacities, war, and globalization. Agustin E. Ferraro is a Professor at the University of Salamanca. From 2001 to 2003, he was a Humboldt scholar. In 2009, he won the national award of INAP in Spain for his research on Latin American state institutions. He has published books, journal articles and book chapters in Spanish, English, German and Portuguese.

State and Nation Making in Latin America and Spain The Neoliberal State and Beyond

Edited by MIGUEL A. CENTENO Princeton University

AGUSTIN E. FERRARO University of Salamanca

Shaftesbury Road, Cambridge cb2 8ea, United Kingdom One Liberty Plaza, 20th Floor, New York, ny 10006, usa 477 Williamstown Road, Port Melbourne, vic 3207, Australia 314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre, New Delhi – 110025, India 103 Penang Road, #05–06/07, Visioncrest Commercial, Singapore 238467 Cambridge University Press is part of Cambridge University Press & Assessment, a department of the University of Cambridge. We share the University’s mission to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781108836906 doi: 10.1017/9781108873031 © Cambridge University Press & Assessment 2023 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press & Assessment. First published 2023 A catalogue record for this publication is available from the British Library A Cataloging-in-Publication data record for this book is available from the Library of Congress isbn 978-1-108-83690-6 Hardback Cambridge University Press & Assessment has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.

In memory of Charles Tilly

Contents

 Notes on Contributors Preface Part I  Introduction 1 The Neoliberal State in Latin America

page ix xiii 3

John Maldonado, Diego Ayala-McCormick, Miguel A. Centeno, and Agustin E. Ferraro

Part II  Economic and Territorial Power 2 The Chilean Neoliberal State: Origins, Evolution and Contestation, 1973–2020

67

Patricio Silva

3 State, Society and the Neoliberal Turn in Mexico, c. 1980–c. 2000

99

Alan Knight

4 Rise of the Neoliberal State in Spain? Fiscal Shortcomings of a Popular Narrative

141

Lars Döpking

5 Guatemala: States and Homicidal Ecologies

175

Deborah J. Yashar

Part III  Infrastructural Power: Reform Strategies 6 Two Roads of Neoliberal Reform in Higher Education: Past Policy Decisions Establishing Today’s Type of Reforms in Peru and Chile

213

Eduardo Dargent Bocanegra and Gabriela Camacho Garland vii

Contents

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7 Reinvented Governments in Latin America: Reform Waves and Diverging Outcomes

243

Luis L. Schenoni

8 The Devil Hides in the Details: Variations of Conditional Cash Transfers Programs in Latin America

269

Luciana de Souza Leão

9 Neoliberal Reform of Transport Institutions in Brazil, Argentina, and Chile: The Tortoise Beats the Hare

289

Katherine Bersch

10 The End Game of Social Policy in a Context of Enduring Inequalities: Assessing “Post-neoliberalism” in Latin America

317

Pía Riggirozzi and Jean Grugel

Part IV  Symbolic Power: Identities and Social Protest 11 Women Are the Social Face of the State: Gender and the Social Uprising in Neoliberal Chile, 2019–2021

343

Verónica Schild

12 Europeanization Effects: Statehood and Contentious Politics in Spanish Democracy

382

Philipp Müller

13 Redefining Labor Organizing: Coalitions between Labor Unions and Social Movements of Outsider Workers

411

Candelaria Garay

14 Locating Neoliberalism in Abiayala: A View from Indigenous Studies

428

José Antonio Lucero

15 Resisting Neoliberalism? Territorial Autonomy Movements in the Iberian World

462

Matthias vom Hau and Hana Srebotnjak

Part V  Conclusions 16 Internal Structure of the Neoliberal State: Power and Public Policy in Latin America and Spain, 1973–2020

495

Agustin E. Ferraro, Gustavo Fondevila, Juan José Rastrollo, and Miguel A. Centeno

Index535

Notes on Contributors

Diego Ayala-McCormick is a Ph.D. student in the Sociology Department at UC Berkeley. He has published several articles on development and inequality in Latin America. He is currently working on two larger projects, one on the political economy of development in Francoist Spain and another on colonialism and development in Puerto Rico and Taiwan. Katherine Bersch is an assistant professor at Davidson College and the author of When Democracies Deliver: Governance Reform in Latin America (Cambridge, 2019). Gabriela Camacho Garland  holds a Ph.D. from the Humboldt University of Berlin and is currently a postdoc at Aarhus University and a visiting researcher at the German Institute for Development Evaluation. Miguel A. Centeno has taught at Princeton for over 25 years. He is well-known for his work on Latin America, state capacities, war, and globalization. Eduardo Dargent Bocanegra  is Professor of Political Science at Pontifical Catholic University of Peru. His main research interests are comparative public policy, political economy, and the state in the developing world. Dr. Lars Döpking  is a historical sociologist and researcher in contemporary history at the German Historical Institute in Rome. His work focuses on the dynamics of taxation and capitalism in Western Europe. Agustin E. Ferraro is Professor of Political Science and Public Administration at the University of Salamanca. He was a Humboldt scholar from 2001 to 2003. In 2009, he won the national award of INAP (Spain) for his research on Latin American state institutions. Gustavo Fondevila is a professor at the Center for Economic Research and Teaching (CIDE). He holds a Ph.D. in law from the Buenos Aires University ix

x

Notes on Contributors and a Master’s in political sciences from Johannes Gutenberg UniversityMainz. Last book: Prisons and Crime in Latin America (Cambridge, 2021).

Candelaria Garay (Ph.D. in Political Science, UC Berkeley) is Associate Professor of Political Science at Universidad Torcuato Di Tella. Her book Social Policy Expansion in Latin America (Cambridge, 2016) won the Robert A. Dahl award from the American Political Science Association. Jean Grugel  is Professor of Global Development at the University of York, UK, and a Research Professor at Institut Barcelona d’Estudis Internationals (IBEI), Spain. She has written widely on the political economy of democracy, regionalism, and governance in Latin America. Matthias vom Hau (Ph.D. – Brown University)  is an associate professor at Barcelona Institute of International Studies. In 2019, he was awarded a European Research Council (ERC) Consolidator Grant for research on ethnic diversity and public goods provision. Alan Knight, Emeritus Professor of the History of Latin America at Oxford University, is the author of The Mexican Revolution (1986) and six other books on modern Mexico. His latest book is Bandits and Liberals, Rebels and Saints: Latin America Since Independence (2022). José Antonio Lucero  teaches Indigenous politics, borderlands, and Latin America in the Comparative History of Ideas Department and the Henry M. Jackson School of International Studies, University of Washington. John Maldonado completed his Ph.D. in the sociology department at Princeton University. He is currently a postdoctoral research associate at the School of Public and International Affairs at Princeton University. Philipp Müller is a historian working on the history of the political economy and intellectual history of the nineteenth and twentieth centuries in Western and Southern Europe. Juan José Rastrollo  is Professor of Administrative Law at the University of Salamanca. He received the extraordinary award upon graduation and again for his Ph.D. He is a well-known expert on public contracts, public employment, and urban law and regulation. Pía Riggirozzi is Professor of Global Politics at the University of Southampton, UK. Her research and publications are on the political economy of development, human rights, and regional governance, with a particular focus on gendered health inequalities in Latin America. Luis L. Schenoni is a lecturer in the Department of Political Science and School of Public Policy, University College London. His research focuses on state formation in Latin America.

Notes on Contributors

xi

Verónica Schild,  born and raised in Chile, is Professor Emeritus of Political Science at the University of Western Ontario. Her research focuses on feminism and neoliberal state formation. Patricio Silva  is Professor of Modern Latin American History at Leiden University, Netherlands. He is the author of several academic books and articles on the political dimension of neoliberalism in Chile. Luciana de Souza Leão is an assistant professor in the sociology department at the University of Michigan. Luciana is a political and comparative sociologist with broad interests in knowledge-making processes, social inequalities, and the state. Hana Srebotnjak  is a research Assistant at Institut Barcelona d’Estudis Internacionals (IBEI). Hana studied modern history (MA) at the University of St Andrews (Scotland) and International Security (MA) at IBEI. Deborah J. Yashar is Donald E. Stokes Professor of Public and International Affairs at Princeton University and Director of Princeton’s Institute for International and Regional Studies.

Preface

This book represents the next stage of a long friendship and scholarly association between the editors. We remain indebted to the enthusiastic collaboration and contributions of colleagues and friends, on both sides of the Atlantic. Their work has been key to the project’s results. Our research on state and nation-making in Latin America and Spain began in 2013, with the publication of this series’ first volume. It examined the formation and consolidation of states and nations in the Hispanic-American world during the long “liberal era,” from 1810 to 1930.1 The second volume of the collection continued the story of state building, from 1930 to 1990, focusing on new state configurations that were purposedly built to promote economic and social development across Latin America and Spain.2 The present volume focuses on neoliberalism as a state model. In the following chapters, we detail how the neoliberal state concentrated power and employed technocratic isolation and other institutional resources with the aim of implementing radical policy proposals. We conclude, in the final chapter, with a discussion of how the neoliberal state represents a specific institutional configuration, just as previous state models discussed in volumes one and two, the modern or liberal state and the developmental state, respectively. Our fundamental inspiration for this theoretical and empirical study of the state came from the work of Charles Tilly, to whom this volume is dedicated. We hope that he would approve of this effort.

1 2

Centeno, Miguel A., and Agustin E. Ferraro, eds. 2013. State and Nation Making in Latin America and Spain: Republics of the Possible. Cambridge: Cambridge University Press. Ferraro, Agustin E., and Miguel A. Centeno. 2019. State and Nation Making in Latin America and Spain: The Rise and Fall of the Developmental State. New York: Cambridge University Press.

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Preface

We are enormously grateful for the outstanding work of our group of collaborators, not only for those in the present project but also for the previous ones. Anyone who has ever planned a series of conferences knows how difficult it can be to identify attendees and then count on them to produce solid scholarship and generous discussion. We received some “no’s” to our initial queries, but mostly we received “yesses” and were elated when practically everyone showed up at Princeton in the fall of 2019. By that time, the papers were already well developed, and the meeting, to our delight, evolved into a bottom-up enterprise. The consequent result was a much better conference than we could have imagined. There was much enthusiasm for a second meeting at Princeton in 2020, but due to the pandemic, it had to take place online. In the final stages of the process, the contributors demonstrated even greater patience, especially when we asked for further, and then, further revisions and additions to their chapters. We feel exceptionally fortunate to have worked with Cambridge University Press editors Rachel Blaifeder and Claire Sisssen, and with assistant editor Jadyn Fauconier-Herry. They have been wonderful partners: supportive and insightful, firm and clear about the work that had to be done. The staff at Cambridge University Press and the associated indexing and copy-editing teams, in particular project manager Veena Ramakrishnan, have also been outstanding. We could not have asked for more. To Chilean artist Francisco Osorio, we offer special thanks for providing the cover image of this book. An extraordinary photographer, Osorio, documents people and cultures with as much ethnographic insight as with his capacity for perceiving and then creating beauty. (flickr.com/photos/francisco_osorio). Our home institutions served as superbly generous hosts and deserve our heartfelt thanks. Financial support for the project came from Princeton University’s Program in Latin American Studies, the Princeton Institute for International and Regional Studies, the Princeton School of Public and International Affairs, and the institution’s central university funds. As always, our families deserve our infinite thanks for allowing us the luxury of spending so much time discussing states, nations, and other such arcane matters. Deborah Kaple, Maya Centeno, and Alex Centeno amazingly keep putting up with one of the editors. Rachel Straus, intellectual companion and partner of the other editor, as well as his daughters Sarah L. Ferraro and Ana V. Ferraro, receive his heartfelt thanks for their constant support and encouragement. Special thanks also to Nina Straus for her unwavering interest in this project.

Part I INTRODUCTION

1 The Neoliberal State in Latin America John Maldonado, Diego Ayala-McCormick, Miguel A. Centeno, and Agustin E. Ferraro

1.1  introduction * A vast literature on neoliberalism has described and discussed the public policy programs proposed and applied by this wide-ranging economic and political movement. While focusing mostly on economics, five decades of scholarship has also considered the impact of neoliberalism on other significant government areas, such as education, health, or social policy. The literature has also thoroughly examined neoliberal ideological discourses, political campaigns, and electoral tactics. Furthermore, an ample body of studies has explored the strong influence of neoliberalism on contemporary culture, including fundamental changes in personal identities and social habits. In contrast, however, we believe that the idea of the neoliberal state remains underdiscussed: What exactly is a neoliberal state? And does such a state formation exist at all?1 The essays contained in this book are organized across four dimensions or categories of state power, which we have employed as analytical tools since the first volume of the collection: territorial, economic, infrastructural, and symbolic. We define and analyze the four dimensions of state power in Section 1.5

*

1

This book is the third volume of a series on state and nation building in Latin America and Spain, published by Cambridge University Press (2013–2019–2023) and coordinated by the same two editors. The chapters of the book return to the series’ general subject matter, state and nation building in the regions under study, with a specific focus on the neoliberal era, beginning in the 1970s. This volume can be read separately from the previous books of the collection, since each book represents a complete unit by itself. Nevertheless, the editors and authors have followed some key issues and applied central conceptual categories that connect the different volumes, as we will explain in this introductory chapter. At the beginning of the research project leading to the present book, some members of our group expressed their skepticism in this regard; that is to say, they had doubts about the possibility of defining a neoliberal state, and even more about its reality.

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of the present chapter. Across diverse national and comparative studies, the essays of the volume describe and discuss government programs, political initiatives, social responses, and other related phenomena in different public policy areas, focusing in each case on one or more of the dimensions of state power. In the last chapter of the volume, as a final summary and conclusion of the project, we advance our suggested answers to the two questions posed above, regarding the conceptual definition, and the reality of the neoliberal state as an institutional formation in history. The present chapter begins by considering, in Section 1.2, diverse measures of neoliberal policy reform, and their impact on key countries of the region, as a general outline of neoliberalism’s extensive influence. Section 1.3 presents a succinct overview of the political and economic processes that were behind the neoliberal reforms in relevant national cases, discussed more in depth by the diverse chapters of the volume. In Section 1.5, we turn to the issue of state capacity, we present our proposed dimensions or categories of political power, and we explain the plan of the book organized by these categories. Finally, the conclusion of the chapter summarizes and evaluates the notion of a neoliberal wave, which went throughout the region in the last two decades, and its ­problematic aftermath.

1.2  neoliberalism

in latin america

Broadly understood as a political program, neoliberalism stressed the necessity and desirability of transferring economic power and control from governments to private markets.2 Standard measures of neoliberal policy reform include trade, financial and tax policy, privatization, and labor legislation.3 In all cases, more “neoliberal” reforms are associated with lower tariff barriers, fewer financial regulations, lower and flatter taxes, more extensive privatizations, and easier hiring and firing of workers. The following figures draw on six indices of structural reform throughout Latin America and provide information on five dimensions: trade, finance, tax policy, labor regulation, and the privatization of state-owned enterprises.4 The final index (structural reform) provides an average of the five individual indices. All the indices take on a value between 0 and 1, with higher values indicating greater neoliberal reforms. While some policy domains (such as trade and finance) show clear evidence of widespread liberalization throughout Latin America, other domains (particularly tax and labor policy) make it more challenging to speak of a general neoliberal turn throughout the region. Moreover, the depth and breadth of reforms varied widely across the region, as detailed in the following section. 2 3 4

Centeno and Cohen, “The Arc of Neoliberalism.” See Lora, “Structural Reforms in Latin America,” 27–28; Morley, Machado, and Pettinato, “Indexes of Structural Reform in Latin America,” 7–10. See Lora, “Structural Reforms in Latin America” for full methodological elaboration.

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1.00

Trade Reform Index

0.75 Country Bolivia Brazil Chile Colombia Mexico Peru Venezuela

0.50

0.25

0.00 1985

1990

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figure 1.1  Trade Reform Index (Lora, 2012). Source: own elaboration, with data from Lora, “Structural Reforms in Latin America;” and Morley, Machado, and Pettinato, “Indexes of Structural Reform in Latin America.”

1.2.1  Trade Policy The trade policy index is the average of two measures, the average rate of import tariffs and the dispersion of import tariffs. Consequently, it is worth noting that this does not capture non-tariff barriers to trade. But the index does demonstrate that trade liberalization was widely and quickly embraced throughout Latin America. Across the region, deep trade reforms occurred throughout the late 1980s, reflecting a pivot toward export-driven growth policies. The widespread embrace of trade liberalization is further demonstrated by the increasing percentage of GDP attributed to trade. As we see in the figure below, nearly every country in the region saw trade becoming an increasingly significant component of national economic output. 1.2.2  Financial Policy The financial policy index is the average of multiple measures including reserve ratio requirements, freedom of interest rates, taxation rates on financial transactions, and the quality of banking supervision. As with trade policy, financial

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Trade (% of GDP)

80

Country Bolivia Brazil Chile Colombia Cuba Mexico Peru Spain Venezuela, RB

60

40

20

1970

1980

2000

1990

2010

2020

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figure 1.2 Trade As Percentage of GDP. Source: own elaboration, with data from Piburn, “wbstats.”

reforms were largely in line with neoliberal orthodoxy. But in contrast to trade liberalization, this process occurred more slowly. Moreover, this trend was much less uniform relative to trade reform. That being said, these data underscore that trade and financial liberalization occurred largely in tandem with one another and reflect broader processes of globalization. 1.2.3 Privatization The privatization index is a simple average, by year and country, of total private sector participation (in millions of dollars) in infrastructure projects as a proportion of GDP. Consequently, it does not capture the totality of privatization arrangements. For example, this measure does not capture the privatization of the management and operation of state services, such as waste collection. While the measure is limited, we do observe a broad shift toward greater private sector participation in state infrastructure projects. Alongside trade and financial policy, this shift is largely consonant with general conceptualizations of neoliberalism. That is, a movement toward an export-driven economy and a decline in state-owned enterprises. Based on this, we might conclude that the region did experience a neoliberal turn. But a review of further metrics ­complicates this picture.

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1.0

Finance Reform Index

0.8

Country Bolivia Brazil Chile Colombia Mexico Peru Venezuela

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0.4

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figure 1.3 Finance Reform Index. Source: own elaboration, with data from Lora, “Structural Reforms in Latin America.”

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Privatization Index

0.75 Country Bolivia Brazil Chile Colombia Mexico Peru Venezuela

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0.00 1985

1990

1995

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figure 1.4 Privatization Index. Source: own elaboration, with data from Lora, “Structural Reforms in Latin America.”

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0.6

Country Bolivia

Tax Reform Index

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Brazil Chile

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Colombia Mexico Peru Venezuela

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0.2 1985

1990

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figure 1.5 Tax Reform Index. Source: own elaboration, with data from Lora, “Structural Reforms in Latin America.”

1.2.4  Tax Policy The tax reform index is composed of four measures: the average of the maximum tax rate applied to personal income and to corporate income, the productivity of income tax (calculated as the ratio of revenue to GDP and the average income tax rate), the basic VAT rate, and VAT productivity (calculated as the ratio between the tax revenue and private consumption times the basic VAT rate, also known as C-efficiency). Unlike trade and finance, tax reform was highly variegated. Broadly speaking, the scale of tax reform was also more muted relative to trade and finance. That is, while changes to taxation largely followed neoliberal prescriptions, the depths of these changes were modest relative to the deep transformations experienced in the domains of trade and finance. 1.2.5  Labor Legislation The index of labor reform reflects the flexibility of legislation on hiring, expected costs of firing employees, flexibility of working hours, costs of social security contributions and other taxes and payroll contributions, and the level of minimum wage as ratio of per capita income. Unlike the other policy

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Labor Reform Index

0.7 Country Bolivia Brazil Chile

0.6

Colombia Mexico Peru 0.5

Venezuela

0.4 1985

1990

1995

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figure 1.6 Labor Reform Index. Source: own elaboration, with data from Lora, “Structural Reforms in Latin America.”

domains, labor legislation did not undergo any systemic regional transformation. Indeed, many countries did not introduce neoliberal labor reforms. More than any of the other indices, this severely undermines the Marxist interpretations of neoliberal reform, which views neoliberalism as capital reasserting dominance over labor. 1.2.6  Overall Structural Reform Based on the overall index of structural reform, we might conclude that Latin America did undergo a general “neoliberal” turn. But as we have seen, the depth of these reforms varied from country to country. Moreover, disaggregating this general measure shows a much more variegated image; through this disaggregation, we see that much of the changes observed in the overall structural reform index stemmed from trade and financial liberalization. The observed changes reflect a broad embrace of export-led growth and a rejection of protectionist economic policies. But other changes typically associated with neoliberalism were less marked, most notably in terms of tax policy and labor legislation. In other words, rather than being a story of the regional embrace of a new economic model, the data instead reflect Latin America’s deep ­integration into the global economy.

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Structural Reform Index

0.7 Country Bolivia Brazil Chile Colombia Mexico Peru Venezuela

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0.5

0.4

0.3 1985

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figure 1.7  Structural Reform Index. Source: own elaboration, with data from Lora, “Structural Reforms in Latin America.”

Turning our attention toward government expenditures further undermines claims of a regional turn toward the paradigmatic model of neoliberal reform. Across both Latin America and Spain, government expenditure as a percentage of total GDP did not contract but instead experienced continued relative growth. This conflicts with the common sense of understanding of neoliberalism that equates reforms with state retrenchment. 1.2.7 Inflation As we have seen, it is difficult to speak off one overarching neoliberal model, but some clear policy goals did emerge during the latter quarter of the twentieth century. Chief among these was the management of inflation. While various Latin America countries experienced inflationary crises during this period, the general trend reflected a more careful management of currency value. 1.2.8 Democratization Outside of the realms of finance and trade, it is difficult to speak of a broader economic model. But in the political sphere, there was a clear shift.

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Government Spending (% of GDP)

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Country Bolivia Brazil Chile Colombia Cuba Mexico Peru Spain Venezuela, RB

30

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10

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figure 1.8 Government Spending As Percentage of GDP. Source: own elaboration, with data from Piburn, “wbstats.”

GDP Deflator (logged)

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Country Bolivia Brazil Chile Colombia

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Mexico Peru Portugal Spain Venezuela

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figure 1.9  Inflation, Source: own elaboration, with data from Piburn, “wbstats.”

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Country Bolivia Brazil Chile Colombia Cuba Mexico Peru Portugal Spain Venezuela

Polity Score

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–5

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figure 1.10  Polity Score. Source: own elaboration, with data from Marshall and Gurr, “Polity5.”

Latin America and the Iberian Peninsula saw a wave of democratization beginning in the 1970s. These changes have largely led to democratic consolidation throughout both regions. In this sense, a double transition did occur, typified by democratization and a pivot toward export-led growth. But the latter change should not be equated with an embrace of the standard neoliberal model. 1.2.9  GDP Per Capita Despite these changes, growth in the region has remained modest. Indeed, the growth experienced in Spain, as measured by GDP per capita, vastly outpaced what was seen in Latin America. In the latter case, while gains were made across the region, the growth was relatively moderate, with Chile and Brazil standing out as regional exceptions. Having provided a general overview of neoliberalism in the region, we now turn our attention toward various competing explanations for these changes before discussing the diverse national cases. Focusing on the individual cases further cautions again interpreting changes in the region as being driven by adherence to a generic model of neoliberal reform.

GDP Per Capita (2010 U.S. dollars)

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Country Bolivia 20000

Brazil Chile Colombia Cuba Mexico Peru

10000

Spain Venezuela, RB

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figure 1.11 GDP Per Capita. Source: own elaboration, with data from Piburn, “wbstats.”

1.2.10  Explaining Neoliberalism and the State The work of Sebastián Edwards represents one of the best attempts to present a “Neoliberal” perspective to explain neoliberalism itself, as a historical and political phenomenon.5 Edwards sees neoliberal economic policies as a natural and necessary response to a crisis generated by irresponsible import substitution policies pursued by Latin American governments, which he claims generated foreign exchange shortages and high inflation, stymied exports, bloated the state sector and thus “crowded out” private investment, and ballooned government fiscal deficits and foreign debt. Latin America distinguished itself from the successful cases of economic development in East Asia during the period 1965–1980 by higher rates of inflation, a shrinkage in exports rather than fast export growth, lower savings rates, and higher debt. Edwards sees these differences as the product of excessively interventionist and protectionist Latin American governments that created a situation ripe for economic crisis when the US Federal Reserve dramatically increased interest rates in 1981. Neoliberalism, in this perspective, was a form of “market rationality” imposing itself back on errant economies. 5

Edwards, Crisis and Reform in Latin America, 4.

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But certainly, the Chilean story was much more complicated. Eduardo Silva describes the evolution of “neoliberal” policies in Chile as a product of shifting coalitions underlying the Pinochet regime.6 An initial policy of gradual reform was replaced in 1975 with a more aggressive program, as a result of a coalition between Pinochet and “radical internationalist” industrialists in more internationally competitive sectors such as food processing. Pinochet’s alliance with these sectors allowed him to maintain a personalist dictatorship. Similarly, Judith Teichman emphasizes that even in the context of shifting social coalitions and regime changes, certain sectors of the Chilean bureaucracy were able to develop a considerable amount of policymaking autonomy.7 Just as in South Korea, then, the export promotion that Edwards celebrates was a product of considerable state intervention in Chile, even under “neoliberalism.” Similar analyses of internal social structure and state continuity have been conducted regarding the case of Brazil. Luciana de Souza Leão claims that Brazil’s political economy has retained an important role for the state from the Vargas era up to the present, as evidenced by the continued economic importance of institutions like the Brazilian development bank (BNDES) and particular models of sectoral bargaining.8 Matthew M. Taylor illustrates how the beginning of the military regime and the transition to democracy – also often considered as the beginning of a shift to neoliberalism – were not decisive changes in determining the Central Bank’s role. This leads Taylor to conclude that “critical junctures” – as the advent of “neoliberalism” in Latin America in the 1980s has often been considered – “may prove to be far less significant – or at the very least, far more ambivalent – as moments of institutional change than more quotidian policy paths that respond to the day-to-day challenges of governance.”9 A very different, “Marxist” version of the rise of neoliberalism is associated with David Harvey who sees neoliberalism as “a vehicle for the restoration of class power” with a genesis in a particularly unfettered iteration of capitalism.10 Harvey thus echoes Duménil and Lévy, who define neoliberalism as “the expression of the desire of a class of capitalist owners and the institutions in which their power is concentrated, which we collectively call ‘finance’, to restore – in the context of a general decline in popular struggles – the class’s revenues and power.”11 Duménil and Lévy reject the notion, common to neoliberal theories, that popular demands and labor costs fueled the crisis that neoliberalism was meant to resolve. Instead, they propose that a slowdown in technological progress beginning in the 1960s was the fundamental cause 6

Silva, “Capitalist Coalitions,” 535–55 in particular. Teichman, “The New Institutionalism,” 65–68. 8 De Souza Leão, “Bringing Historical Sociology and Path-Dependence Together,” 178–90. 9 Taylor, “Institutional Development through Policy-Making,” 487. 10 Harvey, A Brief History of Neoliberalism, 31. 11 Duménil and Lévy, Capital Resurgent, 2. 7

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behind the decline in profitability. Capital reacted to this decline by squeezing labor in order to maintain profit rates, as illustrated by declines in wage growth and increases in unemployment that were greater in magnitude than the decline in profit rates.12 Duménil and Lévy thus conclude that traditional Keynesian regulation, typical of the postwar period of capitalist prosperity, was an inadequate policy framework to deal with the problems posed by capitalism as an economic system: “Control of the macroeconomy is not sufficient in the long run. A combination of economic and political circumstances will repeatedly destabilize Keynesian policy frameworks. For example, macroeconomic policies cannot remedy the effects of a crisis in profitability.”13 In short, for Marxist theory, neoliberalism is essentially a natural product of capital’s natural quest to constantly reinvest surplus capital and maintain a given level of profitability. This was manifested first in the developed world by capital’s squeeze on labor, and then by neoliberalism’s expansion into the Global South, including Latin America, in search of cheap labor, cheaper raw materials, and other sources of profit. The implementation of “neoliberal” policies such as trade and financial liberalization, tax reductions, privatization, and “labor market reforms” in Latin America are thus explained, directly or indirectly, as a result of this quest. Both the “Neoliberal” and the “Marxist” approaches, as described here, encounter difficulties when facing up to several important facts. As a rule, they tend to exaggerate the retreat of the state and underestimate both its continuity and its importance. Edwards, for example, criticizes the fact that Latin American states “severely controlled capital markets, quantitatively allocating credit,”14 and he also mentions East Asia – with its lower inflation, high savings rates, and export-led growth – as a model for what Latin America should have done during the period of 1965–1985. Yet during most of that same period in South Korea, one of the main East Asian developmental “tigers,” virtually all banks were state owned.15 Curiously enough, the case of South Korea also punches a hole in Harvey’s contrasting theory of neoliberalism. Harvey cites the example of steel

12 13

14 15

Duménil and Lévy, Capital Resurgent, 27. Duménil and Lévy, Capital Resurgent, 196. This analysis is, of course, limited in scope to the developed countries of Western Europe and the United States. However, David Harvey more or less illustrates how Duménil and Lévy’s analysis of the raison d’être of neoliberalism applies to the Global South in his Seventeen Contradictions and the End of Capitalism: “Without uneven geographical development and its contradictions, capital would long ago have ossified and fallen into disarray. This is a key means by which capital periodically reinvents itself…. Start-ups in say, South Korea – where steel production is much cheaper because of lower-cost labor, easier to access raw materials and markets, and the like – drive out the more costly and the less efficient industries in older regions such as Pittsburgh and Sheffield.” Harvey, Seventeen Contradictions, 147–48. Edwards, Crisis and Reform in Latin America, 12. Chang, “The Political Economy of Industrial Policy in Korea,” 151–52.

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production moving to Korea in search of “lower-cost labor” and “easier to access raw materials and markets” as an illustration of international capital’s constant search to shore up profit margins, the main force behind the expansion of neoliberalism. Yet here Harvey also seems to ignore the persistent presence of the South Korean state as a political and economic actor, which made the expansion of the South Korean steel industry possible. An existing comparative-historical literature, meanwhile, emphasizes a greater degree of institutional continuity through the period of neoliberal reforms in Latin America, and it addresses, at least in part, the main hole in the “Neoliberal” and “Marxist” approaches outlined above: an underappreciation of the continued importance of state intervention. This literature also emphasizes the importance of domestic social configurations in causing and influencing the neoliberal reforms, a factor that is more or less ignored by the two other theoretical approaches, which see market rationality, international capital, and financial institutions as the main causal actors.16 In the rest of this chapter, we follow what we might call a Polanyian approach. Paraphrasing Polanyi on laissez-faire, we could say that while neoliberalism was the product of deliberate state action, “subsequent restrictions on laissez-faire started in a spontaneous way. Laissez-faire was planned; planning was not.”17 In other words, market society – in nineteenth century England in The Great Transformation, or in modern neoliberalism in the case of “neo-Polanyian” literature – is based on state structures.

1.3  case

studies

In the following pages, we provide short summaries of the various Latin American political and economic policies during the past four decades. We begin with a discussion of the two most cited “successes”: Brazil under Cardoso and Lula, and Chile following Pinochet. We then consider whether these successes could be said to originate with specific neoliberal policies. We continue with the analysis of other cases in the region who had less dramatic policies and outcomes. One of the most obvious findings of our summaries is that it would be impossible to speak of a regional model. One trend was clear: the democratization of the region beginning in the 1980s. But these newly democratic governments did not follow the same model. Some policies do appear consistent, most importantly, the control of inflation in the 1980s and 1990s. Most of the LA countries also expanded their openness to global trade. Both the policies and their results challenge the idea of a single neoliberal public policy model. We then discuss the three cases of “anti-neoliberal” policies and suggest that these did not represent that radical a break, but essentially followed the historical pattern of relaying on commodity sales or, in the case of 16 17

Taylor, “Institutional Development through Policy-Making,” 491. Polanyi, The Great Transformation, 141.

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Cuba, the largesse of an ally. Following this discussion, we present a summary of policies in the Iberian Peninsula, but also call into question any idea that it represents a neoliberal success story. 1.3.1  Brazil and Chile: Neoliberal Success in Latin America? Brazil and Chile are often presented, in slightly different contexts and periods, as neoliberal “successes” – to what extent is this the case? Answering this question must begin with the fact that at least the last two-and-a-half decades have seen relatively little change in the productive structures of Latin America’s major economies. All of them have remained primarily commodity exporters, with the exception of Mexico, which has served as a low-wage manufactured export platform for the United States. The commodity boom in the former, and the expansion of NAFTA in the latter, has only served to reinforce economic continuity. Brazil and Chile are no exception; they have remained exporters of commodities and their derivatives throughout the last few decades. Several differences are of note, however: Exports have always played a more important part of the Chilean economy than of the Brazilian one. In 1995, when Chile’s new democratic government was largely continuing many of the economic policies of the Pinochet dictatorship and Brazil was implementing the Plano Real to control inflation, exports were already much more important to the Chilean economy than to the Brazilian one.18 1.3.1.1 Chile The period between 1975 and 1982 saw the most radical attempts to establish a neoliberal model in Chile. During this period, Pinochet formed alliances with more internationally competitive sectors of the Chilean industrial elite – at the expense of more traditional industrial sectors reliant on import substitution – and placed neoclassical economists trained at the University of Chicago, the 18

Data obtained by dividing Observatory of Economic Complexity (OEC) data for total export value by population data obtained from the World Bank’s World Development Indicators. Note that figures are in current, not real dollars. The composition of Brazilian exports has changed significantly during the past 25 years, while that of Chilean exports has remained remarkably stable. In 1995, the top three Brazilian exports were in order of value, iron ore, coffee, and soybean meal; in 2000, aircraft, iron ore, and soybeans; in 2005, iron ore, soybeans, and cars; in 2010, iron ore, soybeans, and raw sugar; in 2015, soybeans, iron ore, and crude petroleum. Chile, in contrast, has kept the exact same three exports in the exact same order, except for one year (2005): refined copper, copper ore, and sulfate chemical wood pulp. In part, this difference is simply attributable to Chile’s consistent position as one of the world’s primary copper producers. However, behind the difference are also substantial dissimilarities in industrial and economic policy. Take sulfate chemical wood pulp, for example, consistently Chile’s third largest export by value. Its importance is largely a result of concerted efforts to promote the forestry sector using a variety of industrial policy incentives, including under the Pinochet dictatorship.

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so-called “Chicago Boys,” in charge of economic policy. By 1979, tariffs had been reduced to a flat 10 percent rate.19 The new regime re-privatized firms nationalized under the Allende presidency – reducing the number of stateowned enterprises from 460 to about two dozen by 1980 – and it returned about 30 percent of lands expropriated under agrarian reforms to their previous owners.20 Although Pinochet did not privatize the state-owned copper company, CODELCO, he did open up copper production to foreign enterprises.21 Beginning in 1981, workers were required to contribute 10 percent of their incomes into private accounts managed by private Administradoras de Fondos de Pensiones (AFPs).22 However, the economic challenges of 1982 that ensued from both these draconian policies and a general international crisis allowed a more gradualist coalition of industrialists to assemble behind the Pinochet dictatorship.23 The result was a more robust industrial policy and a retreat from radical neoliberalism. Organizations like the old Corporación de Fomento de Chile (CORFO) and new ones like PROCHILE and Fundación Chile supported export sectors like processed forestry and food products with subsidies and credit, while also searching for new export markets. These policies continued under the centerleft governments of the 1990s, which extended financing programs toward small and medium enterprises (SMEs) and established the Fondo de Desarrollo Tecnológico y Productivo (FONTEC) in 1991 in order to expand support for R&D in the export sector.24 Thus, while during the first decade of the dictatorship (1973–1983) exports grew at about the same rate as the previous decade (about 3.5 percent annually), between 1983 and 1999 exports grew at an average rate of about 6 percent per year. At the same time, the importance of copper in Chile’s export profile actually decreased. In 1960–1973, mining exports accounted for an average of 86.5 percent of Chile’s total export value; by the 1990s, this figure had decreased to about 46 percent. During the same period, manufactured exports increased from 10 percent to 40 percent of total export value.25 This change in export profile seems to have been permanent; even during the peak of the commodities boom, when copper increased slightly in importance, the top three exports, including copper, never passed 55 percent of total export value, and they had decreased again to about 45 percent by 2015.26

19 20 21 22 23 24 25 26

Silva, “Capitalist Coalitions,” 547. Petras and Vieux, “The Chilean ‘Economic Miracle’,” 62. Riesco, “Chile, a Quarter Century On,” 100–101. Arenas de Mesa and Mesa-Lago, “The Structural Pension Reform in Chile,” 150. See Silva, “Capitalist Coalitions,” 549–50; for the privatized pension system, see Arenas de Mesa and Mesa-Lago, “The Structural Pension Reform in Chile,” 150. Teichman, “The New Institutionalism,” 65–68. Alvarez and Crespi, “Exporter Performance and Promotion Instruments,” 227–29. OEC data.

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Since the 1990s, meanwhile, Chilean economic policies have been characterized by two innovations. First of all, successive administrations have expanded social spending and redistribution such that the benefits of growth were distributed more evenly (but, as discussed below, not dramatically changing Chile’s levels of inequality). Under the Christian Democratic Aylwin and Frei administrations of the 1990s, public spending in the education sector grew by 150 percent, adjusted for inflation, and spending in the health sector grew by 120 percent, while the poverty rate decreased from 38.6 percent to 21.7 percent during the same period.27 In the early 2000s, the social-democratic Lagos administration (2000–2006) introduced the AUGE program, which somewhat decreased inequality between the country’s public and private health sectors by designating fifty-six illnesses to be treated by standard coverage between the two sectors.28 Meanwhile, the first Bachelet administration (2006–2010) reformed the privatized pension system, which had delivered lower rates of return and higher costs than promised and had not increased the rate of coverage. It established a guaranteed basic pension for those without private pension accounts, as well as a system of supplements for those whose private pensions did not meet a minimum level.29 During her second term (2014– 2018), Bachelet made university education free for students whose household income was in the bottom 60 percent of the distribution and implemented a tax reform increasing the corporate tax and eliminating loopholes; these reforms ultimately increased by 50 percent the amount of taxes paid by the top 1 percent of earners.30 During his first term (2010–2014), center-right president Sebastián Piñera actually added to the list of illnesses covered by AUGE and expanded conditional cash transfers.31 In concert, all of these measures seem to have had a positive effect on economic inequality in Chile, as evidenced by World Bank GINI data, which show a gradual but consistent decline in Chile’s GINI coefficient over the last several decades, from over fifty-five in the late 1980s to about forty-seven by the late 2010s.32 The second important trend in economic policy since the democratic transition has been the consolidation of counter-cyclical fiscal policies. Beginning in 2001, the Concertación governments began to implement fiscal policies adjusting for copper prices and GDP growth, which were enshrined in 2006 in the “Fiscal Responsibility Law.”33 Although the name of the law would seem to suggest orthodox economic policy, in practice it facilitated Keynesian spending

27 28 29 30 31 32 33

Aninat, “Chile in the 1990s,” 20. Huber, Pribble, and Stephens, “The Chilean Left in Power,” 88–89. Huber, Pribble, and Stephens, “The Chilean Left in Power,” 92. Seiler and Raderstorf, “Michelle Bachelet’s Underappreciated Legacy in Chile.” Niedzwiecki and Pribble, “Social Policies and Center-Right Governments in Argentina and Chile,” 79–83. John’s data. Rodriguez, Tokman, and Vega, “Structural Balance Policy in Chile,” 60–61.

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patterns by reserving surpluses in times of economic growth and facilitating greater spending during economic downturns. This came in handy during the recession of 2009 in particular. It also safeguarded social spending, particularly on pensions.34 Thus, the 5.5 percent average fiscal surplus in between 2004 and 2007 turned quickly into a 4.4 percent deficit in 2009 in order to respond to the world economic crisis.35 Moreover, Chilean Central Bank economist Michael Pedersen suggests that “the Chilean fiscal rule works in the sense that copper price movements have little impact on the non-mining sector.”36 Chile has been governed for 24 of the last 30 years by center-left governments. Given the reasonable socioeconomic gains of these years – the consolidation of industrial policy, a gradual decrease in inequality and expansion of the welfare state, and insulation from the worst of international shocks through Keynesian fiscal policy – how is it then that the massive protests of late 2019 erupted? Explanations have abounded. Carolina Tohá, ex-mayor of Santiago and a minister in Michelle Bachelet’s first government, provides what seems to be a level-headed analysis. She roots the problem in the institutional legacy of the dictatorship. Taking into account the advances of the center-left after the transition, she argues: “Lo que ha hecho explotar a Chile es la incapacidad del sistema político de destrabar los debates que no tenían una salida. La derecha estiró demasiado el chicle de las ventajas que le daba el sistema. Hoy probablemente se arrepienta.”37 In other words, there came a point at which the practice of tweaking the Pinochet-era framework to address inequality, expand political representation, and institute progressive social changes became insufficient, and further changes to the system were blocked by the institutions of precisely that framework. This argument seems backed by the limitations of the reforms. The AUGE program has left fundamentally intact the two-tiered health system, of which the public component still serves 85 percent of the population and is burdened 34 35 36

37

Huber, Pribble, and Stephens, “The Chilean Left in Power,” 82–85. Ffrench-Davis, “Challenges for the Chilean Economy,” 64. Pedersen, “The Impact of Commodity Price Shocks,” 1307; Ffrench-Davis, “Challenges for the Chilean Economy,” 64–73. Chilean economist Ricardo Ffrench-Davis points out, however, that this counter-cyclical spending pattern seems to have lost its coherence over the next three years after the recession, seemingly as a result of the way GDP growth and copper prices were estimated. He adds that the Chilean economy, in addition to restoring the coherence of Keynesian fiscal policy, needs more aggressive industrial policy, particularly with respect to “long-term local financing, the transfer of technology and labor training” for small and medium-sized firms. Nevertheless, it should be pointed out that while Brazil entered recession during 2015–2016, in Chile growth only slowed, from 5.7 percent in 2010–2012 to 2.3 percent in 2015, even though according to the OEC data Chile experienced a proportionally greater decline in its export value during that period (from $71.9 billion to $64.8 billion in Chile vs. $207 billion to $197 billion in Brazil), and exports constitute a greater percentage of GDP in Chile than they do in Brazil. See Tohá, “Chile o el vértigo del futuro,” 83–84. Tohá also mentions the improvements in the GINI in particular – see p. 80.

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by exasperatingly long-waiting lists.38 The privatized pension system also remains intact, despite the efforts to make it more progressive and establish minimum pension guarantees. “It is therefore not surprising,” as Kirsten Sehnbruch and Sofia Donoso argue, “that Chileans state that their top three priority concerns are pensions (65 percent), health care (46 percent) and education (38 percent).”39 Nevertheless, the government’s response to the protests has addressed, perhaps surprisingly, the barrier identified by Tohá, in proposing a “social pact” with a referendum on a new constitution. The Mesa de Unidad Social, a coalition of trade unions, NGOs, and representatives of the Communist and Humanist parties, have rejected the proposal due to their lack of consultation in the process. Yet most political parties, as well as 67 percent of Chileans, support it.40 1.3.1.2 Brazil To what extent does Brazil constitute a neoliberal showcase? The Brazilian military dictatorship, which lasted between 1964 and 1985 and thus overlapped substantially with the Pinochet dictatorship, provides a good starting point for a comparison with Chile. The Brazilian dictatorship is not viewed as a paragon of neoliberalism in the same way the Pinochet regime is. Certainly, the regime pursued interventionist economic policies and import substitution, the latter to a greater extent than its Chilean counterpart. But just as the degree of interventionism of the Pinochet regime is underestimated, to say that the Brazilian regime was a pure ISI regime would also be misleading. First, during its first years, the dictatorship substantially reduced inflation by reducing demand, a process that involved the erosion of working-class wages, controlled spending cuts as well as increases in tax collection; not a set of policies typical of Latin American ISI.41 Second, average tariffs actually decreased more than 20 percent between 1967 and 1973, from 48 percent to 27 percent. Moreover, just like the Pinochet regime after 1982, the Brazilian dictatorship pursued export promotion aggressively, particularly in the area of manufactured exports, which grew at an average annual rate of 30 percent during the 1970s.42 This expansion involved a variety of industrial policies including targeted subsidies and state credit and entailed a centralized, bureaucratically efficient authoritarian regime committed both to an alliance with industrial elites and a program of working-class repression. An important caveat to this policy, however, was its substantial reliance on the investment of multinational corporations, which were producing half of Brazil’s manufactured exports by the end of the 1970s.43 38 39 40 41 42 43

Sehnbruch and Donoso, “Social Protests in Chile,” 54. Sehnbruch and Donoso, 55. Sehnbruch and Donoso, 53 and 55–56. Kohli, State-Directed Development, 202–03. Kohli, State-Directed Development, 206. Kohli, State-Directed Development, 203, 207, and 216.

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The oil crises of the 1970s threw off the dictatorship’s industrial strategy, however. When oil prices increased dramatically in the mid-1970s, rather than accepting reduced growth, the regime bet on financing a continuation of the rapid and import-intensive growth strategy with debt, a strategy that seemed viable in the short term but fell apart with the dramatic increase of US interest rates in the early 80s.44 Atul Kohli thus calls the dictatorship’s approach “a debt-led, high-growth strategy that almost worked.”45 Brazil’s newly inaugurated democratic government, which took office at the end of the 1980s, thus inherited a much more difficult macroeconomic situation than its Chilean counterpart, a fact that must be taken into consideration when evaluating the “success” of its policies. The latter could continue the industrial policies initiated after the recession of 1982, policies that had resulted in consistent export-led growth. The former had to deal with the high inflation and debt that it inherited after a debt-financed process of industrialization was blown out of the water by the exact same crisis of the early 1980s. Thus, inflation became a constant concern of Brazilian governments in the 1990s; by the end of the administration of José Sarney in 1990, inflation had reached 2000 percent.46 While the measures used to deal with the debt and hyperinflation often involved significant doses of neoliberalism, they were not the radical neoliberalism of Chile before 1982, for example. Indeed, many of the measures of the 1990s were “heterodox”: trying to insulate wages against inflation and curb demand among the middle and upper classes under Sarney; asset freezes and capital gains taxes under Fernando Collor (1990–1992); and a reintroduction of “moderate protectionism” under Fernando Henrique Cardoso (1994–2002).47 The one neoliberal constant was the privatization of state-owned enterprises. In any case, by Cardoso’s presidency (1994–2002), inflation had decreased to about 15 percent per year.48 The Workers’ Party (PT) government of Luis Inácio “Lula” da Silva thus inherited an economy in 2002 with significantly lower inflation than it had seen in the 1990s. Lula’s administration also benefitted from a massive boom in commodity prices. Between 1995 and 2000, for example, the total value of Brazilian exports increased moderately, from $49.5 billion to $58 billion. Between 2000 and 2005, in contrast, the figure skyrocketed to $126 billion.49 It is thus not surprising that scholars estimate that during the same period 80 percent of Brazil’s GDP growth was a direct result of this expansion of exports.50 44 45 46 47 48 49 50

Kohli, State-Directed Development, 208–10. Kohli, State-Directed Development, 209. Kingstone and Ponce, “From Cardoso to Lula,” 102. Skidmore, The Politics of Military Rule in Brazil, 276–83; Crabtree, “The Collor Plan,” 120–21; Kingstone and Ponce, “From Cardoso to Lula,” 103 and 106. Schneider, “Brazil under Collor,” 326–27; Kingstone and Ponce, “From Cardoso to Lula,” 103 and 106. OEC data. Bonelli and Castelar Pinheiro, “New Export Activities in Brazil,” 14.

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Both fiscal and monetary policy were orthodox during Lula’s administration. As finance minister, Lula installed the neoliberal Henrique Meirelles; in 2005, the Brazilian Central Bank raised interest rates to 19.23 percent from a rate of 16.24 percent the previous year. At the same time, Lula consolidated a program of conditional cash transfers that had been initiated under the Cardoso administration as Bolsa Escola – the program was already reaching 5 million families by the end of Cardoso’s term – which allowed the economic effects of the commodity boom to trickle down. As a result, the poverty rate decreased from 38.7 percent in 2003 to 30.3 percent in 2007, while the Gini index declined from 57.7 to 55 during the same period.51 But what about industrial policy? Something of a program began to come together toward the end of Lula’s presidency with the promulgation of the Programa de Aceleraçâo do Crescimento (PAC) in 2007, and it would carry over to the beginning of Dilma’s administration. The basic pillar of the new developmentalism was an attempt to use local content requirements to create an internally articulated industrial structure. The policy was heavily reliant on oil, especially in wake of the discovery of massive new oil reserves under Lula’s administration.52 By 2011, a study was estimating that “61.5 percent of all industrial investment in the period between 2011 and 2014 will be linked to the exploration, production and refining of oil and gas”; indeed, oil revenues were funding 35 percent of the PAC’s investment by 2012.53 Local content requirements did have something of an effect, however. The shipbuilding industry is a case in point, particularly as it related to the oil industry. In 2012, Petrobras reached an agreement for the construction of twenty-six oil rigs with local content requirements of 55–65 percent.54 As a result of this type of policy, the number of workers employed in the shipbuilding industry increased from 1900 to 80,000 between 2000 and 2010.55 Success did not last, however. Perry Anderson essentially argues that the economic success of Lula’s government had rested on two factors: the growth in commodity exports and an expansion of consumer credit, the latter used to finance a boom in domestic consumption. Thus, Lula’s presidency saw the share of commodities in Brazil’s export profile increase from 28 percent to 41 percent – during Dilma’s first term, the figure would surpass 50 percent – while total private sector debt more than doubled as a percentage of GDP between 2005 and 2015, from 43 percent to 93 percent. At the same time, beginning precisely in 2011, when oil seemed to be one of the key pillars of Brazil’s 51 52 53 54 55

Kingstone and Ponce, “From Cardoso to Lula,” 106–14 and 117; Melo, “Unexpected ­Successes,” 163. Romano Schutte, “Brazil: New Developmentalism,” 50–53. Romano Schutte, “Brazil: New Developmentalism,” 61. Singer, “The Failure of the Developmentalist Experiment in Three Acts,” 360. Romano Schutte, “Brazil: New Developmentalism,” 62.

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industrial development strategy, the price of crude petroleum began to tumble, eventually reaching $50 a barrel from a high of $140, with the prices of iron ore and soybeans experiencing similarly dramatic declines.56 These economic vulnerabilities were compounded by a shift in social support for Lula’s PT. Brazilian political scientist André Singer sees the ultimate failure of the Lula-Dilma development strategy as rooted in the collapse of the implicit social alliance that underpinned it – between the industrial bourgeoisie and the working class, the latter as represented by the PT. During her first term in office, Dilma attempted to “deepen” the developmentalist advance under Lula by expanding credit, planning to channel 600 million reais of industrial investment through the BNDES, applying selective tax incentives for private industrial investment, expanding infrastructure spending, reintroducing some capital controls, attempting to lower the prices of energy inputs in the industrial sector, and devaluing the real. Dilma also went after Brazil’s very high interest rates, an effort that failed in April of 2013 when the Central Bank raised them again. Singer’s basic point is that, in a wave of panic in the international business press about the return of statism, “the industrial bourgeoisie turned ‘against its own interests’ to avoid what was seen as the greater evil: an excessively strong State, allied with the workers and out of control.”57 In any case, waves of protest began in June 2013, organized not by the right but rather by left-wing groups, in response to hikes in public transit fares in Sao Paulo; these protests then became generalized.58 Moreover, after winning reelection in 2014, Dilma’s administration actually began to impose austerity measures.59 Brazil entered recession in the next two years, during which it lost a cumulative 8 percent of GDP relative to 2014 and saw a 76 percent increase in the unemployment rate, to 12.6 percent.60 1.3.2  Middling Cases: Mexico, Peru, and Colombia These three cases have received much less attention and have not been used as exemplars of neoliberal success. The history of their public policy programs over the past 40 years again argues against a reductionist model of neoliberalism and once again demonstrates the critical role of the state.

56

57

58 59 60

Anderson, Brazil Apart, 102–03. Romano Schutte (2013) also mentions the expansion of consumer and housing credit, though not in the same critical fashion as Anderson, likely because he lacked the benefit of hindsight; see pp. 53–54. Singer, “The Failure of the Developmentalist Experiment,” 362. A brief summary of Singer’s analysis can be found in this article; for a more extended analysis in Portuguese, see Singer, “Cutucando onças com varas curtas.” Singer, “From a Rooseveltian Dream to the Nightmare of Parliamentary Coup,” 19–20. Anderson, Brazil Apart, 102. “Brazil’s Recession Worst on Record.”

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1.3.2.1 Mexico The presidency of José López Portillo, who took office in 1976 from Luis Echevarría, is a good point to start a survey of Mexican public policy at the beginning of the neoliberal era, because during this administration the economy went to a structural shift. The discovery of massive oil reserves during López Portillo’s presidency coincided with a global increase in oil prices in the wake of the Arab oil embargo. While annual oil production increased from about 0.7 million barrels to just under 2.5 million barrels during the first four years of López Portillo’s presidency, oil revenues increased twelvefold, from $0.5 billion to $6 billion. As a result, the López Portillo administration went on a massive spending spree, funding it with extensive borrowing from foreign banks in addition to oil revenues. When oil prices began to decline in the early 80s, however, the calculation the administration had made in incurring this debt was shown to have maximized risk. The result was a financial and economic crisis – ­inflation, capital flight, and a collapse of the value of the peso, which slid from 26 to 100 pesos to the dollar during López Portillo’s administration.61 In 1982, just before leaving office, López Portillo introduced foreign exchange controls and ­nationalized private banks as a measure to temper capital flight.62 López Portillo was succeeded by Miguel de la Madrid, who pursued a much more orthodox economic policy. This included a re-privatization of the banks, trade liberalization through a significant loosening of import licensing restrictions, and entrance into the GATT in 1986. The Pacto de Solidaridad Económica (PSE) of 1987 with business leaders included the marketization of exchange rates, wage indexation, price increases, and further trade liberalization.63 De la Madrid also pursued further privatizations and harsh austerity measures in the public sector, including wage reductions and layoffs of public sector workers.64 De la Madrid’s successor, Carlos Salinas de Gortari (1988–1994), continued the liberalizing course, including further privatizations and deregulation.65 Another significant measure was a liberalization of Mexico’s land reform sector. A new law allowed ejidos to be sold and rented and allowed for individual ownership.66 Perhaps the most important economic policy of Salinas’s sexenio, however, was of course the negotiation and ratification of NAFTA, which came into effect on January 1, 1994.67 Salinas also kept the peso at a tight peg to the dollar, resulting in substantial overvaluation and culminating in the peso crisis of 1994, accompanied by

61 62 63 64 65 66 67

Meyer and Sherman, The Course of Mexican History, 678–84. Thacker, Big Business, the State, and Free Trade, 52. Thacker, Big Business, the State, and Free Trade, 53, 81–82, and 86. Meyer and Sherman, The Course of Mexican History, 687. Kleinberg, “Strategic Alliances,” 75. Meyer and Sherman, The Course of Mexican History, 698. Staudt, “How NAFTA Has Changed Mexico,” 43.

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capital flight and foreign exchange depletion. Ernesto Zedillo (1994–2000), Salinas’s successor, thus entered the presidency with a crisis on his hands. The unemployment and annual inflation rates reached 40 percent, GDP declined by 7 percent in 1995, and interest rates skyrocketed. The Zedillo administration thus let the exchange rate float, pursued more privatizations, and tried to lure in foreign investment with tax incentives. The result was some economic improvement – foreign investment, exports, and economic growth picked up, while inflation declined.68 The Zedillo administration also saw the implementation, in 1997, of a new conditional cash transfer program called Progresa, which paralleled the installation of Bolsa Escola in Brazil.69 Zedillo was followed by Vicente Fox of the Partido Acción Nacional (PAN), the first time the PRI lost the presidential election since 1929, a critical juncture that marked the consolidation of the transition to democracy in Mexico. Fox inherited several years of decent growth in the second half of the Zedillo administration. However, his economic policy efforts mostly fell short. Fox struggled to work with a Congress dominated by the opposition, and Mexico suffered from the effects of the US recession in the early 2000s. Only in 2004 did GDP begin to grow again, and even then, at 4 percent, growth was well below Fox’s targeted average rate of 7 percent. The Fox administration was also unable to expand tax revenues and continued to rely on oil sales to finance the budget. Thus, tax revenues were stuck at 11 percent of GDP, as opposed to 25 percent in Chile, for example. As far as NAFTA and international trade were concerned, Fox did inherit a marked increase in the importance of manufactured exports within the total export profile – by the turn of the millennium, they had finally surpassed oil exports in value. However, despite Fox’s effort to strengthen industrial policy and consolidate it in a Comisión Intersecretarial de Política Industrial, linkages between multinational exporters and smaller local firms continued to be weak. The Fox administration did see a slight improvement in levels of inequality, as the bottom 80 percent of households increased its share of national income slightly, relative to the top 20 percent.70 The main policy focus of the administration of Felipe Calderón (2006–2012, also of PAN) was the so-called War on Drugs, which included the deployment of the military and a massive expansion of the Federal Police, from 6,500 to 37,000 officers.71 In terms of economic policy, Calderón continued the long-term program of liberalization pursued by previous presidents since De la Madrid. This included further deregulation – Calderón boasted of having “eliminated 16,000 rules or regulations at the federal level” – and trade liberalization, for which he claimed, “the average tariff on manufacturing supplies 68 69 70 71

Kleinberg, “Strategic Alliances,” 80–83; Thacker, Big Business, the State, and Free Trade, 195. Parker and Todd, “Conditional Cash Transfers,” 866. All the above facts and figures are taken from Pastor and Wise, “The Lost Sexenio,” 143–55. Rodríguez, “Calderon Sees Security as Legacy.”

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reduced from 12% to 4%.”72 However, GDP growth continued to slow: It averaged only 2.2 percent over the course of Calderón’s tenure. Some analysts also pointed to an absolute increase of 14 million in the number of people under Mexico’s poverty line.73 Enrique Peña Nieto (2012–2018) signaled a return of the PRI to the national executive power in Mexico, under a system of fair elections. In terms of economic policy, continuity was the rule. Interest rates remained high, and GDP growth continued to be rather disappointing (less than 3 percent on average during Peña’s sexenio). Tax collection increased slightly as a percentage of GDP, from about 11 percent to just under 14 percent toward the end of Peña’s tenure. Industrial policy continued to be weak, however, compared not only to the industrial powerhouses of East Asia but also to other Latin American countries. Thus, for example, even though the Peña administration channeled more resources into Mexico’s development bank, Nacional Financiera, by 2016 its portfolio represented still only 3 percent of GDP, compared to 15 percent for Brazil’s BNDES. Peña’s landmark piece of economic policy was an attempt at reform in the energy sector, in which the state-owned oil company, PEMEX, was opened up to greater levels of private investment. There is a strong argument to be made that the reform was a product of pragmatic, rather than ideological/neoliberal considerations. Between 2000 and 2013, PEMEX provided the Mexican national government with 40 percent of its total income. Yet the company was increasingly in financial disarray, unable to invest sufficiently in production. It was hoped that opening PEMEX to the private sector would allow for increased investment, although it does not seem that the company has seen the levels of investment that were promised.74 Rhetorically, Peña’s successor, Andrés Manuel López Obrador (AMLO, 2018–2024), has consistently critiqued the liberal economic policies of his predecessors. In practice, however, AMLO’s presidency has not constituted a radical break with the past. Several policy developments have been of note so far. Toward the beginning of his presidency, AMLO cancelled the construction of a new international airport in Mexico City, already partially underway, after an electoral “consultation” with low turnout and numerous irregularities. Under the banner of “republican austerity,” (austeridad republicana), AMLO has undertaken austerity measures in certain parts of the public sector, notably by cutting the salaries of upper-level government officials including his own, which he reduced by 40 percent. He has focused significant attention on several landmark public works projects, including a new international airport project in the Mexico City metro area, a tourist railroad construction project in the southeast of the country (the so-called “tren maya”), and the construction 72 73 74

“Looking Back on the Calderon Years.” Huérfano, “El crecimiento económico con Felipe Calderón fue magro.” The statistics above and the summary of Peña’s tenure are from Bizberg, “El fracaso de la ­continuidad,” 638–72.

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of a new oil refinery. The latter in particular has been part of a broader project to revitalize PEMEX’s productive capacities. Despite AMLO’s ostensibly leftist orientation, his administration has been remarkably conservative in terms of public spending. Even in the area of social welfare, which has been an important part of AMLO’s platform, $2.5 billion in allocated resources had gone unspent by the end of 2019.75 1.3.2.2 Peru Peru transitioned to electoral democracy in 1980 from a military government that had pursued cautious neoliberal reforms. Led by Juan Morales Bermúdez, the regime had undone some of the policies of the preceding leftwing nationalist military government of Juan Velasco Alvarado, particularly by cutting social spending and subsidies.76 The first elected government, led by Fernando Belaúnde (1980–1985), accelerated neoliberal reforms. His program included privatizations, trade liberalization, currency devaluation, and a program of investment in public works, particularly those linked to primary goods exports. The program met limited success, even by its own measures. Privatizations were limited, in part because of political reluctance and also due to lack of demand in the private sector. The administration did make significant advances in trade liberalization – lowering the average tariff rate from 46 to 32 percent and increasing the percentage of goods that entered duty free from 38 to 98 percent – although this had detrimental effects on domestic manufacturing. The public investment program did not meet its targets, nor did the administration’s measures bring in the levels of foreign investment promised. Macroeconomic results were quite disappointing. Growth slowed in 1982–1983, with GDP contracting by 12 percent in 1983 and manufacturing by almost 17 percent, with a slight recovery in the next two years. Meanwhile, annual inflation increased from 60 percent to over 150 percent over the course of Belaúnde’s administration, while gross fixed investment declined from 24 percent to less than 17 percent of GDP during the same period.77 Belaúnde was succeeded by Alan García of the center-left APRA party (1985–1990). García tried to formulate a social-democratic economic policy based on heterodox macroeconomic policy, industrial policy, political sensitivity to the interests of labor, and consultation with major industrialists (concertación). Specific policies included a cap of 10 percent on the debt service ratio, interest rate reduction, price controls, and deficit spending. For a variety of reasons, including hostility from creditors and international financial institutions, a drain in foreign exchange reserves, demand spikes in areas without price controls, and a decline in tax revenue, the program failed; Peru entered into a recession starting in 1988. In 1989, GDP shrunk by 10 percent, the 75 76 77

Bravo Regidor, Beck, and Iber, “El primer año del México de AMLO.” Silva, Challenging Neoliberalism in Latin America, 234–36. Pastor and Wise, “Peruvian Economic Policy in the 1980s,” 86–91.

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manufacturing sector contracted by almost 20 percent, and inflation surpassed 2700 percent.78 Alberto Fujimori (1990–2000) was elected on a promise to tackle this economic crisis in a gradual manner that considered the interests of the working class and the poor, in contrast to the “shock” of public sector layoffs, quick elimination of price controls, and privatizations offered by his opponent, writer Mario Vargas Llosa. Soon after taking office, however, he quickly embarked on a neoliberal agenda of removing subsidies, trade liberalization, privatizations, labor reforms, and financial deregulation. Soon after Fujimori removed price controls and subsidies in 1990, the price of gasoline skyrocketed by more than 3000 percent, and the price of bread by over 1500 percent.79 Although the Fujimori presidency saw some economic growth, it was not translated into improving living standards, and indeed the poverty rate increased from 42 percent to 53 percent between 1993 and 2000. The Fujimori regime was able to maintain power despite these negative results with relatively little resistance from social movements because of the fight against the Sendero Luminoso and Tupac Amaru guerrilla insurgencies as well as a consolidation of authoritarian power backed by the military.80 A corruption scandal unveiled in 2000 resulted in massive protests against the Fujimori regime, and Fujimori was quickly forced to resign. After a brief transition government, he was succeeded by centrist Alejandro Toledo (2001– 2006).81 In political and rhetorical terms, Toledo’s administration repudiated the Fujimori regime, most notably by establishing a “Truth Commission” to investigate crimes committed during the counterinsurgency of the 80s and 90s. In terms of economic policy, however, Toledo’s administration largely “deepened” the neoliberal program of the Fujimori regime. Toledo tried to finance expanded social and public investment by conducting further privatizations and trying to attract foreign investment; however, tax collection remained remarkably low, at 13 percent of GDP. The administration promulgated a decentralization law that, while devolving some powers in areas like education and health, did not devolve tax powers. Finally, Perú under Toledo signed several free trade agreements, most notably with the United States. Riding a rise in demand for Peru’s primary exports, the administration experienced increased growth, which surpassed 5 percent in 2004 and 6 percent in 2005.82 This economic growth did not imply popularity for the government, which saw its approval rating drop dramatically below 10 percent.83

78 79 80 81 82 83

Pastor and Wise, “Peruvian Economic Policy in the 1980s,” 96–104 and 90. Stokes, “Democratic Accountability and Policy Change,” 211–15. Silva, Challenging Neoliberalism in Latin America, 240–45. Silva, Challenging Neoliberalism in Latin America, 245–46. Gonzales de Olarte, “La economía política peruana de la era neoliberal,” 305 and 311–16; Contreras and Zuloaga, Historia mínima de Perú, 278–79. Gonzales de Olarte, “La economía política peruana de la era neoliberal,” 316.

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Toledo’s successor was Alan García (2006–2011), who returned to the presidency after his less than successful first stint in the late 1980s. García further continued the neoliberal model. He backed the free trade agreement with the United States. Somewhat parallel to Toledo’s program, he implemented austerity measures with the expressed purpose of redirecting funds to social spending. He used tax exemptions, such as those on imported capital goods, to attract investment, particularly foreign investment in extractive industries. The government violently repressed protests against the implementation of neoliberal measures. Nevertheless, growth continued to be propped up by a favorable international environment.84 García’s successor (2011–2016), Ollanta Humala, had run previously on an anti-neoliberal platform. In the 2011 elections, however, he presented himself as a candidate of the moderate center-left on the model of Lula in Brazil. There was little discontinuity with the neoliberal model during this presidency, as evidenced by his government’s repression of protests against an enormous gold mining investment project in Cajamarca backed by transnational corporations and his backing of both negotiations for the Trans-Pacific Partnership (TPP) and the Pacific Alliance, a trade agreement with Mexico, Colombia, and Chile.85 Meanwhile, demand for primary exports, particularly mining goods, decreased, and as a result per capita GDP growth slowed to less than 2 percent by 2015.86 The last several years have seen the quick succession of two presidents, Pedro Pablo Kuczynski and Martín Vizcarra. Pedro Pablo Kuczynski only lasted 20 months, having resigned when he was implicated in an extension of the massive Odebrecht scandal. Vizcarra’s administration, meanwhile, has seen two major events. The first was Vizcarra’s dissolution of Congress and call for new elections in late 2019, and the second the COVID-19 pandemic. In terms of the latter, although Vizcarra took quick action, the outbreak seems to be particularly severe, emphasizing the fact that Peru has made less progress in terms of social development and redistribution than it has in terms of macroeconomic indicators.87 1.3.2.3 Colombia Colombia largely escaped the severe economic crises affecting many Latin American countries during the 1980s and 1990s.88 Foreign investment did, however, decrease as a result of the worldwide recession of the early 1980s that hit Latin America particularly hard. Moreover, unemployment increased

84 85 86 87 88

Gonzales de Olarte, “La economía política peruana,” 316–18; Contreras and Zuloaga, Historia mínima de Perú, 280; Avilés and Rosas, “Low-Intensity Democracy,” 168–69. Avilés and Rosas, “Low-Intensity Democracy,” 170–74. “Choosing a New Broom.” See “Peru’s President Pedro Pablo the Brief”; “Dubious Dissolution”; Taj and Kurmanaev, “Virus Exposes Weak Links in Peru’s Success Story.” Holmes, Gutiérrez de Piñeres, and Curtin, Guns, Drugs, and Development in Colombia, 28.

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from 10 percent to 14 percent between 1982 and 1986. Monetary policy in the early 1980s, under the presidency of Belisario Betancur (1982–1986), was relatively restrictive, with increased imports eating up foreign reserves, increasing interest rates, and a shrinking monetary base. In terms of fiscal policy, an increase in top marginal income taxes and an expansion in the value-added tax, along with increases in the ability of the president’s ability to manipulate the VAT, did not fully counteract a decrease in tax collection. However, spending continued apace, which increased the budget deficit but had positive counter-cyclical effects.89 In the late 80s, under the presidency of Virgilio Barco (1986–1990), the Colombian economy benefitted from increases in coffee and oil prices (two principal exports), which hastened an economic recovery. The unemployment rate decreased to 10 percent by the end of the decade. Monetary policy was expansive, as the monetary base increased. Tax collection increased 3 percent as a percentage of GDP as a result of tax reform, and the deficit shrunk with a less expansive fiscal policy. The minimum wage grew at a slower rate than GDP per capita, however, and its real level declined by 8 percent during the second half of the 80s. The inflation rate was generally high, surpassing 20 percent.90 By the inauguration of Liberal president César Gaviria (1990–1994), Colombia was on the brink of crisis – not so much because of economic problems, but because of security issues. Violence between the army, left-wing guerrillas, and drug cartels was becoming extreme, such that the country was practically in a state of civil war. Moreover, several important political figures, including Luis Carlos Galán, the original Liberal candidate for the 1990 election, had been assassinated (Galán by the Medellín cartel). The situation became ripe for some sort of political reform. This demand materialized when voters approved elections for a constituent assembly to form a new constitution. In addition to hot-button political issues like extradition – a ban on which was advocated by politicians paid by the cartels – the constituent assembly also dealt with numerous economic issues. Ultimately, Colombia’s 1991 Constitution promoted land reform programs, guaranteed a right to work, established a mandate for full employment and an independent central bank, and established pension indexation as a right. In the meantime, continued focus on security issues allowed technocrats in the Gaviria administration to quietly undertake numerous economic reforms including fiscal decentralization, labor reforms, liberalization of trade, and privatizations. Several factors, however, including a deterioration in the electricity sector that caused power to be rationed to eight hours a day, substantially eroded Gaviria’s popularity halfway through his term (although the new constitution had established non-reelection).91 89 90 91

García Echeverría, La economía colombiana y la economía mundial, 207, 217, and 227–30. García Echeverría, La economía colombiana y la economía mundial, 236–37 and 239–43. Edwards and Steiner, “On the Crisis of Economic Reform,” 464–74.

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In the medium term, Gaviria’s economic reforms, collectively known as the Apertura, resulted in significant economic problems, however. Financial liberalization, which also allowed cartels to bring their illegal earnings into the legal economy, resulted in a flood of capital into the economy. This both caused substantial inflation (21 percent in 1995) and resulted in the appreciation of the peso. These factors, combined with trade liberalization, hurt both import-substitution and export-oriented industries, such that the Colombian economy suffered over the course of the 1990s; by 2000, the unemployment rate was 20 percent, compared to 7.5 percent in 1994.92 The administrations of Ernesto Samper (1994–1998) and Andrés Pastrana (1998–2002) had to deal not only with the worsening economic situation but also with increasing violence. Right-wing paramilitary groups such as the Autodefensas Unidas de Colombia (AUD) were responsible for three quarters of extrajudicial killings between the late 90s and 2004, but left-wing guerrilla groups like the Fuerzas Armadas Revolucionarias de Colombia (FARC) and the Ejército de Liberación Nacional (ELN) were also heavily involved, with the two of them responsible for a combined total of over 7,000 kidnappings during the 1990s. To add to this, Samper was accused in 1995 of having received $6 million in campaign contributions from the Cali cartel. The government developed a heavily militarized response to the violence that was funded in large part by the United States. Between 2000 and 2006, the United States sent over $5 billion in aid to Colombia through the so-called “Plan Colombia,” while the country’s military budget increased from 3.2 to 4.2 percent of GDP between 2000 and 2005.93 Meanwhile, the state had been unable to keep up fiscally to fund its increased social spending obligations under the new constitution. In 1999, concerned over the fiscal situation – although the central government debt was not necessarily high, it nearly doubled from roughly 15 to roughly 30 percent of GDP between 1998 and 2000 – the Pastrana administration enacted a series of fiscal reforms in collaboration with the IMF, which included both tax reform and adjustments to transfers to local governments. Additionally, efforts began to change the composition of the debt from either foreign currency-denominated debt or inflation-indexed debt to fixed-rate peso-denominated debt, which began to have effects beginning in the early 2000s.94 Pastrana was succeeded as president by Álvaro Uribe (2002–2010), who led a military crackdown on violence. Although it incorporated criminal elites linked to paramilitaries, and although it systematically violated human rights, 92 93 94

Holmes, Gutiérrez de Piñeres, and Curtin, Guns, Drugs, and Development in Colombia, 35 and 42–44. Paul, Clarke, and Serena, Mexico Is Not Colombia, 2–3 and 6–8. Vargas, González, and Lozano, “Macroeconomic Gains from Structural Fiscal Policy ­Adjustments,” 40–41, 44, and 46; Edwards and Steiner, “On the Crisis of Economic Reform,” 446–47.

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the Uribe government did see a reduction in violence. Under the banner of “democratic security,” it instituted a progressive “security tax” to finance an expansion in defense expenses and an increase in the size of the army, from 203,000 to 283,000. Homicides and kidnappings decreased significantly. Largely as a result of increased security, macroeconomic indicators improved. GDP growth averaged slightly over 4 percent between 2000 and 2011, the government debt decreased from 60 to just over 40 percent of GDP between 2002 and 2013, and foreign direct investment skyrocketed from $1.5 billion to $13 billion between 2003 and 2013. Uribe also succeeded in modifying the constitution to allow for his re-election.95 Uribe’s successor, Juan Manuel Santos (2010–2018), broke with him in terms of security policy. Santos’s most notable achievement was the development of a peace agreement with the FARC, which, rejected by voters in a referendum (although by a very small margin), was passed in the legislature in 2016. Economic results were mixed. The poverty rate decreased, and the rate of formal employment increased over the course of Santos’s whole presidency, but GDP growth slowed to 1.8 percent in 2017 and the unemployment rate increased slightly from 9.1 percent to 9.4 percent during Santos’s second term; both of these developments were likely in large part a result of a decrease in oil prices.96 Several structural trends in the Colombian economy since the 1990s are of note. First of all, some evidence suggests that the apertura since the 1990s has exacerbated a long-term characteristic of the Colombian economy: economic inequality between regions.97 Moreover, economic inequality in the country overall remains stubbornly high; the ratio of the average income in the top 10 percent of the income distribution relative to that of the bottom 10 percent was 37:1 as of 2012, compared to 25:1 in Chile and Mexico and 9:1 on average in the OECD.98 Finally, industrial policy remains weak; the Gaviria, Samper, Pastrana, and Uribe administrations all relied on different institutions to channel industrial policies, for example, with weak implementation and unclear results.99 1.3.3  Bolivia, Cuba, and Venezuela: Viable Alternatives? We now turn to the most dramatic cases of at public political rejection of the neoliberal model. Bolivia, Cuba, and Venezuela have all been discussed as “alternatives” to neoliberalism, or to the penetration of the market in society in general. Do the three countries constitute successful alternatives? 95 96 97 98 99

Robinson, “Colombia,” 43–44 and 47–48. Taylor, “Will Duque Maintain Santos’ Other Legacy in Colombia”; “Colombia’s Peace Deal Has Taken Effect, But the Country Remains Divided.” Franz, “Why ‘Good Governance’ Fails,” 777–78. “Colombia: Policy Priorities for Inclusive Development,” 3. Meléndez and Perry, “Industrial Policies in Colombia,” 5–7.

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1.3.3.1 Venezuela It is unfortunately easy to answer this question with respect to Venezuela because the answer is a resounding no. In terms of industrial and fiscal policy, the Chávez and Maduro administrations – the carriers of the “Bolivarian” alternative to neoliberalism – were a disaster. In sharp contrast with Chile in the 2000s, for example, the Chávez administration undermined Venezuela’s oil stabilization fund through various measures “and by 2008, had simply ceased putting money in it,” electing instead to spend freely in the middle of the oil boom of the 2000s; fiscal spending was thus pro-cyclical, not countercyclical.100 In terms of industrial policy, the Chávez government pursued what at face would seem a productivist import-substitution policy insofar as it involved nationalizations and an expansion of the state’s role in the economy. In practice, it was not an import-substitution policy at all, because it did not substitute imports. Instead of channeling foreign exchange toward the import of capital goods for domestic production, the Chávez administration relied “on an avalanche of imports to combat inflation … and to alleviate consumer goods shortages.”101 Meanwhile, between 2003 and 2007, state-sector investment in both the oil and non-oil sectors actually declined, from 9 to 8 and 7 to 4 percent of GDP, respectively.102 Already in the late 2000s, Venezuela had begun to accrue enormous amounts of foreign debt, especially with Chinese banks. The government had also changed restrictions on the use of foreign exchange in order to channel a larger amount of it toward public spending. Already by 2011, debt servicing was equivalent to 20 percent of the value of exports, a figure that reached 55 percent in 2015. The import bonanza became untenable with these levels of foreign exchange depletion. Rather than restructuring the foreign debt, Maduro opted to cut imports, which fell from $66 billion in 2012 to barely $12 billion in 2017. This, on top of the mismanagement of the large state-owned sector that had grown from the numerous nationalizations of the 2000s, resulted in massive disruptions of productive chains as firms were unable to obtain the necessary raw materials and inputs for production. In the economic collapse that followed, Venezuela has seen drastic shortages of goods, including of food and medicines.103 1.3.3.2 Bolivia Needless to say, Bolivia benefitted immensely from the commodity boom of the 2000s; its top three exports for the past several decades have usually been some combination of minerals like zinc ore and gold, agro-exports like

100 101 102 103

Corrales, “The Repeating Revolution,” 35. Corrales, “The Repeating Revolution,” 43. Corrales, “The Repeating Revolution,” 41–43. See Vera, “¿Cómo explicar la catástrofre económica venezolana?,” 85–90.

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soybeans, and hydrocarbons like crude petroleum and petroleum gas.104 The boom, combined with the re-nationalization of natural resources, allowed the government of Evo Morales (2006–2019) to considerably expand social expenditures. This included conditional cash transfers, a universal pension of $300 a year to the elderly, and a tripling of the value of the minimum wage; between 2005 and 2013, the poverty rate decreased from 60 percent to 39  percent. At the same time, GDP growth, which had averaged about 5 percent between 2006 and 2014, fell only slightly to 4 percent in 2015 and slightly more thereafter.105 There are several possible reasons for this relative continuity in growth. First of all, while Argentina, Brazil, Chile, Colombia, Cuba, Venezuela, and Peru all saw absolute declines in their export values (of very varied degrees, especially with Venezuela) between 2010 and 2015, Bolivia’s actually continued to grow during that period, from about $7 billion to $9 billion.106 Additionally, Bolivia seems to have counteracted the slowdown in export growth with countercyclical fiscal policies, and the use of the foreign currency reserves accumulated during the boom. Thus, while in 2006 there was a fiscal surplus of 4.5 percent of GDP, this had turned into a deficit of 7 percent in 2017; foreign exchange reserves, which had increased from 12 to 52 percent of GDP between 2003 and 2012, had declined to 27.5 percent by 2017.107 Bolivia seems to have performed less impressively in terms of industrial policy and has not really reduced the problem of the reliance on commodity exports. As in Venezuela, the commodity boom years actually saw a decline in investment in certain key sectors. Total investment in the hydrocarbons sector decreased from $344 billion in 2002 to just short of $200 billion in 2006. This figure picked up to $211 billion in 2007; extractive industries increased their share of total public investment from 1.18 percent in 2006 to 5.5 percent in 2009. Yet this may have come at the expense of public investment in the non-extractive productive sector, which saw its share of total public investment decline from 15.06 percent in 2007 to 11.8 percent in 2009; infrastructure spending seems to have taken the lion’s share of public investment during this period.108 Manufacturing does not seem to have been the driver behind overall growth. Thus, between 2008 and 2011, while GDP grew at an average rate of 4.6 percent per year, the manufacturing sector only grew at an average rate of 3.6 percent. Meanwhile, average growth in the utilities sector was almost 7 percent, in construction it was 9.1 percent, and in commerce and hospitality it was 7.4 percent.109 104 105 106 107 108 109

OEC data. Postero, The Indigenous State, 97–99. OEC data. Kehoe, Machicado, and Peres-Cajías, “The Monetary and Fiscal History of Bolivia,” 20–21. Molero Simarro and José Paz Antolín, “Development Strategy of the MAS in Bolivia,” 545–46. Webber, “Evo Morales and the Political Economy of Passive Revolution,” 1868.

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1.3.3.3 Cuba Cuba faced tremendous difficulties over the past 30 years: the collapse of its principal economic partner, the continued US embargo, and the persistent attachment to some of the least productive aspects of socialist economic policy. Yet, the transformations Cuba has undergone somewhat resemble those in other Latin American countries, insofar as the country has seen an increased penetration of the market in the allocation of economic resources. By 1989, Cuba had clearly failed to address two of its chronic economic problems: the reliance on both a narrow set of agricultural exports (principally sugar), and on a narrow set of export markets. That year, sugar constituted 80 percent of Cuba’s exports by value and 80 percent of the country’s trade was conducted with the socialist bloc. Not surprisingly, the next few years, when the latter countries and especially the Soviet Union collapsed, were disastrous for Cuba. The purchasing power of Cuba’s exports decreased by 72 percent, while imports of crucial inputs declined even more dramatically. Imports of machinery and transport equipment declined at a rate of 44 percent per year between 1989 and 1993, while the figure for fuels was 28 percent.110 The effects of this collapse in imports of crucial inputs on Cuba’s productive capacity were intense; between 1990 and 1993, the country’s GDP decreased by 35 percent.111 Cuba had to react to this collapse in its international economic fortunes by substantially reorienting its foreign exchange-earning activities. In addition to allowing Cubans to receive remittances and hold foreign currency and permitting increased opportunities for self- and non-state employment,112 export opportunities had to be found in other sectors. In the medium term, these shifts in economic policy did begin to show results. Cuba’s export profile diversified away from sugar: Mineral exports (especially nickel) increased from 7.5 percent to over 30 percent of total exports between 1990 and 2009, while pharmaceutical products increased from 1.6 percent to 18 percent; meanwhile, sugar’s presence in Cuba’s export profile decreased precipitously during the period, from 80 percent to 7.5 percent.113 Indeed, between 2000 and 2015, the composition of Cuba’s top three exports varied, but usually included semi-processed primary exports like nickel mattes, rolled tobacco, and raw sugar as well as, in certain years, packaged medicaments and refined petroleum.114 It is also important to note that while between 1995 and 2010 many Latin American countries (Argentina, Bolivia, Brazil, Chile, Colombia, Peru, and Venezuela) experienced significant increases in the value share of their top three exports in their total export profiles as a result of the commodity boom, in Cuba this value actually decreased significantly, 110 111 112 113 114

CEPAL, La economía cubana, 200–201; Enríquez, Reactions to the Market, 126–28. Enríquez, Reactions to the Market, 126. Enríquez, Reactions to the Market, 140; Chomsky, A History of the Cuban Revolution, 129. Quiñones Chang, “Cuba’s Insertion in the International Economy,” 104. OEC data.

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and during this whole period the monetary value of Cuba’s exports remained quite low.115 Tourism has been as important as exports in providing Cuba with foreign exchange since the Special Period.116 Perhaps even more important than this simple increase in foreign exchange earnings has been the development of “domestic chains of production” related to the tourism sector, since Cuban production was supplying only 12 percent of the tourist industry’s inputs during the beginning of the Special Period. As Cuban economist Miguel Alejandro Figueras explained in 2013, “success in this regard was significant and rapid, with national suppliers meeting up to 68 percent of the needs of the industry by the early 2000s and remaining at roughly that level today.”117 This process involved a wide variety of investments and technology upgrades in different sectors of Cuban production.118 At the same time, Cuban fiscal policy has exhibited counter-cyclical tendencies. Thus, between 1990 and 1993, when the GDP consistently shrunk – by a maximum of 15 percent in 1993 – the public deficit as percent of GDP increased from 9.4 percent to 30.4 percent; in 1994–1996, growth resumed, peaking at over 10 percent in 1996, and the deficit was reduced to 2.2 percent of GDP by that year.119 Economic policy since the Special Period has also seen substantial transformations in agrarian land tenure that in concert can be considered a species of land reform. Over the course of the nineties, most of agricultural production shifted to the non-state sector. This included the concession of small parcelas of land for individual cultivation as well as the organization of various kinds of cooperatives. The transformation of state farms into cooperatives took place quite rapidly; while the non-state sector accounted for about 18.5 percent of total agricultural production in 1990/1991, this figure had increased to 95 percent by 1993/1994.120 The reduction of the state sector was accompanied by the legalization, in 1994, of farmers’ markets.121 Cuba’s land reform had more impact on domestic food production than on agricultural exports. Production of root crops, for example, a staple in the Caribbean diet, had decreased from about 700,000 tons in 1989 to less than 485,000 tons in 1994; however, by 1999 root crop production had surpassed a million tons and by 2004 it had almost reached 2 million.122 115

116 117 118 119 120 121 122

Data obtained by dividing OEC data for total export value by population data obtained from the World Bank’s World Development Indicators. Note that figures are in current, not real dollars. OEC data; Figueras, “The Evolution of International Tourism in Cuba,” 241–42. Figueras, “The Evolution of International Tourism in Cuba,” 244. Figueras, “The Evolution of International Tourism in Cuba,” 244–46. U-Echevarría Vallejo, “The Evolution of Cuba’s Macroeconomy,” 71 and 76. Enríquez, Reactions to the Market, 129–32. Enríquez, Reactions to the Market, 133–34. Enríquez, Reactions to the Market, 140–41.

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Finally, the Cuban state seems to have persisted with social provision as much as it could through the Special Period. The most difficult years at the beginning of the 1990s saw the return of nutritional deficiencies as a serious health problem due to food scarcity, while secondary school enrollment decreased from over 90 percent to barely 75 percent between 1989 and 1994.123 On the other hand, guaranteed social services still distinguished Cuba from the rest of Latin America in that over the course of the 1990s, in the midst of the crisis, physician density continued to increase, and infant mortality c­ ontinued to decrease.124 1.3.4  Spain and Portugal Latin America is often considered one of the developing regions whose countries most ardently embraced neoliberal policies. Already we have seen how such a view hides substantial heterogeneity. But what about the old metropoles, Spain and Portugal? In measuring whether Spain constitutes a neoliberal success story, we can examine the evolution of two main indicators – GDP per capita (and particularly convergence of this indicator with the Western European, or EU-15 average) and unemployment. A comparison with the case of Portugal is particularly fruitful. Starting from a low point of less than 50 percent in the 1940s, Spanish GDP per capita began to converge with the EU-15 average in the 1950s, reaching about 80 percent of that average by the time of Franco’s death in 1975.125 Between 1975 and 2000, Spain actually lost some of this convergence before regaining it at the end of the 1990s. Sociologist Robert M. Fishman suggests that the figure has remained flat during the 2000s, at around 75–80 percent.126 Spain’s unemployment rate since the transition has not been any more promising. Indeed, high unemployment in Spain is not simply a novel result of the 2008 recession; it has been a chronic problem since the 1970s. Even in the late 1990s, for example, Spain’s unemployment rate was around 14 percent.127 The “neoliberal” explanation of this phenomenon is that excessive labor protections for certain workers in the Spanish labor market have encouraged employers to rely on temporary contracts. The Economist explains it this way: “High unemployment also reflects a long-standing feature of southern labour markets: a relatively large share of workers cycle in and out of temporary jobs. Cushy contracts for permanent workers, with high severance pay and lengthy

123 124 125

126 127

Farber, Cuba since the Revolution of 1959, 73 and 77. Farber, Cuba since the Revolution of 1959, 73–74. Alcaide Inchausti, Evolución económica de las regiones, 70. The EU-15 consists of all countries in the EU before 2004. www.fbbva.es/en/publicaciones/evolucion-economica-de­ las-regiones-y-provincias-espanolas-en-el-siglo-xx-2/. Fishman, “Anomalies of Spain’s Economy and Economic Policy-Making,” 68n1. Fishman, “Anomalies of Spain’s Economy and Economic Policy-Making,” 68.

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appeals procedures, make it costly for bosses to sack them. Instead they hire lots of temporary staff, and respond to downturns by cutting their wages or not renewing their contracts. Collective-bargaining agreements for permanent staff can be inflexible – in Portugal, for example, they cannot include wage cuts, making it hard to cope with downturns.”128 A common argument among orthodox economists has been that Spain’s failure to generate an employment-generating model of growth in the postFranco period has been a result of labor market “rigidities.” In fact, during the late 90s and 2000s the rate of temporary contracts in Spain, at over 30 percent, was the highest in the European Union.129 Indeed, a comparison with neighboring Portugal undermines conventional explanations of Spain’s chronic economic problems. In 1995, the rates of independent and part-time employment were about the same in the two countries, while Portugal’s labor force participation rate, at 67 percent, was significantly higher than Spain’s, at 58 percent. Both countries had similar levels of deficit spending; government debt was 60 percent of GDP in Spain and 68 percent in Portugal. Collective-bargaining practices were largely similar in the two countries. The countries also had similar levels of labor protections; an OECD survey actually ranked Portugal as the country with the strictest labor protections at the time. Blanchard and Jimeno suggest that the difference in unemployment rate between the two countries may have been due to differences in the structure of unemployment benefits; in Spain, benefits were contingent on a less strict period of previous employment. Even then, however, the authors were quite cautious about this finding.130 The unemployment gap seems to have been about more than just differences in the structure of unemployment benefits, however. Moreover, there seems to have been fundamental differences in economic policy in Portugal and Spain since their transitions to democracy that are reflected in more than just unemployment rates. Fishman characterizes the “Iberian Employment Paradox” as part of a broader substantive difference in economic policy between the two countries related to the nature of their democratic transitions. The data suggest that Portugal began to overtake Spain in the 1990s in terms of a variety of indicators – generation of permanent employment; growth in labor productivity; growth in capital formation, investment and availability of credit among small manufacturing firms; and convergence with average European levels of consumption (although Spain still remained ahead due to its initial advantage). Fishman argues that the pattern of divergence between the two Iberian countries is largely a product of their transitions to democracy; in particular, he argues that in Spain the center-left PSOE has been more timid and the center-right PP more conservative than their Portuguese counterparts. 128 129 130

“Work in Progress.” De Arriba, “Crisis Política, Económica y Desigualdad En España,” 72. Blanchard and Jimeno, “Structural Unemployment: Spain versus Portugal.”

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The timidity of the PSOE in Spain with respect to economic policy was most evident in the government of Felipe González, which lasted from 1982 to 1996. In 1984, the González government initiated a “Law of Reconversion and Reindustrialization,” which aimed at promoting industrial restructuring and involved the layoffs of more than 80,000 workers. It also promulgated several labor market reforms that made it easier to fire workers and expanded the use of temporary labor contracts. The government’s consistently neoliberal economic policies resulted in tensions with the labor movement. A general strike in 1988 led the government to pursue an expansionary fiscal policy, increase public works investment, and improve the welfare system (including, especially, the national healthcare system, which became a European model); monetary policy remained conservative, however. As the latter began to be limited by EEC membership and foreign investment began to decline, the country began to face a recession in the early 1990s.131 Unemployment decreased in Spain during a period of significant growth during the 2000s. During this same period, Spain’s growth also overtook Portugal’s.132 However, Spanish growth was based on a construction bubble that burst with the world recession of 2008. Ever since, the pattern of the 1990s seems to have returned. The PSOE government of José Luis Rodríguez Zapatero (2004–2011) and the PP government of Mariano Rajoy (2011–2018), both pursued austerity programs in response to the economic crisis of 2008. After a brief fiscal stimulus of about 1 percent of GDP in 2008, the PSOE government promised to cut the budget deficit, raised the value-added tax, reduced public employee salaries and froze their pensions, passed a labor reform making layoffs easier and reducing the layoff compensation package, and reduced the generosity of social security pensions. The Partido Popular continued the austerity program with further belt-tightening for public employees, €10 billion budget cuts in health and education, further labor reforms, and reductions in unemployment benefits. Austerity measures worsened the recession, and, contrary to their intention, resulted in an increase in the public debt and the budget deficit.133 In turn, the new PSOE-Podemos government has pursued more progressive economic policies but came to power relatively recently and has had to face the explosive issue of Catalan independentism.134 In contrast, as Fishman points out, Portugal’s Carnation Revolution bred a stronger left and a less conservative center-right than did Spain’s transition to democracy. In Portugal, the center-right has generally shared the commitment to the state’s role in industrial policy, including continued state ownership of the Caixa, Portugal’s largest bank.135 Since 2015, Portugal has been governed 131 132 133 134 135

Kennedy, The Spanish Socialist Party, 57–59, 62–66, 67–71, and 75–79. Fishman, “Rethinking the Iberian Transformations,” 283 and 286. De Arriba, “Crisis Política, Económica y Desigualdad En España,” 73–76. Ubasart-González and Martí i Puig, “España: ¿un nuevo ciclo político?” Fishman, “Rethinking the Iberian Transformations,” 289 and 293.

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by the center-left Socialist Party, with support from the Communist Party and other parties of the left. The new government has stood out for reversing austerity policies – it increased the minimum wage, public sector salaries, and pensions. In addition to these measures, it has also used a combination of industrial policy measures, including “development subsidies, tax credits and funding for small and midsize companies,” to stimulate manufacturing exports in sectors like paper and aerospace.136 Critics point out that the combination of the government’s turn away from austerity policies and more aggressive industrial policy with its continued commitment to tame the deficit has come at the cost of public spending in other areas such as housing, infrastructure, and other public services.137 Nevertheless, the contrast with Spain is still evident.

1.4  a

note on covid

Latin America has not fared particularly well during the COVID-19 pandemic. As of December 2021, the region had reported the highest rate of COVID-19 deaths per 1,000 inhabitants of any in the world – at a rate of 2.34, surpassing the next-highest regions of Europe (2.34) and North America (2.16). That Latin American death rates were higher than other parts of the developing world might have something to do with better reporting – indeed, Africa’s rate of 0.16 COVID deaths per 1,000 inhabitants is very likely a vast underestimate. Paradoxically, then, the region’s high rate may actually reflected comparably higher levels of state capacity. Nevertheless, that Latin America’s death rate has been higher than Europe’s and North America’s, where underreporting of deaths should be comparably lower, reflects how severe the pandemic has hit the region (Table 1.1). Despite the generally poor performance of the Latin American region in the pandemic, conditions varied significantly between countries. To what extent have these variations had to do with the trajectories of neoliberalism discussed so far? The two tables below describe pandemic performance in the nine Latin American countries we have analyzed so far along two axes – health and socioeconomic conditions (Table 1.2). The first details performance on two standard measures of public health during the COVID pandemic, as of January 2022: the COVID death rate (generally considered a better indicator than case rate due to lower levels of underreporting) and the percentage of the population fully vaccinated. Several patterns are of note. First of all, Venezuela’s particularly low reported rate death rate is likely a product of underreporting in the context of a country in general economic, social, and political crisis; indeed, such a low death rate (less than 19 per 100,000, by far the lowest of all nine countries) does not line up 136 137

Alderman, “Portugal Dared to Cast Aside Austerity.” Correia, “The Dark Side of Portugal’s Economic Success Story”; Bugge and Goncalves, “­Portugal’s Economy.”

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table 1.1  COVID-19 deaths per 1,000 inhabitants, December 2021 Latin America and the Caribbean Europe Asia North America (the United States and Canada) Africa Oceania

2.34 1.89 0.26 2.16 0.16 0.1

Note:  Social Panorama of Latin America, 2021, 18.

table 1.2  Health measures – deaths and vaccinations Country

Deaths per 100,000 (Jan 2022)

% Fully vaccinated (Jan 2022)

Argentina Bolivia Brazil Chile Colombia Cuba Mexico Peru Venezuela

263.51 176.24 294.62 208.04 260.77 73.63 236.31 626.4 18.88

75.37 43.29 69.91 88.57 59.46 86.22 59.42 68.69 40.71

Note:  Sullivan and Meyer, “Latin America and the Caribbean: Impact of COVID-19.”

with the country’s particularly low vaccination rate of 41 percent (the lowest of all nine countries). Bolivia’s death rate may also be relatively underreported; despite having the second-lowest vaccination rate of all nine countries, it also reports the third-lowest death rate. Two countries stand out as relatively good performers on COVID health measures: Chile and Cuba. Both had achieved vaccination rates of more than 85 percent by January 2022 – higher than the United States and most developed countries. Cuba had a particularly low death rate of 73.63, the lowest excluding the likely unreliable data for Venezuela. Cuba’s particular advantage may have had to do with its status as an island nation – indeed, the Dominican Republic also saw a particularly low death rate, as did many other island nations during the pandemic, and the lowest rates in the United States were seen in island states and territories like Hawaii, Puerto Rico, and the Virgin Islands.138 Chile’s rate, although significantly higher than Cuba’s at 208, was lower than those of Argentina, Brazil, Colombia, Mexico, and Peru. That these two countries performed relatively well in the pandemic would concord with our analysis. They 138

See “Coronavirus in the U.S.,” accessed April 25, 2022.

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table 1.3  Pandemic effects on various socioeconomic measures, as of 2020

Argentina Bolivia Brazil Chile Colombia Mexico Peru

% Change per capita income

% Change Gini

% Change poverty

% Change in CT coverage

–12.7 0.6 –5.3 –1.3 –13.4 –5.3 –20.9

0 4.4 –3.5 4.6 4.3 –2.6 8.2

7.1 1.4 –1.8 3.5 8.1 1.9 13

8 27 – 27 2 0 33

Note:  Data for % changes in per capita income, Gini index, and poverty rate are from Social Panorama of Latin America, 2021, 79. Pandemic figures are from 2020; prepandemic figures are for 2019 for all countries except Chile and Mexico, for which they are for 2017 and 2018, respectively. Data for % change in CT coverage are from Stampini et al., “Adaptive, but Not by Design,” 10 and 16. Prepandemic data for CT expansion are for the years 2017–2019, while pandemic data are from 2020.

are Latin American states with particularly high state capacity, and, as we have seen, amid the turn to economic liberalization in the previous several decades, they have both maintained or strengthened systems of social protection. Argentina has been somewhat behind Chile and Cuba in its pandemic health performance. As of January 2022, its vaccination was the third highest among the nine countries, but it had seen a relatively higher rate of deaths. Brazil, Colombia, and Mexico were all middling performers, with vaccination rates of around 60–70 percent and death rates well over 200. Peru had a decent vaccination rate of around 70 percent. Its death rate was astronomical – over 600 – but this may have had to do with a difference in the way it counted COVID deaths.139 Bolivia and Venezuela had by far the lowest vaccination rates, and their death rates, although comparatively low, may be less reliable. The second table below compares data on pandemic performance, as of 2020, in various socioeconomic measures for those countries for which it is available – all of them except Cuba and Venezuela. The pandemic had significant economic effects on the region as a whole; two thirds of households experienced a decline income, while 16 percent of workers lost employment. In general, Latin American governments responded to these and other economic effects by expanding existing cash transfer (CT) programs; while 22 percent of the region’s households received such transfers before the pandemic, during the pandemic this increased to almost half of households (Table 1.3).140 139

140

“Peru revised its official COVID-19 death toll in May 2021 to account for excess deaths attributed to COVID-19 not previously counted, which tripled the country’s reported death toll” – Sullivan and Meyer, “Latin America and the Caribbean.” Jaramillo, “Social Protection and COVID-19 in Latin America.”

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Examining the second table above, however, trends are somewhat less clear. In an environment where the pandemic largely caused decreases in employment and income, we should expect increases in cash transfers to prevent increases in inequality or poverty. The table above suggests this is not necessarily the case, however. Peru seems to have performed particularly poorly in economic terms during the pandemic, just as it did in health terms: It experienced the greatest decrease in per capita income (21 percent). It also, however, experienced the largest expansion in cash transfer coverage among households, which grew by 33 percentage points over the pandemic. However, this did not prevent Peru from also experiencing by far the greatest increase in its Gini index and poverty rate – an alarming 8.2 and 13 percent, respectively. Brazil seems to have performed the best of all seven countries in the table in purely economic terms – the only place where both inequality and poverty actually have decreased during the pandemic. Comparable data on the precise percentage increase of households receiving cash transfers were not available; however, the country did see a significant expansion in such programs. After the pandemic began, the Brazilian government announced “emergency aid” payments of $112 dollars a month to a third of the country’s population, with the combined costs of cash transfer and job-retention programs increasing to 8 percent of GDP.141 What is particularly surprising is that these developments occurred under the presidency of the right-wing populist Jair Bolsonaro. Along with Brazil, Mexico seems to have done relatively well; although per capita income decreased by more than 5 percent in 2020, the Gini index decreased, and poverty increased only slightly. Yet the percentage of households receiving cash transfers did not budge at all. This may be a product of most people continuing to work as usual rather than staying at home – indeed, Mexico has not done particularly well in terms of pandemic deaths – or an expansion of benefits to families who already received transfers. Besides particularly disastrous effects in Peru and surprisingly positive ones in Brazil and to some extent Mexico, socioeconomic effects of the pandemic seem to have been not catastrophic but still bad in the remaining countries. In Argentina, for example, inequality remained steady, but poverty increased by 7 percent. In Bolivia, poverty increased by 1.4 percent, but the Gini index grew by 4 percent. Colombia and Chile also saw increases in their Gini index of more than 4 percent; in Chile, poverty grew by 3.5 points and in Colombia by an alarming eight. Looking at the effects of the pandemic on the Latin American countries we have studied, then, several general points are worth emphasizing. First of all, performance on health measures during the pandemic – COVID death rate and vaccination rate – is not necessarily correlated with performance on socioeconomic measures. Most notably, Brazil experienced decreases in inequality and poverty, despite performing relatively poorly in terms of death rate. 141

“Just Keep Us Alive.”

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Conversely, Chile has done relatively well in having a comparably low death rate and a very high vaccination rate, but its performance in terms of inequality and poverty was worse than Brazil’s. Overall, however, a general pattern of correlation can be drawn between pandemic performance and the trajectories under neoliberalism that we have discussed so far. The two countries that have performed relatively poorly on both the health and socioeconomic axes during the pandemic – Colombia and Peru – also had very uneven trajectories during the period of neoliberalism. They did not see the expansions in social provision that other Latin American countries saw in the 1990s and 2000s. Conversely, the three countries that stand out as better performers – Cuba and Chile because of their health performance, and Brazil because of its ability to decrease poverty and inequality during pandemic – can have this better performance traced to their trajectories under neoliberalism. As we have emphasized, Chile and Cuba stood out in the 1990s and 2000s in their ability to maintain or expand social provision. Meanwhile, Brazil was one of the first countries to implement cash transfer programs and was one of the most generous in doing so (see the chapter by Souza Leão in this volume).

1.5  dimensions

of state strength and plan of the book

The present book studies state and nation building in Latin America and Spain during the time of ascendance and consolidation of neoliberal political ideology. This period of analysis, commonly designated as the neoliberal era, begins around 1975, and it was connected from the start with Latin America, a region that has been described as the “birthplace” of neoliberalism. More specifically, the foundational moment of neoliberalism as a comprehensive government program happened in Chile, during the dictatorship of Pinochet, as discussed by Silva in his chapter for this volume. Several of the case studies in the book include, furthermore, the analysis and discussion of political movements that tried to confront neoliberalism and reverse neoliberal public policy reforms. Such a reversal happened in many cases – with varying levels of success – after movements opposing neoliberalism reached government positions. As shown in the table of contents, the parts of the book are organized according to their focus on four different dimensions or categories of state capacity: economic, territorial, infrastructural, and symbolic. In the present section, we explain the organization of the book, as well as its conceptual framework. Since the first book in our three-volume collection on state and nation building in Latin America and Spain, we have employed the same four categories or dimensions of state strength as analytical tools.142 The first dimension of state 142

Previous volumes are Centeno and Ferraro (eds.), State and Nation Making in Latin America and Spain. Republics of the Possible; and Ferraro and Centeno (eds.), State and Nation Making in Latin America and Spain. The Rise and Fall of the Developmental State.

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capacity we call territorial power, and it involves the classic Weberian notion of monopoly over the means of violence. Note that we explicitly do not specify the legitimate use of violence as we wish to distinguish between a simple capacity to coerce from the much more complex notion of justifying and making acceptable such coercion. Mann called this category of power despotic, and it represents the influence that state elites are able to exert over the population of a certain territory, without having to enter into routine negotiations with nonstate actors.143 The concept of despotic power captures the conventional perception of power as the actual capacity to issue and impose commands. This form of state strength is the simplest to wield, as it merely requires the acquisition and utilization of enough coercive force to impose control on a certain region. It is the state as military and disciplinary institution, and it takes place on two fronts: first, in relation to other states defining sovereignty and, second, against internal or domestic rival claimants and subjugated groups. As we will further explain below, the majority of states analyzed in this book maintained a relatively high level of capacity with regard to territorial power, during the period under discussion; however, the control of the national geography was far from completely assured in all cases, and serious deficiencies of territorial power had sometimes catastrophic consequences. We define the second category of state capacity as economic power, and this involves diverse connected processes. First, economic power is about the state promoting the general prosperity of a society. Prior to the Keynesian revolution, states mostly contributed to prosperity in the course of the unification of an economic space through the creation of a national market. Of greater relevance for our cases, states may also increase prosperity by creating the physical and legal infrastructure supporting the insertion of their domestic economy into a global system of exchange. A second aspect of economic power involves the control over and appropriation of resources through the establishment of an efficient tax system, which includes the training and recruitment of professional tax bureaucracies, able to work in public agencies protected from political interference. The third and perhaps most extensive aspect of economic power concerns the formulation and implementation of long-term economic policies. After the neoliberal turn, some countries in the region adopted policies that stressed the necessity and desirability of transferring economic power and control from governments to private markets. Somewhat paradoxically, however, this transformation required the extensive use of state intervention. Three national cases, discussed in the first part of the book, were emblematic in this respect. Chile, Mexico, and Spain had to concentrate and strengthen their economic state capacity in a substantial manner, in order to be able to impose and maintain long-term neoliberal public policy programs. This required many kinds of political transformations, struggles, and reorganizations, discussed

143

Mann, The Sources of Social Power.

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in single national case studies by Silva, Knight, and Döpking in the present volume. Some of such transformations resulted in new forms of state organizations and state structures. As we will discuss in the conclusions of the book, Mexico was not coincidentally the first country in the world where a “neoliberal state” was described by social science. The essays in the first part of the book focus on territorial and economic power, two categories of state strength that are intrinsically related. In order to implement the economic and institutional transformations required by longterm neoliberal government programs, three of the national cases considered in this part of the book, Chile, Mexico, and Spain, had to confront diverse kind of protest movements, reaching into massive civil disobedience, armed insurrection, or attempted secession by regional separatist groups, depending on the case. Chile, Mexico, and Spain were able to confront and either defeat or neutralize such protest or insurrection movements, securing the control of their national territories without severe operational difficulties – although certainly suffering a negative impact on their democratic legitimacy. However, the national case discussed by Yashar in the last chapter of this part of the book, Chapter 5 on Guatemala, shows the possibility, and the pitfalls, of a massive deficiency of territorial power during the neoliberal era. The author considers also two neighboring countries affected by the same category of state failure, and with similar destructive consequences for the population: El Salvador and Honduras. Although these three Central American countries represented outliers in certain respects, it is important to observe that deficiencies in territorial power remain generally endemic in Latin America to this day, as was described by O’Donnell with the concept of “brown areas,” which remains a widely accepted characterization of the phenomenon.144 The third category of state strength corresponds to the notion of infrastructural power. Originally defined by Mann, infrastructural power refers to the capacity of the state to coordinate society by means of the diffusion of law and administration in many areas of social life that had remained outside the scope of state concern before the vast expansion of its capacity during the second half of the nineteenth century.145 Infrastructural power involves organizational and technical skills to collect and process information, build organizational structures, and maintain communication and interaction networks. Infrastructural power is a key category among the dimensions of state capacity because it is what makes modern states exceptionally strong.146 The expansion and diversification of bureaucratic organizations increases the penetration of the state in terms of infrastructural power. However, according to Mann, such an increase in infrastructural power does not imply, as Weber mistakenly assumed, a more vertical concentration of power in a 144 145 146

O’Donnell, “Why the Rule of Law Matters.” Mann, The Sources of Social Power. Mann, The Sources of Social Power, 60 and 66.

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central authority. Infrastructural capacity does not involve centralization of power; rather, the contrary is the case. First of all, modern state administration “almost never forms a single, bureaucratic whole.”147 The infrastructure of the modern state is formed by an array of bureaucratic organizations variously linked to power networks in civil society. Secondly, the expansion of infrastructural penetration predictably goes both ways: As a result of the embeddedness of relatively autonomous bureaucratic organizations, civil society’s capacity to bring influence to bear on the state also increases. The expansion of infrastructural power occurs simultaneously with the widespread politicization of civil society.148 The second part of the book focuses on infrastructural power, and it examines the advances and failures of this form of state capacity under neoliberal and postneoliberal administrations, in diverse national cases. Camacho and Dargent, in Chapter 6 of the volume, discuss the implementation of neoliberal higher education reforms in Peru and Chile. The concentration of economic and political power was characteristic of neoliberal administrations, under both dictatorial and democratic regimes in Latin America and Spain, and the initial implementation of neoliberal reforms was characteristically fast and comprehensive in many public policy areas. In Chile and Peru, the privatization of higher education was imposed without hesitation at the beginning of the neoliberal turn – much earlier in the case of Chile, where a murderous dictatorship made any opposition to neoliberal reforms dangerous. However, the subsequent management of the reforms depended on the infrastructural capacity that each state was able and willing to develop, both in terms of the creation of bureaucratic structures, as also in terms of engagement with civil society groups affected by the reforms. Camacho and Dargent show that, against the usual expectations of the literature, it was Peru – a country ranked low for state capacity in comparative studies – that succeeded in creating a regulatory framework that contributed to the steady improvement of the quality of higher education. Most crucially, a professional and independent regulatory agency was created, in order to take charge of this public policy framework. The agency was protected from political interference due to its strong relative autonomy, and its increasing legitimacy among citizens. In Chile, meanwhile, widespread disappointment with the low quality and bad results of private higher education was one of the main factors in the development of a vast protest movement against neoliberal policies, which resulted in a general crisis of legitimacy of the democratic system consolidated after the transition – more on this below. The long-term implementation of reforms, in comparing both cases, reveals the key relevance of infrastructural power not only as bureaucratic capacity but also as embeddedness, which is to say, as the connection and involvement of civil society actors in public policy management. 147 148

Mann, The Sources of Social Power, 68. Mann, The Sources of Social Power, 56.

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The next chapter in this part of the book, Chapter 7 by Schenoni, addresses state and public administration reforms in four national cases, Argentina, Peru, Chile, and Brazil. In Argentina and Peru, administrations with concentrated executive power were able to enforce fast neoliberal “first generation” reforms, neutralizing in advance almost every political opposition. Bureaucracies were rapidly downsized and reorganized with little meaningful input from civil servants themselves. The result was a degradation of the quality and efficiency of the civil service, and a widespread loss of confidence among bureaucrats. Infrastructural power revealed in these cases a remarkable vulnerability, which classics of the field, such as Weber, did not fully recognize. The continuous advancement of professional bureaucracies was sometimes described by Weber as an increasing necessity (steigende Notwendigkeit) in modern states once the process of bureaucratization had started.149 However, the first two cases discussed by Schenoni reveal a regression or involution of state bureaucratization, and therefore of infrastructural power. In contrast, in Brazil and Chile reforms were more gradual, and the state bureaucracy in these countries was much better prepared to lead “second generation” reforms. Alarmed by the potentially disruptive impact of first-generation reforms on state administrations, experts and international financial organizations promoted a second generation of reforms, which aimed precisely at improving the quality, rather than reducing the size, of public administration systems. By virtue of the fact that Brazil and Chile preserved stronger state bureaucracies, second-generation reforms were much more successful. Chapter 8, by Souza Leão, shows that infrastructural power does not correspond to the mere technical competence of high-ranking officials; it would be a mistake to associate infrastructural power with technocratic styles of government. The author compares how conditional cash transfer programs were implemented to fight poverty in Brazil and Mexico. In both cases, the new programs sought to deliver payments to a targeted sector of society, poor families, in exchange for a set of “conditionalities” – mainly sending children to school and healthcare services. However, in Mexico conditional cash transfer programs were implemented by an administration that emphasized the concentration of presidential power, and that insulated presidentially appointed technocrats from the input of social movements, political parties, and the media. The result was that technocrats in charge of the programs sought to legitimize their public policy strategies, in the eyes of their “natural” constituency of academics and international policy networks, by emphasizing the “efficiency” of the programs – efficiency defined as the use of rigorous statistical algorithms to identify poor people, with no input or involvement by social actors. In contrast, the Brazilian program was implemented, beginning in the mid-1990s, and especially under the Lula administration 2003–2010, in the context of a 149

Weber, Gesammelte Politische Schriften, 327; see English translation Weber, Political ­Writings, 152.

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more gradual application of neoliberal policies and more robust multiparty democracy. Instead of top-down implementation by an insulated group of appointed technocrats, the Brazilian program opted instead for “legitimation by inclusion,” relying heavily on the meritocratically recruited civil service to implement and regulate a system in which the first emphasis was placed on expansion of the system to as many poor families as possible. Instead of efficiency as a technocratic ideal, the Brazilian program measured itself by a civic ideal of inclusion. In Chapter 9, Bersch uses the transport sector as a lens through which to examine the broader viability and success of reform implementation in Latin America. Through case studies of Argentina, Brazil, and Chile, she argues that some neoliberal reforms in the transportation area were “powered” through by executives, in collaboration with appointed technocrats, and without input from social actors and civil servants. These powered reforms generally resulted in unsuccessful outcomes. In contrast, reforms that were conducted gradually and respected the acquired expertise of professional civil servants, as well as involving diverse social actors, were more successful. Bersch analyzes first the case of Argentina, where the Menem administration rapidly privatized the country’s railroad system in the 1990s by means of a top-down process led by a team of insulated technocrats. The Argentine transport bureaucracy experienced severe cutbacks that accompanied the privatizations. Therefore, the much diminished and demoralized bureaucratic staff proved unable to lead and regulate the transition to a privatized system. As a result, the transportation system became mismanaged, poorly funded, inefficient, and unsafe, and the whole system came crashing down with the infamous Once crash on the Sarmiento line in 2012. This failure also prompted a new wave of “powering” reforms as the postneoliberal administration of Cristina Fernández rapidly re-nationalized the railroads. Second, Bersch looks at the case of Brazil, which constitutes something of a counterpoint to the Argentine case. Here, attempts to rapidly privatize Brazil’s highway transport system, initiated by the Collor administration and Congress in the 1990s, ran into obstructions, whereas the Cardoso, Lula, and Rousseff administrations implemented more gradual changes that maintained mostly intact a professionalized civil service running the system. Finally, Bersch turns to the Chilean case, which constitutes something of a mixed case as well. She finds further evidence for the weakness of “powered” reforms in the botched effort to revamp the Santiago bus system under the Bachelet administration, led by an insulated group of technocrats that did not consult with citizens on any aspect of the project. On the other hand, a reform process that was less sudden than the Argentinean one resulted in a less spectacular failure of the transport system overall. In Chapter 10, the last chapter of this part of the book, Riggirozzi and Grugel examine the strengths and weaknesses of economic and social redistribution efforts initiated by postneoliberal political orientations during the

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2000s. As an attempt to overcome neoliberalism, New Left or “Pink Tide” administrations challenged fundamental tenets of the neoliberal understanding of social welfare. In particular, these administrations expanded social welfare programs, many of which were made universal rather than targeted, since the latter had been the common practice under neoliberalism. They thus created a new social discourse rooted in human rights, citizen identity, and social responsibility, rather than the neoliberal principles of personal responsibility, individuals considered as human resources, and the search for market solutions to social and other public policy issues. However, despite this successful and widely legitimate conceptual reformulation of social programs, Riggirozzi and Grugel show that the New Left encountered two major difficulties in their successful implementation. On the one hand, New Left administrations did not attempt consensusbuilding strategies, which could have increased public trust in government institutions. The policy focus was instead on short-term redistributive gains, premised on partisan-based, unilateral political decisions to apply new export taxes and thus capture the profits of rising commodity prices at the time. Paradoxically, this short-term public policy approach increased the region’s dependency on a growth model based on the export of primary goods, and it also enabled agrarian elites to acquire extraordinary power by organizing opposition and blockades to the new taxes and subsequently oppose any further attempt to introduce more progressive tax reforms. On the other hand, the implementation of social programs was not preceded or complemented with any attempt to establish or consolidate independent and professional bureaucratic structures, that is to say, a general neglect of infrastructural power. Therefore, Riggirozzi and Grugel describe how social policies were plagued with significant difficulties of implementation, monitoring, and evaluation, with frequent cases of mismanagement, political clientelism, and corruption. The next part of the book focuses on symbolic power, both as a capacity deployed by the state and as a series of contestation strategies, which were widely adopted by social and political actors in Latin America and Spain. The notion of symbolic power as a state capacity was amply discussed by Bourdieu,150 and this category shows similarities to what Weber discussed as legitimacy. Chapters 11 to 15 examine the institutional consolidation of symbolic power during the early implementation of neoliberal regimes, and its increasing contestation by postneoliberal movements in later periods of the neoliberal era. As Bourdieu notes, “what appears to us today as self-evident, as beneath consciousness and choice, has quite often been the stake of struggles and instituted only as the result of dogged confrontations.”151 The study of the state’s symbolic capital is the history of how it attempts to construct its own sense of inevitability. It is a set of devices that state elites employ to try to place 150 151

Bourdieu, “Rethinking the State.” Bourdieu, “Rethinking the State,” 15.

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the authority of public institutions, as such, out of the bounds of contention. Regarding this symbolic dimension, Joseph Strayer assigns a central role to what he calls “loyalty” during the consolidation of state power in the modern era, a “shift in the scale of loyalties” from earlier societies, and a new “priority of obligation” toward public institutions, or what he later calls a “cult of the state.”152 As the chapters of this part of the book discuss, neoliberalism employed from the beginning strong cultural discourses and images, which contributed to the perception of its inevitability as an economic and political regime. Nevertheless, the contestation of symbolic state power kept increasing during the whole neoliberal era, and it became very intense after the Global Financial Crisis of 2007–2008. In the first chapter of this part of the book, Chapter 11, Schild examines the era of neoliberalism in Chile as a radical cultural transformation. The author points out that, far from just an economic project, as often described in the literature, neoliberalism was a strategy aimed at a fundamental reorganization of Chilean society, including the development of new practices of social integration, and new personal identities. It was not the market alone that transformed the identities of subjects into autonomous, responsible individuals but, rather, cultural images and discourses embedded in sweeping reforms applied to a wide range of institutions. Connecting to a thesis of Bourdieu about the left and the right hand of the state, one more protective and caring (social left hand), and the other focused on resources and spending (financial right hand), Schild proposes a gendered analysis of the neoliberal cultural transformation in Chile, showing that supposedly gender-neutral, entrepreneurial ideals of citizenship were actually carried out by inflicting a series of social costs on women, including the imposition of heavy family and community burdens. This analysis helps to explain the key fact – nowadays rather neglected – that the vast movement of social protest in Chile, which led to a profound legitimacy crisis of the neoliberal model, began with massive women’s marches from 2018 to 2020. These marches represented at the time the largest social mobilizations in Chile’s history. The Chilean neoliberal state was able to consolidate for decades a perception of its inevitability, which was almost unanimously embraced by the political elites and also supported – or endured with resignation – by ample sectors of society. However, the social and political rebellion against neoliberalism, when it happened, began with women’s defiance of the set of gender norms and expectations inscribed in this cultural model. Müller further discusses, in Chapter 12, the symbolic capacity of the state under neoliberalism, as well as its contestation in Spain. The author examines, in the first place, the difficulties of the Spanish Socialist Party (PSOE) to reconcile its long periods in government, during the neoliberal era, with the party’s working-class identity. Socialist government reforms involved the

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Strayer, On the Medieval Origins of the Modern State, 47.

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implementation of neoliberal policies in certain key areas, such as the labor market and fiscal austerity. This was almost impossible to reconcile with the party’s traditional working-class social basis and identity, and its longestablished organizational structures, which depended on close cooperation with workers’ unions. During the 2000s, attempts by the party elites to transition into a postmaterial, values-based political identity were only modestly successful, and by the beginning of the next decade, the popularity of the Spanish Socialist Party was severely damaged by neoliberal labor reform and austerity policies, particularly among the youth. A vast protest movement against neoliberalism developed swiftly, questioning the legitimacy of the whole political system established since the negotiated democratic transition of the 1970s and 1980s in Spain. Müller examines, in the second place, the fact that the social protest against neoliberalism, in Spain, deliberately employed mechanisms of social mobilization initially developed by the New Left in Latin America. Such mechanisms, often described as counter-hegemonic, are based on the construction of new political identities. In the next years, similar symbolic strategies were to become very influential in all of Southern Europe. The concept of “Latinamericanization” of political protest was adopted as early as 2011 by leftwing activists of the political movement Podemos in Spain, under the declared influence of Laclau and Mouffe.153 The notion of Latinamericanization of social protest, in Southern Europe, went on to become a well-known concept in scholarly analysis.154 However, Müller suggests that the adoption of such counter-hegemonic, identitarian strategies made it more difficult to reach political agreements or alliances in support of specific programs. Such strategies, in other words, could be difficult to reconcile with electoral and coalition tactics, as seen in the Spanish case. The problem results in part from the “agonistic” dimension of identitarian strategies, which emphasize a fundamental conflict “us vs. they,” as a component or source of political identity for the movement. Agonistic framing can make political coalitions difficult, although certainly not impossible, considering that Podemos finally agreed to integrate a coalition government with the Socialist Party in 2020. In summary, the framing and organizational strategies of social protest against neoliberalism involved a widespread contestation of the state’s symbolic power. Moreover, these counter-hegemonic forms of political discourse and organization demonstrated a considerable flexibility: It was shown that they could be employed to build new political identities without specific connections to the material basis of individuals and social groups, such as ethnic, gender, or class membership. For example, the next chapter of this part of the volume, Chapter 13 by Garay, examines how unions and social movements

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Iglesias, “Understanding Podemos,” 14; Laclau and Mouffe, Hegemony and Socialist Strategy. Padoan, Anti-Neoliberal Populisms.

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in Latin America, as a response to globalization, technological changes, and neoliberal labor market reforms, developed new types of political alliances between “insiders,” defined as workers with formal employment, and “outsiders,” defined as informal, rural, and unemployed workers. The literature has neglected generally the political movements based on such alliances and coalitions, among other reasons, because of their unexpected character, particularly considering that conventional scholarship always assumed that insiders and outsiders of the labor market have inherently opposing interests. However, Garay shows that one of the key factors enabling the development of new labor movements across Latin America was the construction and empowering of new workers’ identities, disengaged from each individual’s legal status in the labor market. This represented another of the several forms of contestation of the state’s symbolic power, which is also based, among other resources, on the perceived certainty of legal categories. Nevertheless, the malleability of symbolic politics, although a powerful tool in principle, also enabled its opportunistic employment, either by political movements or by the state, and such opportunism resulted often in a certain ambiguity and confusion about this power’s consequences. The ambiguity of symbolic power is examined from different perspectives in the last two chapters of this part of the book. In Chapter 14, Lucero analyzes the rise of indigenous movements and their response to neoliberalism in Abiayala – the word for the Americas that Aymara leader Takir Mamani suggested that indigenous peoples use to refer to the continent. As a result of generations of Indigenous struggles and negotiations, by the year 2000 the political constitutions in many Latin American countries recognized Indigenous collective rights, languages, and territories. However, Lucero shows that such Indigenous recognition could actually correspond to the increased dispossession of Native peoples. The 1990s, in fact, marked also the beginning of new booms in extractivism across the region, including legal and illegal seizures of Indigenous land, and depletion of natural resources, under both administrations of the left and of the right. Recognition functioned thus as an ideological tool, conditioning Native peoples into a selfunderstanding that was compatible with colonial asymmetries, and even with the neoliberal exploitation of their territories. The literature has discussed this phenomenon as “multicultural neoliberalism.” The symbolic recognition of Indigenous peoples could lead to a range of outcomes. In some cases, extensive neoliberal reforms coexisted with a modest set of multicultural policies, the latter limited primarily to language, education, and restricted collective land rights. In other cases, more expansive sets of multicultural policies included considerable political representation and autonomy rights for Indigenous peoples, and they could lead to more radical experiments in political and economic reforms. The success, failure, and ambiguity of multiculturalism as symbolic politics are examined by the author in the national cases of Bolivia, Ecuador, and Chile.

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It is interesting to consider that innovative forms of political protest were not exclusive of the New Left, either in Latin America or in Southern Europe. Latinamericanization, in other words, has not been a trend developed only by left-wing protest movements. Vom Hau and Srebotnjak, in Chapter 15, analyze another phenomenon that the literature has neglected: the fact that neoliberal political orientations were able to adopt and effectively employ, during the 2010s, the same counter-hegemonic and identitarian strategies that were previously characteristic of the Latin American New Left. The three cases considered by the authors are the territorial, either regional or national autonomy movements in Catalonia (Spain), Santa Cruz (Bolivia), and Guayas (Ecuador). In all the three cases considered, the fiscal motive was certainly important, as it was pointed out by Piketty for the case of Catalonia.155 All three regions are substantially wealthier on average than the rest of their countries, and an important political motive for political protest has been the demand to keep taxes in the territory, drastically reducing social and fiscal solidarity with other, less-wealthy regions. Vom Hau and Srebotnjak confirm that fiscal motivation played a role for social mobilization in favor of greater territorial autonomy or secession and that wealthier groups predominated in the social composition of the territorial and nationalist movements in all three regions considered. However, the authors also indicate that the development of a political protest movement with strong identitarian components was built on a broader social base in Catalonia and involved constituencies of different class backgrounds. The traditional neoliberal political elite remained influential among the leadership of nationalist protest in this region, and its members occupied government positions as leading partners of the governing coalition from 2010 to 2021. Nevertheless, the key for the political success of nationalist Catalan politics, at the local level, was the adoption of identitarian, counter-hegemonic strategies. Again, this phenomenon is not as paradoxical as it sounds, because neoliberal elites could successfully develop a socially much broader and therefore powerful protest movement, employing similar strategies in Santa Cruz and Guayas. Finally, in the concluding chapter of the volume, Ferraro, Fondevila, Rastrollo, and Centeno begin by discussing the concept of the “internal structure” of the state, which was proposed by the classic German scholar Otto Hintze as the foundational principle for state-building theory. Furthermore, recapitulating the results of the previous chapters, and additional literature on the diverse national cases, the concluding chapter examines and compares the internal structure of the neoliberal state, and the internal structure of the preceding state model, the developmental state. Based on this discussion, the authors address the two questions mentioned at the beginning of

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Piketty, Capital and Ideology, 921.

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the present introduction: Considering the national cases discussed in the book, as well as the fundamental principles of state-building theory, can we consider that the neoliberal state represented an institutional model as clearly defined as the developmental state? Did the neoliberal state exist as a historic formation?

1.6  conclusion Much has been made in Latin America of supposed neoliberal showcases and alternatives. Yet, insofar as these countries have been successful, they have been so for an ideologically mixed set of reasons: The development or maintenance of a social safety net, the use of counter-cyclical fiscal policies, and the implementation of robust industrial policies aimed at diversifying away from a few primary exports and promoting manufacturing, and particularly processed/manufactured exports. Spain and Portugal transitioned to democracy at roughly the same time and have been at reasonably comparable levels of economic development during the last few decades. An examination of economic policy in the two countries during this period would suggest that Portugal’s outperformance of Spain puts the neoliberal model of economic policy into serious question. It seems that the conventional “orthodox” explanation fails to explain the divergence in performance. During the last few decades, Portugal has not embraced austerity measures more intensely than Spain, nor has it exhibited a less interventionist economic policy; quite to the contrary, it has intervened more successfully in its economy through a variety of industrial policies. Nor does the difference in unemployment rates between the two countries seem satisfactorily explained by the “orthodox” analysis – namely, more generous unemployment benefits and less “flexible” labor markets as the cause of unemployment. In this sense, Spain since the democratic transition cannot be called a neoliberal success story. Did the state represent during the neoliberal era, following the Marxist perspective discussed at the top of the chapter, a clear set of class interests, and did state organizations consistently work toward this goal? The answer is no, since we cannot speak of any coherent class-based strategies in the turns and dynamics of economic and social policy during this historical period. However, the state was characterized during this time by a set of policy norms and expectations defined by the post-1989 global context. Each state was neoliberal in its own way, but there were clear patterns in the policies and their outcomes across the region. First, all the countries that followed what may be called neoliberal policies were operating under democratic rules and processes, at least after an early period of authoritarian neoliberalism in Chile and Mexico. The link between democratic governance and the imposition of supposedly unpopular policies remains one of the great mysteries of the neoliberal era. Second, most of the

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region did experience some economic growth during this period even after the 2007–2008 crisis. Third, despite the general view of neoliberalism shrinking the state, there was a clear upward trend in the size of the state during these years measured by both expenditure and tax revenue. Again, unlike stereotypical accounts, the share of government expenditure that was oriented toward health and education also increased. Finally, there were considerable consistencies in policies as measured by general neoliberal policy indices. There was something of a neoliberal wave throughout the region, even if each case adopted them in different ways and at different times. The major trends included a taming of inflation, an opening to world markets, and a great deal of privatization. Yet, several major structural problems remained unchallenged in the neoliberal era. First of all, much of economic growth may have been derived from exogenous sources: commodity booms or EU money. Second, there was a significant improvement in inequality and a decline in the poverty head count across these years. This was a product of both government policy and the commodities boom, which raised government revenues. However, these advances remain extremely fragile, and as the COVID-19 crisis of 2020 demonstrated, structural inequality remained a defining part of the region’s political economy. Third, as COVID-19 has pointed out, the LA political economies persistently have high informal wage forces as a percentage of labor constraining efforts to increase state capacity and also reform inequality. Fourth, the endemic corruption that characterizes almost all LA civil services and that may also be partly responsible for a continued atmosphere of random violence and drug trafficking indicates that whatever boom may have occurred, it did not translate into deep political reform. In the end with this third volume, we find that while Spain addressed many of the concerns described in the first volume of this series, the developmentalist and neoliberal turns did not produce the kinds of successful republics of the possible that once made up the Latin American dream. bibliography

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Pedersen, Michael. “The Impact of Commodity Price Shocks in a Copper-Rich Economy: The Case of Chile.” Empirical Economics 57, no. 4 (October 2019): 1291–318. “Peru’s President Pedro Pablo the Brief: Lessons from Another Fallen Leader.” The Economist, March 28, 2018. www.economist.com/the-americas/2018/03/28/ perus-president-pedro-pablo-the-brief. Petras, James, and Steve Vieux. “The Chilean ‘Economic Miracle’: An Empirical Critique.” Critical Sociology 17, no. 2 (July 1990): 57–72. Piburn Jesse. wbstats: Programmatic Access to the World Bank API. Oak Ridge, TN: Oak Ridge National Laboratory. 2020. https://doi.org/10.11578/dc.20171025.1827. Piketty, Thomas. Capital and Ideology. Cambridge and London: Harvard University Press, 2020. Piburn, Jesse. “wbstats.” Open Source, Publicly Available Repository. September 08, 2016. https://doi.org/10.11578/dc.20171025.1827 Polanyi, Karl. The Great Transformation. Boston: Beacon Press, 1985. Postero, Nancy Grey. The Indigenous State: Race, Politics, and Performance in Plurinational Bolivia. Oakland, CA: University of California Press, 2017. Quiñones Chang, Nancy A. “Cuba’s Insertion in the International Economy since 1990.” In Cuban Economists on the Cuban Economy, edited by Al Campbell, 89–113. Gainesville, FL: University Press of Florida, 2013. Riesco, Manuel. “Chile, a Quarter Century On.” New Left Review, no. 238 (November 1999): 97–125. Robinson, James A. “Colombia: Another 100 Years of Solitude?” Current History 112, no. 751 (February 1, 2013): 43–8. Rodriguez, Jorge C., Carla R. Tokman, and Alejandra C. Vega. “Structural Balance Policy in Chile.” OECD Journal on Budgeting 7, no. 2 (October 19, 2007): 59–92. Rodríguez, Olga R. “Calderon Sees Security as Legacy: As His Term Nears Its End, President Says Country Is on the Road to Rule of Law and Economy Is Stabilized.” The Globe and Mail, September 4, 2012. Romano Schutte, Giorgio. “Brazil: New Developmentalism and the Management of Offshore Oil Wealth.” European Review of Latin American and Caribbean Studies, no. 95 (October 2013): 49–70. Schneider, Ben Ross. “Brazil under Collor: Anatomy of a Crisis.” World Policy Journal 8, no. 2 (1991): 321–47. Sehnbruch, Kirsten, and Sofia Donoso. “Social Protests in Chile: Inequalities and Other Inconvenient Truths about Latin America’s Poster Child.” Global Labour Journal 11, no. 1 (January 30, 2020): 52–58. Seiler, Beryl, and Ben Raderstorf. “Michelle Bachelet’s Underappreciated Legacy in Chile.” Americas Quarterly, March 9, 2018. www.americasquarterly.org/article/ michelle-bachelets-underappreciated-legacy-in-chile/ Silva, Eduardo. “Capitalist Coalitions, the State, and Neoliberal Economic Restructuring: Chile, 1973–88.” World Politics 45, no. 4 (July 1993): 526–59. Silva, Eduardo. Challenging Neoliberalism in Latin America. Cambridge Studies in Contentious Politics. Cambridge and New York: Cambridge University Press, 2009. Singer, André. “Cutucando onças com varas curtas.” Novos Estudos 34, no. 102 (July 2015): 43–71.

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Singer, André. “From a Rooseveltian Dream to the Nightmare of Parliamentary Coup.” Translated by Emilio Sauri and Nicholas Brown. Princeton University, 2019. https://spo.princeton.edu/sites/spo/files/media/nightmare-singer-princeton1.pdf. Singer, André. “The Failure of the Developmentalist Experiment in Three Acts.” Critical Policy Studies 11, no. 3 (July 3, 2017): 358–64. Skidmore, Thomas E. The Politics of Military Rule in Brazil, 1964–1985. Oxford and New York: Oxford University Press, 1990. Social Panorama of Latin America, 2021. LC/PUB.2021/17-P. Santiago: Economic Commission for Latin America and the Caribbean (ECLAC), 2022. https://hdl .handle.net/11362/47719. Stampini, Marco, Pablo Ibarrarán, Carolina Rivas, and Marcos Robles. “Adaptive, but Not by Design: Cash Transfers in Latin America and the Caribbean before, during and after the COVID-19 Pandemic.” Inter-American Development Bank, November 2021. https://doi.org/10.18235/0003795. Staudt, Kathleen. “How NAFTA Has Changed Mexico.” Current History 117, no. 796 (February 2018): 43–8. Stokes, Susan C. “Democratic Accountability and Policy Change: Economic Policy in Fujimori’s Peru.” Comparative Politics 29, no. 2 (January 1997): 209–26. Strayer, Joseph. On the Medieval Origins of the Modern State. Princeton: Princeton University Press, 1973. Sullivan, Mark P., and Peter J. Meyer. “Latin America and the Caribbean: Impact of COVID-19.” IF11581, Version 24. Congressional Research Service, January 21, 2022. https://crsreports.congress.gov/product/pdf/IF/IF11581. Taj, Mitra, and Anatoly Kurmanaev. “Virus Exposes Weak Links in Peru’s Success Story.” The New York Times, June 12, 2020. www.nytimes.com/2020/06/12/ world/americas/coronavirus-peru-inequality-corruption.html. Taylor, Luke. “Will Duque Maintain Santos’ Other Legacy in Colombia – the Economic Recovery?” World Politics Review, August 21, 2018. www .worldpoliticsreview.com /articles/25618/will-duque-maintain-santos-otherlegacy-in-colombia-the-economic-recovery. Taylor, Matthew M. “Institutional Development through Policy-Making: A Case Study of the Brazilian Central Bank.” World Politics 61, no. 3 (2009): 487–515. Teichman, Judith. “The New Institutionalism and Industrial Policy-Making in Chile.” In Comparative Public Policy in Latin America, edited by Jordi Diez and Susan Franceschet, 54–77. Toronto: University of Toronto Press, 2012. Thacker, Strom Cronan. Big Business, the State, and Free Trade: Constructing Coalitions in Mexico. Cambridge and New York: Cambridge University Press, 2000. Tohá, Carolina. “Chile o el vértigo del futuro.” Nueva Sociedad, no. 286 (April 2020): 78–92. Ubasart-González, Gemma, and Salvador Martí i Puig. “España: ¿un nuevo ciclo político?” Nueva Sociedad, no. 286 (April 2020): 4–13. U-Echevarría Vallejo, Oscar. “The Evolution of Cuba’s Macroeconomy: From the Triumph of the Revolution through the Special Period.” In Cuban Economists on the Cuban Economy, edited by Al Campbell, 62–88. Gainesville, FL: University Press of Florida, 2013. Vargas, Hernando, Andrés González, and Ignacio Lozano. “Macroeconomic Gains from Structural Fiscal Policy Adjustments: The Case of Colombia.” Economía 15, no. 2 (2015): 39–81.

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Vera, Leonardo. “¿Cómo explicar la catástrofre económica venezolana?” Nueva Sociedad, no. 274 (April 2018): 83–96. Webber, Jeffery R. “Evo Morales and the Political Economy of Passive Revolution in Bolivia, 2006–15.” Third World Quarterly 37, no. 10 (October 2, 2016): 1855–76. Weber, Max. Gesammelte Politische Schriften. 3rd ed. Tübingen: J. C. B. Mohr (Paul Siebeck), 1971. Weber, Max. Political Writings, edited by Piter Lassman and Ronald Speirs. Cambridge: Cambridge University Press, 1994. “Work in Progress- Employment in Southern Europe: Better, but Fragile.” The Economist, August 22, 2019. www.economist.com/europe/2019/08/22/employmentin-southern-europe-better-but-fragile.

Part II ECONOMIC AND TERRITORIAL POWER

2 The Chilean Neoliberal State Origins, Evolution, and Contestation, 1973–2020 Patricio Silva

Chile can be regarded as the birthplace and main bastion of neoliberalism in Latin America. It all started in April 1975 when Pinochet’s minister of economic affairs, Sergio de Castro, publicly announced the application of a radical plan to liberalize the Chilean economy. This marked the beginning of what with the passing of time has become known as the Chilean neoliberal model. Many of the profound economic, social, political, and institutional changes introduced during the seventeen years of military rule will be inspired by neoliberal principles. By adopting free-market economics, Chile abruptly abandoned the state-led industrialization strategy that since the early 1930s had constituted the keystone of the Chilean developmental state.1 In retrospective, it can be stated that since 1975 neoliberalism has radically reshaped Chilean society. The changes generated by the application of market-oriented policies have been so profound that many scholars have argued that Chile has experienced a veritable ‘neoliberal revolution’.2 This chapter explores the main features of the Chilean neoliberal model since its inauguration in the mid-1970s. My aim is to provide an explanation for the remarkable longevity, relative strength, and substantial degree of support the neoliberal model was able to generate until very recently among key actors in society. Particular attention is given to the origins of neoliberalism in Chile in order to establish the military rulers’ motives to abandon the longexisting developmental state and replace it by a radical neoliberal formula. This chapter also pays attention to the continuity of the neoliberal model following the democratic restoration in 1990. It explores a series of political factors and

1 2

Silva, ‘The Chilean Developmental State’. Vergara, Auge y caída; Collier and Sater, A History of Chile; Gárate, La revolución capitalista.

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considerations that persuaded the new democratic authorities to maintain the inherited neoliberal economic model. The final aim of this chapter is to assess several expressions of social and political contestation the neoliberal model faced during the Concertación era (1990–2010) and in more recent years. The demand to abandon the neoliberal model in Chile has not only come from radical social movements and the extra-parliamentary left. Also, within the Concertación governmental coalition (1990–2010) some voices expressed from the start their uneasiness with the continuation of the neoliberal policies following democratic restoration in 1990. So, during the twenty years of the Concertación era, neoliberalism was hegemonic but did not remain uncontested. The Concertación’s dramatic electoral defeat in 2010 against the Rightwing presidential candidate Sebastián Piñera fueled even further the antineoliberal voices within this center-left alliance. This resulted in the adoption of a new name, the New Majority, and the inclusion of the Communist party and other radical groups into the conglomerate. In 2014, the New Majority coalition brought Michelle Bachelet for the second time to power, now defending a marked anti-neoliberal agenda. The New Majority government, however, showed poor political and economic performance and proved unable to build up a credible alternative to neoliberalism. In the end, this brought many Chileans to reject Bachelet’s eclectic reformist policies.3 This rejection was expressed in the reelection in 2018 of Sebastián Piñera and the subsequent restoration of the neoliberal agenda. This chapter ends with a brief reference to the profound political crisis Chile has been confronting since October 18, 2019. That day, the streets of Santiago and other major cities experimented violent protests and riots, demanding the end of neoliberalism in the country. By the passing of weeks and months, the protests did radicalize even further, acquiring an increasingly insurrectionary character. The protestors demanded Piñera’s immediate abdication and the elimination of the main pillars of neoliberalism, including the 1980 Constitution and the private pension system. However, the outbreak in Chile of the Corona pandemic in March 2020 brought the unceasing wave of protests to a sudden standstill, as Chileans were compelled to remain at home. However, all seems to indicate that as soon as the corona emergency comes to an end, the anti-neoliberal protests in the country will probably reemerge.

2.1  the

chilean road to neoliberalism

Neoliberalism in Chile shows a quite different starting point, trajectory, and outcome than what can be observed in the rest of Latin America. To begin with, the Chilean neoliberal model constitutes one of the single cases in the

3

Brunner, Nueva Mayoría; Walker, La Nueva Mayoría.

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region that has been relatively successful in transforming and modernizing the economy and society at large.4 In addition to this, after forty-five years, neoliberalism continues to rule the key aspects of the Chilean economic system and society. This is in strong contrast with the situation in the rest of Latin America where for the last fifteen years neoliberalism has been successfully challenged by a series of ‘pink tide’ governments.5 In Chile, neoliberalism has only been seriously threatened following the October 2019 protests. Chile also avoided the experience of the ‘double transition’ that took place in other Latin American countries during the 1980s. Those countries faced the monumental task to simultaneously accomplish a transition from authoritarian rule to democracy and to replace their state-led developmental model with a market-oriented economic strategy. In Chile, the establishment and consolidation of neoliberalism had previously occurred under the Pinochet regime. Hence, when Chile recuperated democracy in 1990, many of the most painful neoliberal reforms were already implemented and consolidated. In addition to this, the new democratic authorities inherited an economy which was in a relatively good shape.6 This advantageous situation did certainly facilitate the process of democratic restoration and consolidation in the country. Chile was not only the first Latin American country in adopting clear-cut neoliberal policies but it also preceded most other countries in the world. So, for instance, Thatcherism in the United Kingdom and Reaganomics in the United States only took shape in the early 1980s. It was also in the 1980s that international financial institutions started conditioning their loans to Latin American countries to the application of market-oriented economic reforms. In this way, in the Chilean case, the actions of external actors seem to have been less relevant in explaining the adoption of neoliberal policies than in the rest of Latin America. So contrary to what has been stated by some scholars,7 neoliberalism in Chile was not in my view the result of a foreign ‘imposition’, as it certainly may have been the case in other Latin American countries. The local roots of the decision to break with the former pattern of development constitutes are in my opinion an important factor in explaining the legitimacy of the Chilean neoliberal model and the identification with it by local Rightwing sectors and entrepreneurial groups. Hence, it is not unreasonable that the Chicago boys – the group of technocrats who designed and implemented the neoliberal agenda – proudly considered themselves as the true creators and architects of the Chilean neoliberal model.8 The adoption of neoliberalism in Chile has been rather the result of the severity of the economic crisis inhered by the Allende government, and of 4 5 6 7 8

Martínez and Díaz, Chile: The Great Transformation. Silva, Challenging Neoliberalism; Flores-Macía, After Neoliberalism?. Larraín, ‘The Economic Challenges’, 301. See Klein, Shock Treatment. Büchi, La Transformación económica de Chile.

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the political lessons taken by the Chilean right from the Unidad Popular (UP) experience. In this way, the ‘UP factor’ is fundamental for understanding the radical and orthodox nature of Chilean neoliberalism and the decision of important actors of the elite to support the model whatever the costs.9 Indeed, following the coup, the Right-wing sectors and the ­entrepreneurial groups were willing to accept and support the application of a severe ‘shock treatment’ as proposed by the Chicago boys. They did this, even at the price of sacrificing part of their short-term interests.10 They regarded neoliberalism not only as the right way to confront the economic crisis but also to regenerate the Chilean economy. In their view, it primarily represented a guarantee to discard a possible comeback of state-based socialist formulas in the future. Indeed, the neoliberal model aimed to eliminate the structural conditions which in the past had made possible the ascendancy of the left and the popular sectors, which culminated in the experience of the Unidad Popular.11 Another distinctive feature of Chilean neoliberalism is that, in contrast to what occurred in other countries in the region, neoliberalism in that country did not exclusively restrict itself to the liberalization and privatization of the economy. During the Pinochet regime, neoliberalism eventually evolved into an all-embracing hegemonic ideology with strong political and doctrinarian components. Moreover, the neoliberal postulates were able to deeply penetrate the social, political, legal, institutional, and even cultural domains. With the passing of time, the Chicago boys became the organic intellectuals of the military regime, legitimating the applicability of the neoliberal principles to practically all aspects of Chilean society.12 The indisputable hegemony obtained by neoliberalism in Chile culminated in the adoption of the 1980 Constitution. This legal chart incorporated the most important neoliberal tenets concerning the role of the state, the guarantee for private property, and the emphasis on the individual.13 But what certainly constitutes one of the most remarkable aspects of Chilean neoliberalism is that it managed to survive the end of the Pinochet regime. Indeed, following democratic restoration in 1990, the newly elected authorities decided to continue with the application of the inherited neoliberal economic model. This was not only the result of the fact that, in general, the Chilean neoliberal model had undeniably provided economic prosperity and financial stability. Also, political considerations related to the existing balance of power 9 10 11 12 13

Stepan, ‘State Power’; Remmer, 1989. Huneeus, The Pinochet Regime. Silva, The State & Capital in Chile, 123. Vergara, Auge y caída, 159; Arriagada, Por la Razón o la Fuerza, 80. That constitution was officially named ‘the Constitution of Liberty’, in honor of Fredrich Hayek, after his homologous book published in 1960. In that book he describes the characteristics that, according to him, a constitution has to possess in order to preserve liberal values and individual freedom.

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in the country and the need to guarantee high levels of governability were crucial factors for the adoption of that decision.14 The Concertación governments (1990–2010) though proved not to be simple administrators of neoliberalism in the country. During the years, the four Concertación administrations introduced important modifications to the economic model, particularly by implementing a huge package of social programs. This resulted in a successful reduction of the levels of poverty in the country. In this respect, following democratic restoration, Chile was a pioneer in applying the so-called neo-structuralist approach. This was expressed in the hybrid combination of some neoliberal goals (such as keeping low inflation, financial stability, and high levels of economic growth) with structuralist postulates. The latter included the existence of an active role of the state in the implementation of solid and well-financed social schemes.15 This combination of neoliberal and social democratic goals in the economic and social domains, respectively, became fully reflected in Concertación’s maxim ‘Growth with Equity’. The maintenance of the neoliberal economic model under democratic rule, however, generated permanent criticism from Left-wing sectors. They particularly stressed its illegitimate, authoritarian origin, and its inability to eradicate the huge social inequalities in the country.16 But anti-neoliberal voices could be found within the ruling Concertación coalition as well. There was indeed a sector that felt extremely uncomfortable with the fact that the neoliberal rationale was still dominant in determining the general orientations of the Chilean economy and society at large. Following the end of the twenty years of Concertación rule in 2010, the anti-neoliberal forces, which cohabitated in this former governmental coalition, felt themselves finally liberated to openly express their condemnation of neoliberalism. This resulted in an open demand for the adoption of a more state-led developmental path. In addition to this, neoliberalism also began to face contestation in the form of massive street protests. This is particularly the case of the emergence of a radical student movement since 2006. The students’ protests were initially mainly directed against the marketization of education and the dominance of the principle of profit-making in practically all spheres of public life. Since 2011 this discontent evolved into an open rejection of neoliberalism in general. Many of the students’ demands counted on the explicit support of the most Left-wing sectors of the parties conforming the former Concertación coalition. In 2014 emerged the New Majority, a radicalized version of the former Concertación coalition (now including the Communist Party), which incorporated most of the students’ demands. This new coalition succeeded in bringing Michele Bachelet back into power. During her second four-year term (2014–2018), she introduced several major economic, legal, and institutional reforms. They aimed 14 15 16

Boeninger, Democracia en Chile. Ffrench-Davis, Entre el neoliberalismo y el crecimiento. Moulian, Chile actual.

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at strengthening the role of the state and reducing the role of the market, in order to initiate the breakdown of the neoliberal order in Chile. In the end, however, the New Majority government failed in its attempt to redirect the country into a non-neoliberal direction. The second Bachelet government was also affected by continuous internal conflicts and contradictions within the coalition and her inability to maintain the rates of high economic growth of the previous years.17 The Chilean electorate punished the New Majority coalition and its attempt to terminate neoliberalism in the country. Former Right-wing President Sebastián Piñera was reelected and continued with the application of the neoliberal model.

2.2  the

origins of neoliberalism in chile

Most Latin American countries only became familiar with neoliberalism after the emergence in the early 1980s of the ‘Washington Consensus’ and its crusade to promote free-market reforms across the region. In contrast, the presence in Chile of monetarist and neoliberal-oriented policies can be traced back to the early 1950s. It is important to pay attention to those previous experiences with market economics as they are closely connected to the later adoption of the neoliberal model by the military regime in the early 1970s. The quest for adopting a market-oriented economy in Chile in the 1950s and 1960s was launched by sectors that were discontent with what they considered the poor performance of the Chilean developmental state. The latter was originated in the late 1920s and represented Chile’s main economic engine until the 1973 military takeover. This developmental strategy was based on state-led industrialization and the expansion of state institutions in charge of promoting economic growth and social development in the country.18 Following World War II, the Chilean economy experienced increasing levels of inflation and severe financial constraints. This was partly a result of the continuous expansion of the state apparatus and public investments. In the early 1950s, numerous voices began to demand the adoption of anti-inflationary measures, the reduction of the state bureaucracy, and the application of market-oriented policies to stimulate the economy.19 During the second government of Carlos Ibáñez (1952–1958), a series of policies were adopted in that direction as the economic situation continued to deteriorate. In the last two years of his government, Ibáñez decided to put into action a rather orthodox monetarist anti-inflationary program, following the advice of the Klein-Saks mission, an American consulting firm. In the end, Ibáñez was forced to abandon his pro-market policies as the application of

17 18 19

Brunner, Nueva Mayoría; Molina, Michelle Bachelet; Walker, La Nueva Mayoría. See Silva, ‘The Chilean Developmental State’. Sierra, Tres Ensayos.

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this program generated growing criticism and widespread protests from the union movement and the Left-wing parties.20 In 1958, Jorge Alessandri, a liberal engineer with technocratic credentials, became President of Chile. Like his predecessor, Alessandri attempted to abandon the state-led pattern of development, by announcing a gradual liberalization of the economy. His aim was to catapult the private sector as the main agent of economic development in the country. Alessandri also dismissed a large group of professionals working at state agencies and public companies, who became replaced by a new generation of managers coming from the private sector. Because of his open pro-business and technocratic orientation, and because of the radical character of his program, the Alessandri government soon become known as the ‘managerial revolution’. Nevertheless, and despite his open call to the Chilean entrepreneurial class to assume a pivotal position in the country’s development, the latter did not really embrace Alessandri’s plans.21 At the end of the day, the entrepreneurial elite had become accustomed to the financial and technical support provided by the developmental state. Hence, at that time, they were not disposed to accept the risks associated with the adoption of free market economics.22 As Petras pointed out, ‘the Chilean industrialists are not the free-wheeling, risk-taking adventures of Schumpeterian frame: they prefer to take subsidies from the state and seek its protection exploiting a limited internal market’.23 Like it happened under Ibáñez, also Alessandri was finally forced to abandon his technocratic pro-market experiment as the unions and the Left-wing parties strongly resisted his austerity measures and his attempt to put an end to the developmental state. It is important to stress here that not only Right-wing sectors seriously questioned the developmental state. Also, representatives of the left severely criticized in the 1950s and early 1960s the ability of the Chilean state to solve the main problems affecting the country. Even the Christian Democrats, representing the moderate political center, began since the late 1950s to argue that Chilean economy and society found themselves in a ‘structural crisis’, requiring the application of profound transformations.24 The genesis of the Chicago boys also finds its roots in the 1950s. In 1956, the Department of Economics of the University of Chicago signed a cooperation agreement with the Catholic University of Santiago, allowing among other things the exchange of staff members and students. This was a conscious attempt to counteract the solid hegemony exerted by Keynesian ideas and the UN Economic Commission for Latin America (ECLA) on Chilean economists, by also exposing them to the monetarist vision. Between 1955 and 1963, a 20 21 22 23 24

Sunkel, ‘El fracaso de las políticas de estabilización’. Cavarozzi, Los sótanos de la democracia. Moulian, ‘Los frentes populares’. Petras, Political and Social Forces, 66. Ahumada, En vez de la miseria.

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total of thirty young economists, graduated at the Catholic University, made use of grants to obtain a master or a PhD degree in economics at the University of Chicago.25 Many of them will later be part of the Chicago boys, in charge of the economic policies of the military regime. Following their return to Chile in the early 1960s, most of them became assistant professors at the Department of Economics at the Catholic University. They used the lecture rooms to spread the main neoliberal tenets of market economics and their message about the need to eliminate state interventionism in Chilean economy. However, outside the university walls, the future Chicago boys were not very influential at that time, as state interventionism and social reformism dominated the political agenda in Chile.26 Many Chicago boys also participated in the formulation of the economic program of the Right-wing candidate Jorge Alessandri during the presidential election of 1970. That program contained many proposals and ideas which will be later implemented during the military government. Alessandri finally lost the election to Salvador Allende, by a small number of votes. After the two frustrated attempts to apply free-markets policies in the 1950s, and following the electoral defeat of Alessandri in 1970, many supporters of neoliberalism came to the conclusion that the application of such a radical economic strategy would be almost impossible under democratic conditions.27 Since the late 1930s until 1970, the Chilean developmental state had created a large number of agencies and public enterprises in all areas of the economy. However, only after the installation of the Unidad Popular government, the expansion of state interventionism really reached its zenith. During the Allende years, the UP government expropriated a large number of companies, banks, and farms. As a result of this, the Chilean state took control of the largest part of the economic activities in the country.28 In the end, the Allende government proved unable to solve a series of severe problems resulting from its economic policies and its confrontational political styles, such as hyper-inflation and the poor management of the expropriated firms. As a result of the economic crisis, Chileans suffered of dramatic shortages of food and of all kinds of consumer goods.29 This turbulent period of Chilean political history was characterized by increasing political polarization and confrontation between government and opposition. The increasing deterioration of the economic situation and the exacerbation of the political conflict led to a situation cataloged by Hirschman as a ‘ideological inflation’.30 In the final stage of the Unidad Popular government, the Left-wing parties frenetically attempted to make of Chile at any cost 25 26 27 28 29 30

Valdés, Pinochet’s Economists. Délano and Translaviña, La herencia de los Chicago Boys; Silva, In the Name of Reason. O’Brien, ‘The New Leviathan’, 39. Silva, ‘The Chilean Developmental State’. De Vylder, Allende’s Chile. Hirschman, 1979.

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a socialist society. With the same token, the Right-wing opposition did not discard any means to put an end to the Allende administration, including a military coup.31 During the Unidad Popular government, the future Chicago boys started in total secrecy with the elaboration of an alternative economic program which was intended to be carried out after the expected military coup against Allende. This extensive document was nicknamed ‘the brick’ due to its heaviness. Previous to September 1973, this program circulated among a restricted group of Right-wing entrepreneurial and political leaders, as well as among some liaison officials within the armed forces.32 Between the military coup of September 1973 and the early days of 1975, it was still not clear how long the military were planning to stay in power, nor the kind of developmental strategy the Pinochet government was going to finally adopt. This was the result of the existence of two main options which will keep the armed forces and their Right-wing followers divided for a while. On the one hand, the so-called ‘restorative’ option was present from the very first moment following the coup. According to this perspective, the military coup was carried out to restore the rule of law and the old Chilean democracy, which resulted severely damaged by the Allende g­ overnment. This implied that the military government only represented a temporal solution to normalize the political and civil life in the country and to return power to (non-Left-wing) politicians.33 On the other hand, however, the most radical Right-wing sectors and the hardliners within the Armed Forces defended the so-called ‘refoundational’ option. In their view, the military junta had to make use of this unique historic opportunity to stay in power for a long period of time if necessary. They esteemed that a long authoritarian period was needed to deeply reshape the political, economic, and even cultural bases of the country in order to eradicate forever the traditional presence and ­influence exerted by the left.34 Following the military coup, the military government searched for its own solutions to face the consequences of the deep economic and financial crisis, inherited from the Allende administration. As Eduardo Silva summarizes, the Chilean economy was hit at that moment by ‘hyper-inflation, lack of investments, low foreign exchange reserves, declining export earnings, and general economic disorder in the wake of Unidad Popular’s failed attempt at socialist transformation’.35

31 32 33

34 35

Valenzuela, The Breakdown of Democratic Regimes; Sigmund, The Overthrow of Allende. Fontaine, Los Economistas; De Castro, ‘El Ladrillo.’ This ‘restorative’ goal was already stated in the first edict emitted by the military junta on the day of the coup: ‘The Armed Forces and the Police are united to initiate the historic and responsible mission to (…) restore order and the institutional framework’ [in memoriachilena.cl]. Garretón, ‘1970–1973’. Silva, The State & Capital in Chile, 97.

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As Foxley points out, in the beginning, the economic authorities of the military government choose a gradual approach in introducing changes in the functioning of the economy by means of deregulation. The idea was to gradually restore the market mechanisms in an economy which was until that moment extremely regulated by the state. This gradual approach included measures such as the liberation of prices, the devaluation of the national currency, and the reduction of the public sector deficit by reducing public expenditures and increasing taxes.36 The military regime also initiated the restitution to their former owners of many firms and landed states that had been expropriated by the Allende government, in the cases that the courts of law had qualified those expropriations as being illegal. Also in the initial period the influence of ‘developmentalism’ within the Chilean armed forces was not totally neutralized, as some more moderate Generals still supported the idea of a strong presence of the state and the existence of social policies directed to the poor.37 This was expressed in the decision to keep the state control on the nationalized copper mines and to redistribute part of the confiscated land during the land reform in private smallholdings among part of the peasantry. In the first year after the coup, the Chicago boys only occupied secondary positions within the state agencies engaged with the economic policies. Their radical ideas generated rejection in moderate circles and within certain sectors of the armed forces.38 However, their relative influence began to grow when the policies of gradual economic reforms did not produce the expected results. The economic and financial situation of the country became even worse as a result of the enormous increase in oil prices and the sharp reduction in the country’s export revenues in 1974. In early 1975, the Chicago boys mobilized all their resources in an attempt to convince the military government that the time had come to adopt radical economic solutions. So, in March 1975, the neoliberal think tank Fundación de Estudios Económicos invited the well-known US economist Milton Friedman to a conference on economic issues. Friedman had personally known many of the Chilean Chicago boys during their study at the University of Chicago. His visit to Chile was used as a powerful show of support for the Chicago boys and their call for adopting an orthodox neoliberal economic model. His visit became not unnoticed as he met several authorities, including Pinochet, all amidst huge media coverage.39 The fact is that a month after his visit, the leader of the Chicago boys, Sergio de Castro, became an economy minister. De Castro was successful in finally convincing the government that there was no other alternative than to radically reconvert the Chilean economy according to the laws of the market. Following his appointment, de Castro announced in a television speech the decision to 36 37 38 39

Foxley, ‘The Neoconservative Economic Experiment’, 17–23. Gárate, La revolución capitalista de Chile, 194. Valdés, Pinochet’s Economists. Oppenheim, Politics in Chile, 111.

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start with the application of an orthodox program of economic liberalization, a ‘shock treatment’, based on neoliberal free-market principles. This marked the beginning of the neoliberal era in Chile. As the following section shows, the continuous expansion of the neoliberal ideology in Chile will eventually result in the constitution of a veritable neoliberal state. Indeed, the neoliberal principles succeeded in penetrating the nation’s economic, social, political, institutional, and cultural spheres.

2.3  pinochet ,

the chicago boys , and the

construction of a neoliberal state

The ascendance of the Chicago boys and the implementation of the neoliberal agenda went hand in hand with the consolidation of Pinochet’s personal rule within the military junta. Although at the beginning Pinochet’s leading position was one of primus inter pares vis-à-vis the representatives of the Navy, the Air Force, and the Police, he soon deployed a power strategy to consolidate his supremacy. In June 1974, he became Supreme Chief of the Nation and six months later, he proclaimed himself as President of the Republic. As Arriagada indicates, Pinochet used his position as Commander in Chief of the Army, the most important branch of the armed forces, to eclipse the power of the other members of the junta. He also centralized the security and intelligence forces in a single organization, the DINA, which became directly under his control and was utilized to strengthen his position within the armed forces. According to Arriagada, until the early 1980s, the Chicago boys became, together with the Army and the DINA, one of the most important pillars of support for Pinochet.40 Previous to the ascendancy of the neoliberal team, those in charge of the economic policies were almost entirely concerned with the direct consequences of the economic chaos left by the Unidad Popular. Also, their criticism of the condition of the Chilean economy in the past was mainly restricted to the former Unidad Popular experience. In contrast, the Chicago boys formulated a long-term critical assessment of Chile’s economic policies, going back to the 1930s. In their view, state interventionism during the developmental era resulted extremely harmful to the country, as it blocked Chile’s great potential to accomplish rapid economic growth and increase social prosperity. Hence, the message was to put an end to the developmental state and to initiate the construction of a new developmental model, based on free-market economics.41 Previous to the application of their ‘shock treatment’, the Chicago boys warned the population that the first years would not be easy as the reconversion of the economy would imply a series of deep measures. And indeed, in the

40 41

Arriagada, Pinochet, 19–20. De Castro, ‘El Ladrillo,’ 12.

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years 1975 and 1976, Chile experienced a severe recession. However, from 1978 onwards, the Chilean economy began to experience an unprecedented boom. In the period 1978–1981, inflation was reduced to a historical low level, while the fiscal deficit disappeared, the balance of payments showed a growing surplus, and the export sector expanded very fast. The relative success of the neoliberal policies not only potentiated the power and influence of the Chicago boys within the government but also the relative legitimacy of Pinochet’s rule. He was very conscious of the fact that the consolidation of his personal leadership depended on an important degree on his ability to obtain a good economic performance and financial stability.42 The achievement of economic growth and access to foreign loans also stimulated enthusiasm among the Chilean economic elite with the new pattern of development. Moreover, the process of privatization of state companies started by the Chicago boys also benefited the large economic and financial conglomerates, which obtained control of a series of enterprises at low prices and mainly financed by external credits.43 Three important factors facilitated the application of the neoliberal model in Chile. To begin with, the Chicago boys counted on the resolute support of Pinochet, whose authority was not questioned by the rest of the armed forces. So, despite the initial reticence shown in certain military circles toward the application of the neoliberal project, in the end, the strict verticality in the chain of command was decisive to subordinate the military corps to the new economic model.44 Secondly, both the political right and the entrepreneurial class exhibited impressive support to Pinochet and the government of the armed forces. This was the direct result of the intensity of the threat they experienced during the Unidad Popular government.45 Indeed, nowhere in Latin America did the social and economic elite feel so threatened as in Chile. During the Unidad Popular, they faced a threat ‘from above’ (the Allende government) and a menace ‘from below’ (the radical masses demanding expropriation of their assets and the instauration of socialism). Thus, Pinochet was regarded by the Chilean elite as a great patriot and savior who liberated Chile from communism. He also received, from the very first moment until his death (and even beyond), the elite’s enthusiastic support and loyalty.46 And last but not least, the Chicago boys possessed a very strong “sprit de corps” and unity. They propagated, as a cohesive group, a coherent diagnosis of the problems

42 43 44 45 46

Huneeus, The Pinochet Regime, 140, 162. Mönckeberg, El saqueo de los grupos económicos. Arriagada, Pinochet; Garretón, The Chilean Political Process. Stepan, ‘State Power’. This became manifest during Pinochet’s arrest in London in 1998–2000. Both the Chilean right and the entrepreneurial elite financed his stay and his lawyers in London. They also visit him on a regular basis to express him their total support. Even today the figure of Pinochet generates a broad support within several rightwing circles.

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affecting the economy and presented a complete plan about how to deal with each of them. The Chicago boys stressed time and again the alleged ‘apolitical’ nature of their economic policies. According to them, their policies were strictly based on scientific principles and were only directed to guarantee the good functioning of the economy. Pinochet certainly welcomed the scholarly and technocratic tone adopted by the economic team. This alleged apoliticism was congenial with his own purpose to depoliticize Chilean society and eliminate doctrinarian elements in the discussion about how to foster economic growth. Pinochet also saw the political and strategic benefices of the deindustrialization of the country, as proposed by the Chicago boys, as this represented in his view an important blow to Marxism and the labor unions.47 At the zenith of their hegemonic position, the Chicago boys announced what they called ‘the seven modernizations’, involving a series of profound reforms intended to introduce the neoliberal rationale in several strategic policy fields. The seven modernizations included the introduction of a new labor legislation, the transformation of the social security system, the municipalization of education, the privatization of heath care, the internationalization of agriculture, the transformation of the judiciary system, and the decentralization and regionalization of the government administration.48 As stated before, the role played by the Chicago boys was not restricted to administrate the economic policies. They also played a pivotal role in the attempt to legitimate the authoritarian regime of Pinochet. Moreover, the Chicago boys disseminated political and doctrinarian neoliberal ideas (coming from Hayek, Friedman, and other neoliberal thinkers) against communism and collectivism in general. The 1980 Constitution adopted by the Pinochet regime is almost enterally written from a neoliberal worldview. Making use of Hayek’s ideas, the Chicago boys stated that most Western democracies, including the old Chilean one, were in fact pseudo-democracies, as they were controlled by political parties, labor unions, and other power groups. According to them, the introduction of a neoliberal system based on what they considered general and impartial rules, will be able to put an end to the constant pressure exerted by sectoral interests on the state. In addition, they defended the neoliberal tenet that the achievement of economic liberty represented a precondition for the existence of political liberty and real democracy. Moreover, the existence of the authoritarian regime was presented as a conditio sine qua non to be able to introduce and consolidate a free market economy. However, they foresaw that once the new economic system achieved maturity, the prolongation of the authoritarian rule was going to be unnecessary and restoration of democratic rule in Chile would be possible.49 47 48 49

Silva, The State & Capital in Chile, 123. Baño, 1982. Vergara, Auge y caída, 89–106.

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One important instrument used by the Chicago boys to provide some degree of legitimacy to the neoliberal model was mass consumerism. The opening of the Chilean economy to foreign imports allowed many Chileans, for the first time, to acquire desirable foreign consumer goods, from clothes to television sets, from perfumes to cars. The massive import of consumer goods was made possible with the subsequent expansion of credits for consumption. This represented a byproduct of the privatization of the banks and the authorization of foreign banks to operate in the country. The broad presence of foreign goods in the country created a general sensation of welfare and that Chile had been integrated into the dominant Western lifestyle. Not only the rich but also the middle classes participated in this consumeristic festival. Also, the popular masses acquired access to cheap foreign products coming mainly from China and other Asian countries.50 The hegemony of the Chicago boys would eventually come to an end as a result of a sudden and profound economic crisis in 1981, which shook severely (but not destroyed) the entire basis of the neoliberal structures. The crisis led to the bankruptcy of several financial and industrial conglomerates, a radical fall in production, and an unprecedented rate of unemployment. Pinochet was forced to dismiss the Chicago boys, including his minister of finance Sergio de Castro. He replaced them by military men who began to apply more pragmatic economic policies to reactivate the economy.51 After a couple of years, the Chilean economy recovered from the crisis. After a while, Pinochet started again to appoint a series of neoliberal economists, closely associated with the Chicago boys, in key positions in his government. In other words, neoliberalism as such managed to survive the crisis. However, the economic crisis had changed the political scenario for good. The economic turbulences generated, for the first time since the 1973 coup, a huge wave of street demonstrations against the military regime. A large number of people demanded the end of the dictatorship and the restoration of democracy in the country. Pinochet appointed Sergio Onofre Jarpa as interior minister. This experimented Right-wing politician started conversations with leaders of the democratic opposition forces as a way to deradicalize the protests and to win time to deal with the new political scenario. It is interesting to note that the protests were not mainly directed against the neoliberal economic model but primarily again the dictatorship; the main objective was clearly the recovery of democratic freedom and the reign of the rule of law. Not only the regime but also the leaders of the democratic parties were concerned with the radicalization of the street protests against the dictatorship. The democratic leaders were afraid that if the radicalization continued, a

50 51

Silva, ‘Modernization, Consumerism and Politics’. Silva, The State & Capital in Chile, 173–213.

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scenario of political polarization, similar to the situation previous to the 1973 coup, could emerge. If that occurred, the chances to come closer to a political solution and put an end to the dictatorship by peaceful means, would evaporate. So, the leaders of the main democratic opposition parties consciously decided to demobilize the masses and to conduct directly, at a top level, negotiations with certain civil politicians within the military government. Another factor which facilitated the establishment of bridges between the democratic opposition and the regime were a series of research institutes founded by the democratic opposition to monitor the policies applied by the military regime. These think tanks were mainly financed by donations coming from western countries. The idea was to support the democratic intelligentsia in those difficult years and help to formulate possible policy alternatives for the eventual restoration of democracy in the future. As political parties were prohibited, these think tanks were careful in not adopting a too obvious oppositional stance, preferring to make sophisticated academic studies on the policies implemented by the Chicago boys. Their papers and books were written in a rather technical style, making use of heavy scholarly jargon. Paradoxically, the professionals working in those research institutes also adopted with the passing of time a technocratic style, very similar to the one characteristic of the Chicago boys. These technocrats from the opposition also gained increasing prestige and power within the political forces against Pinochet, helping to moderate their agendas and to diminish the confrontational tone vis-à-vis the military regime.52 In retrospective, the peaceful nature of the Chilean democratic transition was paradoxically facilitated by the existence of the plebiscite mechanism, introduced in the 1980 Constitution. It was established that eight years after the adoption of the new constitution, a general plebiscite would take place in which the population should decide, in a yes-or-no option, if they wanted another eight years of military rule. If the no option won, general elections should take place within twelve months after the referendum. This was exactly what happened: the no option became victorious and within a year general election took place, marking the return of democratic rule in the country. Between the October 1988 Plebiscite and the installation of the Aylwin government in March 1990, frenetic negotiations took place between representatives of the military government and the future democratic authorities. One of the major fears of the supporters of the military regime was the possible dismantlement of the neoliberal economic model by the future democratic government. However, the future Concertación authorities did not even contemplate the idea to radically modify the neoliberal economic policies introduced by the military regime.53

52 53

Puryear, Thinking Politics. Tulchin and Varas, From Dictatorship to Democracy.

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2.4  the

social - democratization of

neoliberalism ,

1990–2010

The decision by the Aylwin administration to maintain the main components of the neoliberal economic model following democratic restoration in 1990 was the result of multiple factors, which were certainly not circumscribed to strict economic considerations. In my view, perhaps the most important factor in producing this outcome was not even related to the Pinochet government and the Chicago boys, as one could have expected, but to the experience of Allende’s Unidad Popular in the early 1970s. Following the coup, a series of books and essays of former leaders of the Allende government were published in exile, in which they attempted to find explanations for the dramatic debacle of their socialist experiment.54 In the beginning, the analysis was extremely ideologized and biased: time and again both the CIA and the national bourgeoisie were indicated as the sole responsible for the abrupt termination of the Unidad Popular experience. However, with the passing of time, the Unidad Popular’s own responsibility in the 1973 debacle became integrated into the assessments55 The important point to stress here is that those reassessments were particularly critical about the economic policies followed by the Unidad Popular. In their view, the inability shown by the Allende government to manage the economy and to avoid the emergence of serious issues (such as hyperinflation, food and consumer goods shortages, huge fiscal deficit, and so forth), constituted, if not the sole responsible element, a crucial factor in producing its fall. The recognition that the UP economic policies were a failure would have important consequences for the traditional economic thinking within the Chilean democratic left. The previous existing conviction that a state-based economic strategy, the nationalization of enterprises and banks, the expropriation of farms, the control of prices, etc., was the right thing to do, gradually disappeared among most leaders of the Chilean democratic left, following the Allende experience and the coup. That is the reason why, at the end of the Pinochet dictatorship, no serious leader of the democratic left proposed or defended the idea to replace Pinochet’s neoliberalism by an economic model similar to what was implemented during the Unidad Popular. The same evolution can be seen within the democratic left with respect to the neoliberal model implemented by the military regime. At the beginning, most of the leaders of the Chilean left in exile were convinced that the neoliberal model introduced by the Chicago boys was economically inviable. They enthusiastically made predictions about the collapse of the model, as they expected it could occur in a few years. Contrary to this, the neoliberal model 54 55

See Altamirano, Dialéctica de una derrota. See Garretón, ‘1970–1973’, 252ff.

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not only survived the crisis of 1975 and 1981 but even outlived the authoritarian government after 1990. By the late 1970s, many economists from the opposition finally began to recognize the viability of the neoliberal strategy followed by Pinochet, as most economic indicators showed undeniable good results. Although they correctly stressed the enormous social costs of these economic achievements, they also began to realize the importance of having a sound economy in the years ahead. After the expected restoration of democratic rule in the near future, Chile was going to require constant economic growth to obtain the needed resources to improve the living standards of the popular masses.56 The decision to maintain the neoliberal model following democratic restoration was in my view also linked to the experience of exile. Following the coup, thousands of Chileans abandoned the country, becoming disseminated around the globe. Most of the former UP leaders lived a long exile in countries of Western and Eastern Europe. That experience was decisive for the increasing ‘social democratization’ of the democratic left, known as the ‘renovation process’. On the one hand, many Chilean refugees consciously decided to live in a Communist country in Eastern Europe. They got by this a personal experience of the dark sides of ‘real socialism’. They became disenchanted with those countries due to the lack of freedom, the repression of dissidents, and the bad shape of their economies. Already in the late 1970s, many of them moved toward Western European countries, escaping from those societies they had so much admired in the past. On the other hand, many leaders who lived in Western European countries became increasingly impressed by the accomplishments of social democracy in the establishment of welfare states. They were particularly impressed by the social democrats’ moderation and their ability to reach compromises and consensus with opposite political forces. Many Chilean Left-wing leaders saw with their own eyes that it was possible to have progressive labor legislation and relatively good living standards for the popular sectors under capitalism. At the end, many of them finally rejected the Leninist postulates and explicitly renounced the old goal to build up a (proletarian) dictatorship. At the same time, they expressed their unequivocal support for democratic rule.57 But what perhaps became the most decisive factor among the opposition forces in the decision to maintain the neoliberal model had to do in my view with their great concern in guaranteeing governability and political stability following democratic restoration.58 The new democratic authorities had to show their ability to maintain economic growth and financial stability in the country, as many Chileans feared that economic chaos could be one of the possible unintended consequences of democratic restoration. That is the reason 56 57 58

Tulchin and Varas, From Dictatorship to Democracy. See Arrate, La fuerza democrática. Boeninger, Democracia en Chile.

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why President Aylwin consciously empowered his economic team, led by his minister of finance Alejandro Foxley, in an attempt to ensure the achievement of economic success under democracy. As Oppenheim pointed out, ‘Chileans were extremely sensitive to situations that they thought might recreate previous crises. For example, many Chileans associated inflation and economic dislocation with the Allende government: consequently, the Aylwin government made the day-to-day management and stability of the economy a major priority’.59 Also, the trauma of 1973 and the failure of Allende’s economic policies were extremely present in the minds and memories of the leaders of the democratic leftist parties participating in the Concertación coalition. Many of them had actively participated in the Allende government and considered its debacle also as a kind of personal failure. This personal commitment in guaranteeing the success of the new Chilean democracy is expressed in the following words of the socialist leader Enrique Correa. He was the minister secretary general of the government and key articulator of general agreements between the government and the Right-wing opposition during the Aylwin administration: ‘we have made many concessions, but it is thanks to this that we have built the kind of democracy we have today. (…) we have constructed a political and social order which will be very stable. And the contributions of the Socialists will remain related to that success, in the same way we remain related to the failure of the early 1970s. The Socialists of the future shall be the inheritors of that success, and not of the failure of the past’.60 Also, international factors concerning experiences coming from neighboring countries convinced the Concertación authorities not to change the neoliberal economic model. As Chile became the last country in South America in recuperating democracy (1990), the Chilean democratic forces had the chance to witness the calamitous results of the economic policies followed in Peru, Argentina, and Brazil following their transitions earlier in the 1980s. That sad and worrying spectacle in the region finished to convince many within the Concertación coalition that Chile had to avoid any experimentation in economic policies after the reestablishment of democracy in the country. Last but not least, the maintenance of the neoliberal model was also a consequence of the existing political balance of power between the center-left forces in government and the Right-wing forces in opposition. The 1980 Constitution, still in force after 1990, made possible an over-representation of the right in the Senate. This was a result of the so-called senadores designados, members of the Senate designated by constitutional stipulation, including former military commanders, and former top officials of the authoritarian regime. Moreover, the existence of a binominal electoral system, also introduced by Pinochet, favored the Right-wing parties, as they obtained in each electoral district half

59 60

Oppenheim, Politics in Chile, 212. Interview, El Mercurio, February 2, 1992.

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of the seats in dispute, even in places where the center-left forces had obtained nearly 2/3 of the vote. In this manner, the Concertación governments faced a Parliament in which the Right-wing forces were heavily (over)represented. This forced the Concertación governments to seek for agreements with the opposition in order to be able to introduce new legislation and implement a series of social reforms. The result was a climate of relative cooperation between the Concertación governments and the Right-wing opposition which became known as the ‘politics of agreements’ (política de acuerdos). This attitude of both sides was critical to guarantee the climate of strong political stability and consensus which dominated most of the twenty years of Concertación rule in Chile. As Tulchin and Varas correctly indicated ‘after seventeen years of military dictatorship, Chilean political leaders all across the political spectrum began to put an end to a long tradition of bitter confrontations, and slowly to value more and more democratic stability through compromise. (…) The trauma of the military coup and its long and bloody aftermath were ­powerful incentives for all political sectors not to recreate the same conditions that produced the breakdown of democracy’.61 In retrospective, it can be stated that the Concertación governments of the period 1990–2010 were extremely successful in both political and economic terms. On the political front, they consolidated a climate of political stability and consensus-seeking among the major political forces in the country. In the economic realm, Chile experienced during the Concertación years very good results in terms of economic growth, increasing expansion of trade, foreign investments, and sound management of the finances (including very low inflation, almost no fiscal deficit, and other achievements). But what is even more important, the Concertación government dramatically reduced the levels of poverty in the country, going from almost 40 percent in 1990 to 12 percent of the population in 2010. Although the new democratic authorities eliminated the most controversial features of neoliberalism in the country, the maintenance of a free-market economy remained a contested issue among certain sectors of the left that were part of the governmental coalition. Pinochet’s paternity of the neoliberal system represents a key factor to understand the constant resistance neoliberalism has experienced among that sector within the Concertación forces. This is despite the good performance of the country’s economy and the functioning of state institutions since democratic restoration in 1990. So, in fact, ‘two souls’ cohabited within the Concertación. On one hand, the Concertación had been drawn up by a Social Democratic oriented sector, which aspired to gradual and moderate changes in the country’s political and institutional structures. This was the so-called ‘self-complacent’ sector (autocomplacientes) that tacitly supported the economic model inherited from Pinochet and favored the use of

61

Tulchin and Varas, From Dictatorship to Democracy, 4.

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technocratic public policies to combat social problems. On the other hand, a very influential Left-wing minority always felt uncomfortable with these neoliberal policies. This was the so-called ‘self-flagellating’ sector (autoflagelantes), which demanded a more predominant role for the state and greater levels of citizen participation.62 The struggle between both sectors intensified during the first Bachelet’s government (2006–2010), to the extent that different social movements began to burst forcefully onto the political scene, supporting the ‘self- flagellating’ thesis. The struggle between the so-called ‘two souls’ within the Concertación visibly weakened the internal cohesion of Bachelet’s administration. Moreover, her administration did not manage to reduce the political effervescence of the social movements that regularly took to the streets in protest against the neoliberal model. The ‘self-flagellating’ sector expressed its support for the social movements’ demands. At the same time, this sector started an open attack on the powerful group of technocrats in charge of economic policies, led by the minister of finance, Andrés Velasco. These technocrats were accused of not paying attention to the demands coming from civil society, as they consistently resisted the pressures to substantially increase public expenditures as was demanded during street protests.63 During the Concertación years, a series of publications coming from the academic world severely criticized the continuation of neoliberal policies. One of the most influential was the book Present-day Chile: Anatomy of a Myth by Tomás Moulian.64 In this book, the Concertación is severely criticized and accused of not daring to take distance from neoliberalism. That book became a bestseller and went through several editions in a short period of time. In addition to this, the UN agency UNDP published a report entitled The paradox of modernization.65 This study argues that despite the economic and social achievements of the Concertación, there was a growing discomfort among the population with this particular type of neoliberal modernization. This document, as well as subsequent PNUD publications on this topic, became extremely influential among the Left-wing leaders within the Concertación. The electoral victory of the Right-wing candidate Sebastián Piñera in 2010 showed, however, that the assessment done by the self-flagellating sector about the discontent in Chilean society with neoliberalism did not fully correspond to reality. According to Peña, the emergence of relative discontent is natural in countries like Chile, experiencing a very vast transition toward modernity. However, this cannot be automatically interpreted as an expression of rejection of the neoliberal economic system by the Chilean population. For Peña, when present-day Chileans are discontent with the system is when the system 62 63 64 65

Brunner and Moulian, Brunner vs Moulian. Silva, 2008. Moulian, Chile actual. UNDP, 1998.

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does not observe its own rules of game. So for instance, when conglomerates collude among themselves to fix prices or when someone obtains a prestigious job because of his social connections and not on the basis of merit.66 Following the electoral defeat of the Concertación, the self-flagellating forces took control of the conglomerate, radicalizing their positions and adopting a tough and non-cooperative attitude against the Piñera government. This occurred despite the fact that the Right-wing government conducted policies very similar (and most times identical) to those of the Concertación era, including the continuation of a broad scale of social programs directed to the popular sectors. After Piñera’s installation, a kind of total symbiosis took place in the opposition between the self-flagellating forces and the radical social movements. From 2011 onwards, Piñera had to deal with a fierce student movement that used the struggle against profits made by private universities as their main weapon. The students took aim at the commercialization of university education, cataloged by Piñera as a ‘consumer good’. Even though current legislation prevented profit-making, many private universities made large amounts of money for their owners by demanding high registration fees and through real estate speculation. The students demanded free education and an improvement in its quality. Student protests continued throughout Piñera’s administration, posing an increasing threat to both his government’s legitimacy and the neoliberal economic model.67

2.5  the

new majority and its failed assault

on neoliberalism ,

2014–2018

During the first Piñera government (2010–2014), the political forces that had supported the old Concertación coalition were visibly in disarray. After their electoral defeat, the Concertación parties sank into mutual recriminations regarding each other’s responsibility in the collapse of the Concertación coalition. After their defeat, the old struggle between radical and moderate sectors inside the alliance reached a peak, putting on an upsetting show for the electorate. In fact, at the end of March 2013, the Concertación still did not have an official presidential candidate to go up against the ruling Right-wing coalition. Michelle Bachelet, however, suddenly appeared, like a saving deus ex machina, to lead the debilitated center-left opposition. Bachelet had finished her previous administration with high rates of popularity and public approval. She had also wisely kept her distance from the Concertación’s internal disputes, holding a 66 67

Peña, Lo que el dinero sí puede comprar. For a specific study of political struggles around university reform and neoliberalism in Chile and Peru, see the chapter by Camacho and Dargent in this volume. For a detailed examination of the recent wave of social protests against neoliberal policies in Chile, see the chapter by Schild in this volume.

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high-ranking function at the United Nations in New York. In the meantime, the more radical sectors of the Concertación had managed to gain political control of the conglomerate, disowning most of what had been done during their twenty years of government. Imbued with a strong ‘refoundational spirit’ and eager to change almost everything, they left the ‘Concertación’ behind once and for all, by renaming it ‘New Majority’. As a sign of their turn to the left, the New Majority coalition included the Communist Party and representatives from the radical student movement. As a result of this political and ideological about-turn, the Christian Democrat Party, which represented the moderate sectors, was given a painful secondary role in the electoral coalition. In fact, with the exception of the Christian Democrats, the New Majority represented (in terms of the political forces included in the coalition) a kind of upgraded Unidad Popular. The main foundation for the New Majority’s government program, called ‘Chile for All’, was based on achieving greater equity in Chilean society. To do so – among other measures – profound reforms in education and in the tax system were proposed. Following its electoral victory, the New Majority government immediately started with the proclamation of a long list of reforms. However, the self-confidence and legitimacy of the New Majority government became abruptly damaged in February 2015, following an article in the weekly magazine Qué Pasa in which Sebastián Dávalos, the son of President Bachelet, became linked to a questionable purchase of land.68 This news did deeply shake the main foundations of Bachelet’s government. The problem was that Dávalos was not only Bachelet’s son but also he held public office in the government at the time, a position his mother had appointed him to. Namely, Dávalos was Director of the Presidency of the Republic’s Sociocultural Department, in charge of a series of activities normally carried out by the First Lady. This case of traffic of influence (which became known as the Caval scandal) severally affected the popularity of Bachelet and hence of the New Majority government. Soon after this, another scandal emerged when following a judicial investigation, a situation came to light involving the illegal financing of political parties by the Chilean Chemical and Mining Society (SQM), run by Pinochet’s former son-in-law, Julio Ponce Lerou. It became clear that SQM had financed not only Right-wing parties but also several parties that participated in the New Majority as well.69 In the final years of the first Piñera administration, most sectors of the former Concertación had adopted many of the slogans and goals defended by the student movement and the radical social movements in general. The ambitious reformist agenda of the New Majority strained government-opposition relations to the limit. Bachelet’s government was characterized by its unwillingness

68 69

Navia, ‘Dirty money scandal’. Silva, Public Probity and Corruption in Chile, 221–223.

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to compromise with Right-wing parties on its large-scale package of political, economic, and institutional reforms. Finally, the New Majority’s ability to introduce radical reforms was seriously affected by the emergence of a series of cases of corruption that affected President Bachelet and some of the former Concertación parties. Bachelet’s second administration and her New Majority coalition constituted a radical break with the line followed by the previous Concertación governments. It was motivated by a ‘refoundational logic’ in a clear attempt to break not only with the economic and political legacy of the military government but also with the own legate of the Concertación era. The new coalition aimed to implement three fundamental reforms, which in fact were intended to hit the very heart of the neoliberal structures which had been constructed in the last thirty years. It included a tax reform, a reform of the education system, and a new Constitution.70 In sharp contrast to the economic and fiscal policies followed by the Concertación, aimed to maintain high rates of economic growth and fiscal discipline, the New Majority administration paid almost no attention to the strengthening of the economy, while the deficit and the public debt grew as never before.71 During Bachelet’s second government, the practice of looking for a compromise with the opposition, initiated in 1990, came to an abrupt end. As the name of the new coalition indicated, the new government had a majority in both chambers of parliament and it was decided to make use of it to implement a series of profound reforms in Chilean society. With this favorable correlation of forces, the New Majority decided to govern and implement its policy program without compromising with Right-wing parties. In addition, the New Majority’s most radical sectors publicly expressed their intention to go beyond the original aims set out in the government program, having as their ultimate goal to put an end to the neoliberal system in Chile. This objective was fully reflected in the declarations of a prominent leader of the New Majority, senator Jaime Quintana, who claimed that ‘we’re not just going to steamroll everything, we’re going to excavate everything, because we have to destroy the obsolete foundations of the dictatorship’s neoliberal model’. These maximalist declarations had a profound impact on the Right-wing opposition, which saw in Quintana’s words the real objective of the series of reforms announced by Bachelet. From then on, the center-right began to view the radical spirit of the New Majority as an attempt to revive some of the aims of Allende’s Unidad Popular government of the early 1970s. 70

71

The New Majority depicted the Constitution as an unacceptable heritage of the Pinochet years. This, despite the fact that in 2003 the Constitution had been profoundly revised. All the controversial and authoritarian components in the constitution were eliminated. This profound reform of the Constitution took place during the government of President Ricardo Lagos (a Socialist) in which Bachelet was minister of state. Walker, La Nueva Mayoría.

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The New Majority also got the intellectual support of several scholars who wrote in 2013 about the imminent end of neoliberalism in Chile and the inevitability of its replacement by a new system based on universal social rights and new forms of citizen’s participation. That was the case of the best-seller collective volume The other Model: from the Neoliberal Order to a Public Regime, written by a group of well-known public figures and scholars.72 The study contains a veritable blueprint for an alternative developmental model in the fields of institutional reforms, public services, education, and others. The same year appeared the book The Model’s Collapse: The Crisis of the Market Economy in present-day Chile by the sociologist Alberto Mayol.73 This book presented an almost apocalyptic impression of Chilean neoliberalism, that according to the author, was witnessing its very last days. The mismanagement that characterized Bachelet’s second administration produced an increasing alienation from the middle classes who feared that the ‘reformist fever’ showed by the New Majority could result in a clear reduction of the levels of the general welfare of the country. The fears regarding another economic collapse (like in 1973) were reactivated by the New Majority itself by presenting the figure of Salvador Allende as a central source of inspiration. So for instance, Bachelet used very often a gigantic picture of Allende as background in her public presentations, with texts such as ‘the Chilean people will fulfil your mandate’. In practice, the desire among the New Majority leaders to get rid of neoliberal structures was several times stronger than their real ability to formulate and implement possible alternatives. The lack of internal consensus within the coalition also provoked a visible incoherence in the performances of ministers and other important figures who regularly made simultaneous declarations that contradicted each other. Also, new law proposals presented by the government were often severely criticized by members of the parliament who were part of the governmental coalition. Particularly, the co-habitation between the Christian Democratic party (PDC) and the Communist party within the New Majority governmental coalition proved to be very tense as both represented totally opposite visions about most of the issues under discussion. So while the PDC felt very proud about the accomplishment of the twenty years of Concertación rule, the Communist party had permanently criticized the Concertación in the past and decided to eradicate any memory of it within the Chilean left.74 In the end, many supporters of the PDC abandoned the party. They felt that there was no room for moderate positions within a governmental coalition that had adopted a too militant and intransigent position. The New Majority, which initially considered itself the natural successor of the Concertación 72 73 74

Atria et al., El otro modelo. Mayol, El derrumbe del modelo. Walker, La Nueva Mayoría.

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coalition, aimed to rule the country for a very long time. However, it did not manage to remain in power following Bachelet’s presidential period. The defeat of the New Majority coalition became extra painful as a Right-wing coalition won the 2017 presidential elections. In March 2018, Bachelet handed over the presidential baton to Sebastián Piñera. During his second administration, Piñera initially focused on the reactivation of the Chilean economy, following the very poor performance of the New Majority government in this field. After their electoral defeat, the parties of the New Majority coalition become extremely divided, missing a central figure who could keep the conglomerate together. After finishing her term, Bachelet accepted a high position at the UN in Geneva, making clear that she was not intending to lead the New Majority coalition in the future. In the months previous to the socio-political upheaval of October 18, 2019, nothing indicated that Chile was on the eve of the worst socio-political crisis the country has experienced since the breakdown of democracy in 1973. Only a week before that event, Piñera stated in an interview that Chile was like an oasis amidst a turbulent region. He stressed the relatively good performance of the economy and the political stability in the country and contrasted it with the complex scenario affecting the rest of Latin America. In the international arena, Piñera achieved a series of successes. In late August 2019, he participated at the G7 summit in Biarritz, as President Macron’s guest of honor. This was a clear expression of the international prestige Chile and the country’s economy enjoyed among Western leaders. Moreover, Chile was going to host two major and prestigious international summits before the end of the year. In mid-November, the Summit of the Asian-Pacific Economic Cooperation (APEC) was going to take place in Santiago. More than 7,000 delegates from twenty-seven Asian and (Latin) American countries were expected. Among those who had confirmed their presence were Vladimir Putin, Donald Trump, and Xi Yinping. In the beginning of December 2019, Chile was going to host for ten days the United Nations Climate Change Summit (COP25) for which more than 25,000 delegates from all over the world should be present. But all of a sudden everything changed. On October 18, 2019, a slight rise (4 US$ cents) in the price of the Santiago subway immediately originated protest actions led by secondary school students who massively avoided to pay the subway. In a matter of hours, these protests evolved into a veritable general uprising that obtained the full support of the Left-wing political parties and a broad variety of social movements. Twenty subway stations were put on fire, and the other 41 stations became severely damaged. In the following days, weeks, and months, the protests persisted. In some cases, they were accompanied with violent riots and plundering of supermarkets, malls, drugstores, and all types of shops in the major cities of the country. The government responded with the use of force, deploying anti-disturb police and later military personnel in the streets of the main cities. The security forces were clearly overtaken by the massive nature of the protests and its persistence in time. Following

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the October 18 uprising and the immediate deterioration of the political and security situation in the country, both international meetings were canceled. From October 18, 2019 until the beginning of the corona pandemic in Chile in March 2020, Chile has been in a state of continuous socio-political turbulence. It is still too soon to identify clearly the main factors that caused the socio-political upheaval the country has been experiencing since October 2019. Some analysts and politicians point at the big social inequalities still existing in the country as the major catalysator of the socio-political explosion. Others stress Piñera’s own responsibility in creating too high expectations among the population during the presidential elections that brought him back to power. During the electoral contest, Piñera had promised to recuperate the high levels of economic growth the country had experienced in the recent past. However, in the course of 2019, it had become clear that although the economy was showing clear improvements, the pace of the reactivation was far much lower than expected. Still, others see in the October upheaval a coordinated political action organized by the Communist Party, anarchist organizations, and a series of extreme leftist groups, to force the cancelation of the two world summits in Chile at the end of the year. Both events were seen by the Chilean Leftwing forces as the crowning of Piñera in the international arena and a proof of Chile’s full involvement in a globalization process they openly condemned. In the same light, some accused Cuba and Venezuela to have been involved in the organization of the October 18 uprising and the subsequent riots. According to this view, this corresponded to a concerted action against Piñera after he took a leading position in Latin America in the condemnation of the Maduro regime and for openly supporting the Venezuelan opposition.75 Independently of the question concerning which factors were decisive in producing the socio-political upraising, what is clear is that the protesters have identified neoliberalism as responsible for the main problems affecting the country. Indeed, most of the slogans proclaimed by the multitudes on the street and most texts of the protest banners contained to demand to terminate with the neoliberal system in Chile. The second Piñera administration confronted a Left-wing opposition that from the very beginning showed little disposition to reach agreements with the executive. Following the October 2019 upraising, the government-opposition relations reached a low critical point. Many leaders of the opposition rejected Piñera’s invitations for direct talks about the crisis and possible ways to overcome it. However, the levels of violence and confrontation on the streets of the major cities began to reach explosive dimensions. At that point, many Chileans feared for a possible military intervention. At that critical moment, representatives of the right- and center-left political forces represented at the parliament reached a historical agreement on November 19, 2019. They agreed to deploy

75

Peña and Silva, Social Revolt in Chile.

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common efforts to reestablish social peace and public order, as well as to protect human rights and democratic institutions. They also agreed to call for a referendum to determine if the majority of the population support the idea of a new Constitution. The corona pandemic, however, forced the authorities to postpone the plebiscite for a later occasion. Like in the rest of the world, the corona pandemic forced the Chilean state to take a very active role in trying to control the spread of the virus among the population and to deal with its social and economic consequences. This has resulted in a marked increase of state interventionism in all spheres of public and private spheres. The government has deployed a large battery of state support in the form of large subsidies, distribution of food packages, and other measures. Moreover, the government has provided full support to industrial initiatives to produce medical equipment and medicines which until now were acquired abroad. In other words, the new reality created by the pandemic has visibly reduced the freeway the market forces possessed in Chile until very recently. It is still not clear if this strengthening in the state presence will be a temporal phenomenon or will become a more permanent feature of the Chilean state in the post-pandemic era.

2.6  conclusion Chile possessed until October 2019 socio-political upraising one of the most dynamic and stable economies in Latin America. The country maintained that exceptional position for more than three decades. In the political and institutional domains, Chile represented until mid-2019 one of the most stable and successful democracies in the continent. Both the political stability and the good economic performance have dramatically evaporated since October 18, 2019. The relatively good economic and political performance achieved since democratic restoration in 1990 was a combination of market-oriented economic policies and the existence of a moderate political class that managed to build up a general consensus around its ‘growth with equity’ formula. While conserving many aspects of the original economic model implanted by Pinochet, the Concertación administration introduced a series of important reforms to adequate the model to the goal of fighting poverty in the country. Despite its relatively good performance since democratic restoration in 1990, the Chilean neoliberal model has been constantly questioned by Leftwing sectors that stress its illegitimate origin as it was born under an authoritarian and repressive regime. They also permanently criticized the full opening and internationalization of the Chilean economy, as this had allowed multinationals of all sorts and origins to exploit Chile’s natural resources. In retrospect, it seemed for a long time that the initial purpose of the military regime to eliminate state interventionism in the economic domain and to impede by this a future comeback of socialist-based formulas had been achieved. However, since the New Majority government (2014–2018) and

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particularly following the social upheaval of October 2019, Chile has experienced an increasing shift toward a stronger presence of the state in both the social and economic realms. If we look back at the twenty years of Concertación governments, it can be concluded that they were quite successful in terms of economic performance, political stability, and overall performance of the country. The credit for this achievement goes in first place to the Concertación authorities who showed a high level of political competence to adequately rule the country in a very crucial historical moment. But also the Right-wing opposition showed its good disposition, through a ‘politics of agreements’, to collaborate with the government and to introduce a series of important reforms. Both government and opposition shared the same interest in maintaining the good functioning of the economy and avoiding political and social turbulences which could jeopardize democratic consolidation. By continuing with the previous neoliberal policies, the Concertación governments unintentionally provided neoliberalism with an important degree of legitimation that it had lacked during the Pinochet years. Still, the presence of neoliberalism created continuous tensions within the Concertación governments. Left-wing sectors within the coalition could not easily accept that the economic system inherited from Pinochet was not only alive but that it had been improved under democratic rule. In reality, during the Concertación governments, neoliberalism experienced a process of ‘social-democratization’, as an impressive battery of social policies and programs were implemented to support the popular sectors, which have been unparalleled in the rest of the Latin American region. As long as the Concertación was in power, the fact of being part of the government restrained the dissident voices within the coalition to criticize too much the neoliberal course. However, when the Right-wing candidate Sebastián Piñera won the presidential elections in 2009, all the previous self-restraint among the anti-neoliberal forces within the Concertación disappeared. This resulted in the adoption of a very confrontational attitude toward the new Right-wing government. Since 2010, the former Concertación forces, with the exception of the Christian Democratic party, experimented an accelerated process of radicalization, adopting most of the slogans and demands coming from the student movement and other radical social organizations. The only serious threat neoliberalism has met since democratic restoration took place during the New Majority government (2014–2018). This alliance elaborated a radical Left-wing agenda which included a marked expansion of the role of the state, in terms of establishing more public agencies and social programs as a way to guarantee universal social rights for the popular sectors. In addition, the New Majority aimed to increase state control of the private sector and the market, by means of new legislation. The second Bachelet government took a very intransigent attitude vis-à-vis the Right-wing oppositions and the business organizations. The idea was that the government had a program to carry out independently of the objections and criticism it could generate in the opposition.

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By this, the New Majority government definitively abandoned the tradition of consultation and negotiation with the opposition, which had been established during the Concertación era. Having achieved a majority in both chambers of the parliament, the New Majority forces concluded that no negotiation was needed to implement a series of reforms. In reality, many of those projects did eventually not pass the acceptance of the parliament. This was the product of internal divisions among the parties of the New Majority, and particularly because of the increasing dissident voice of the Christian Democrats. The attempt to introduce an enormous number of complex reforms in just four years often produced chaotic situations as ministries, state agencies and the parliament were unable to cope with so many issues at the same time. The result was a generalized administrative disorder that negatively affected the image and the popularity of the government. In the end, the New Majority not only failed in its attempt to dismantle the neoliberal state. It also put in evidence that the neoliberal system was much more powerful and resilient than the Bachelet government had previously expected. The inability of the New Majority to win the 2017 presidential elections and the triumph of the Right-wing coalition headed by Sebastián Pinera were another political expression that the days of neoliberalism in Chile were not counted yet. The bad performance of the New Majority government convinced many Chileans that they better not bury neoliberalism until a better, more efficient, and realistic alternative was actually within reach. No one can predict how and when the current socio-political crisis in Chile will conclude. Nor what the future of neoliberalism in Chile will be. It is quite plausible that many aspects of neoliberalism will remain relatively unchanged, such as the strong orientation of the Chilean economy to foreign markets and the constant influx of foreign investments. In other areas, however, the role of the state and the public sector has been markedly strengthened. This is the case in the social field in which the Chilean state has witnessed a huge expansion following the socio-political uprising and the corona pandemic. These two major events have unleashed a broad battery of vast social programs and a close involvement of state agencies in a series of social policies intended to reach the most vulnerable sectors in society. What Chile is witnessing today is very probably not the end of neoliberalism in the country. The increasing role of the state in the social area is gradually transforming the neoliberal model toward a hybrid type of social market economy or Rhine capitalism. If this is the case, in the coming years, the Chilean free market capitalist system will evolve toward a sort of limited welfare state based on a gradual expansion of social rights among the population. bibliography

Ahumada, Jorge. En vez de la miseria. Santiago: Editorial del Pacífico, 1958. Altamirano, Carlos. Dialéctica de una derrota. Mexico City: Siglo XX, 1977.

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Angell, Alan. “Democratic Governance in Chile.” In Democratic Governance in Latin America, edited by Scott Mainwaring and Timothy R. Scully, 269–306. Stanford: Stanford University Press, 2010. Angell, Alan. Elecciones presidenciales, democracia y partidos políticos en el Chile post Pinochet. Santiago: Centro de Estudios Bicentenario, 2005. Arrate, Jorge. La fuera democrática de la idea Socialista. Barcelona: Ediciones Documentas, 1985. Arriagada, Genaro. Pinochet: The Politics of Power. Boston: Unwin and Hyman, 1988. Arriagada, Genaro, Por la Razón o la Fuerza: Chile bajo Pinochet. Santiago: Editorial Sudamericana, 1998. Atria, Fernando, Guillermo Larraín, José Miguel Benavente, Javier Couso, and Alfredo Joignant. El otro modelo: Del orden neoliberal al régimen de lo público. Santiago: Debate, 2013. Baño, Rodrigo, ed. Las modernizaciones en Chile: un experimento neoliberal. Rome: Centro de Estudios y Documentación Chile-América, 1982. Boeninger, Edgardo. Democracia en Chile: Lecciones para la gobernabilidad. Santiago: Editorial Andrés Bello, 1997. Borzutzky, Silvia and Lois Hecht Oppenheim, eds. After Pinochet: The Chilean Road to Democracy and the Market. Gainesville, FL: University Press of Florida, 2006. Brunner, José Joaquín. Nueva Mayoría: Fin de una ilusión. Santiago: Ediciones B, 2016. Brunner, José Joaquín and Tomás Moulian. Brunner vs Moulian: izquierda y capitalismo en 12 rounds. Santiago: Ediciones El Mostrador, 2002. Büchi, Hernán. La Transformación económica de Chile: el modelo del progreso. Santiago: Aguilar Chilena de Ediciones, 2008. Cavarozzi, Marcelo. Los sótanos de la democracia. Santiago: Lom Ediciones, 2017. Collier, Simon and William F. Sater, eds. A History of Chile, 1808–1994. New York: Cambridge University Press, 1996. De Castro, Sergio. ‘El Ladrillo’: Bases de la política económica del gobierno militar chileno. Santiago: Centro de Estudios Públicos, 1992. De Vylder, Stefan. Allende’s Chile. The Political Economy of the Rise and Fall of the Unidad Popular. Cambridge: Cambridge University Press, 1976. Délano, Manuel and Hugo Translaviña. La herencia de los Chicago Boys. Santiago: Ediciones del Ornitorrinco, 1989. Drake, Paul and Iván Jaksic, eds. El modelo chileno: Democracia y Desarrollo en los noventa. Santiago: Lom Ediciones, 1999. Edwards, Sebastián and Alexandra Cox Edwards. Monetarism and Liberalization: The Chilean Experiment. Cambridge: Ballinger, 1987. Ffrench-Davis, Ricardo. Entre el neoliberalismo y el crecimiento con equidad: Tres décadas de la política económica en Chile. Buenos Aires: Fondo de Cultura Económica, 2004. Flores-Macías, Gustavo A. After Neoliberalism? The Left and Economic Reforms in Latin America. New York: Oxford University Press, 2012. Fontaine, Arturo. Los Economistas y el Presidente Pinochet. Santiago: Zig-Zag, 1988. Foxley, Alejandro. Latin American Experiments in Neoconservative Economics. Berkeley: University of California Press, 1983.

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Foxley, Alejandro. “The Neoconservative Economic Experiment in Chile.” In Military Rule in Chile: Dictatorship and Oppositions, eds. J. Samuel Valenzuela and Arturo Valenzuela, Baltimore: The Johns Hopkins University Press, 1986: 13–50. Gárate, Manuel. La revolución capitalista de Chile (1973–2003). Santiago: Ediciones Universidad Umberto Hurtado, 2012. Garretón, Manuel Antonio. The Chilean Political Process. Boston: Unwin and Hyman, 1989. Garretón, Manuel Antonio. “1970–1973: sentido y derrota de un Proyecto popular: notas para una discusión”, Mensaje 66 (January–February 1978). Hirschman, Albert O. “The Turn to Authoritarianism in Latin America and the Search for its Economic Determinants.” In The New Authoritarianism in Latin America, edited by David Collier, 61–98. Princeton: Princeton University Press, 1979. Klein, Naomi. Shock Treatment: The Rise of Disaster Capitalism. Toronto: Alfred A. Knopf, 2007. Larraín, Felipe. “The Economic Challenges of Democratic Development.” In The Struggle for Democracy in Chile, edited by Paul W. Drake and Iván Jaksic, 279–304. Lincoln and London: Nebraska University Press, 1991. Larraín, Felipe and Rodrigo Vergara, eds. La Transformación económica de Chile. Santiago: Centro de Estudios Públicos, 2001. Martínez, Javier and Alvaro Díaz Chile: The Great Transformation. Washington, DC: The Brookings Institution, 1996. Mönckeberg, María Olivia. El saqueo de los grupos económicos al Estado chileno. Santiago: Penguin Random House, 2015. Muñoz Gomá, Oscar. El modelo económico de la Concertación 1990–2005: ¿Reformas o cambio? Santiago: Flacso/Editorial Catalonia, 2007. Huneuus, Carlos. La democracia semisoberana: Chile después de Pinochet. Santiago: Taurus, 2014. Huneeus, Carlos. The Pinochet Regime. Boulder, CO: Lynne Rienner, 2007. Mayol, Alberto. El derrumbe del modelo: La crisis de la economía de mercado en el Chile contemporáneo. Santiago: LOM, 2013. Molina, Pilar. Michelle Bachelet 2014–2018: Detrás de la derrota. Santiago: Ediciones El Líbero, 2018. Moulian, Tomás. Chile actual: Anatomía de un mito. Santiago: LOM, 1997. Moulian, Tomás. “Los frentes populares y el desarrollo político de la década del sesenta.” Documento de trabajo 191. Santiago: Flacso, 1983. Navia, Patricio “Dirty money scandal makes waves in Chile.” Buenos Aires Herald, January 14, 2015. O’Brien, Philip. “The New Leviathan: The Chicago Boys and the Chilean Regime, 1973–1980.” IDS Bulletin 13, no. 1 (1981): 38–50. Oppenheim, Lois Hecht. Politics in Chile: Socialism, Authoritarianism, and Market Democracy. New York and London: Routledge, 2018. Peña, Carlos. Lo que el dinero sí puede comprar. Santiago: Taurus, 2017. Peña, Carlos and Patricio Silva, eds. Social Revolt in Chile: Triggering Factors and Possible Outcomes. New York and London: Routledge, 2022. Petras, James. Political and Social Forces in Chilean Development. Berkeley and Los Angeles: University of California Press, 1969. Pizarro, Crisóstomo, Dagmar Raczynski and Joaquín Vial, eds. Políticas Económicas y Sociales en el Chile Democrático. Santiago: CIEPLAN / UNICEF, 1995.

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Puryear, Jeffrey M. Thinking Politics: Intellectuals and Democracy in Chile, 1973–1988. Baltimore and London: The Johns Hopkins University Press, 1988. Remmer, Karen. Military Rule in Latin America. Boulder, CO: Westview Press, 1989. Sehnbruch, Kirsten and Peter M. Siavelis, eds. Democratic Chile: The Politics and Policies of an Historical Coalition, 1990–2010. Boulder, CO: Lynne Rienner, 2014. Sierra, Enrique. Tres Ensayos de Estabilización en Chile. Santiago: Editorial Universitaria, 1970. Sigmund, Paul E. The Overthrow of Allende and the Politics of Chile, 1964–1976. Pittsburgh: University of Pittsburgh Press, 1977. Silva, Eduardo. Challenging Neoliberalism in Latin America. New York: Cambridge University Press, 2009. Silva, Eduardo. The State & Capital in Chile: Business Elites, Technocrats, and Market Economics. Boulder, Co: Westview Press, 1996. Silva, Patricio. “Doing Politics in a Depoliticised Society: Social Change and Political Deactivation in Chile.” Bulletin of Latin American Research 23, no. 1 (2004): 63–78. Silva, Patricio. In the Name of Reason: Technocrats and Politics in Chile. University Park, PA: Pennsylvania State University Press, 2008. Silva, Patricio. “Modernization, Consumerism and Politics in Chile.” In NeoLiberalism with a Human Face? The Politics and Economics of the Chilean Model, edited by David Hojman, 118–32. Liverpool: The University of Liverpool, 1995. Silva, Patricio. Public Probity and Corruption in Chile. London and New York: Routledge, 2019. Silva, Patricio. “The Chilean Developmental State: Political Balance, Economic Accommodation, and Technocratic Insulation, 1924–1973.” In State and Nation Making in Latin America and Spain: The Rise and Fall of the Developmental State, edited by Agustín E. Ferraro and Miguel A. Centeno, 284–313. Cambridge: Cambridge University Press, 2019. Stepan, Alfred. “State Power and the Strength of Civil Society in the Southern Cone of Latin America.” In Bringing the State Back In, edited by Peter Evans, Dietrich Rueschemeyer and Theda Skocpol, 317–43. Cambridge: Cambridge University Press, 1985. Sunkel, Osvaldo. “El fracaso de las políticas de estabilización en el contexto del ­desarrollo latinoamericano.” El Trimestre Económico 120 (1963): 123–41. Tulchin, Joseph S. and Augusto Varas. From Dictatorship to Democracy: Rebuilding Political Consensus in Chile. Boulder and London: Lynne Rienner, 1991. UNDP. Las paradojas de la modernización. Santiago: United Nations Development Program, 1998. Valdés, Juan Gabriel. Pinochet’s Economists: The Chicago School in Chile. Cambridge: Cambridge University Press, 1995. Valdivia, Verónica. “Estatismo y neoliberalismo: un contrapunto militar: Chile 1973–1979.” Historia 34 (2001): 167–226. Valenzuela, Arturo. The Breakdown of Democratic Regimes: Chile. Baltimore: Johns Hopkins University Press, 1978. Vergara, Pilar. Auge y caída del neoliberalismo en Chile. Santiago: Flacso, 1985. Walker, Ignacio. La Nueva Mayoría: Reflexiones sobre una derrota. Santiago: Catalonia, 2018.

3 State, Society, and the Neoliberal Turn in Mexico, c. 1980–c. 2000 Alan Knight

Writing contemporary history – which can be roughly defined as the history of the last generation – presents particular problems. Two are salient: first, access to the principal archives becomes more restricted (in the United Kingdom, there is a strict “30 year rule”) and the dearth of traditional primary sources is not – at least in this case – significantly offset by the potential of oral history.1 Second, the relative lack of hindsight means that historical research and informed historical debates are, at best, incipient. We don’t yet know the final outcome of events (is the Mexican neoliberal project here to stay? I touch on this question in conclusion) and historians have only recently begun to trawl the archives and initiate debates. Of course, journalists, pundits, and social scientists have already entered this terra – somewhat – incognita and staked out some initial interpretative claims (and I freely draw on their insights in this essay). But, just as we could not base a sophisticated and rounded interpretation of the Mexican Revolution (of 1910–40) solely upon what contemporary observers – including serious journalists, travelers, and academics – reported during those decades, so I suspect that the events of 1980–2000 (not to mention post-2000) are still quite poorly and partially understood. In other words, the analysis which follows is often tentative and suggestive (possibly not my normal exegetical style). Indeed, even the main questions to be asked – as well as the “organizing concepts” which may help provide 1

Interviewing elite political figures may be useful, but, if a rounded analysis is required, interviews can only supplement “traditional” (i.e., documentary) sources. Also, Mexican políticos are adept at presenting their chosen narratives (“rollos”), which – perhaps by design – can obfuscate critical analysis. For this essay I have made only one excursion into “oral history” (other attempts were stymied). Regarding the rich and often revealing documentary evidence located in the (United Kingdom) National Archives, it unfortunately stops in c. 1991.

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answers – are open to wide debate and disagreement. A great deal of contemporary comments and analysis – notably by journalists and pundits, but often by academics too – adopts frankly normative positions (thus, for or against Mexico’s neoliberal project), whereas I am sufficiently positivistic to believe that historians, though they usually have their own personal normative preferences, should try to silence them in the interests of objective analysis. Rigorous objectivity may be elusive, but that does not mean that objectivity – as a desired goal – should be ditched in favor of polemic and partisanship.2 Pundits, politicians, and journalists are fully entitled to occupy the bully pulpit, but historians should steer clear. Since the terrain to be covered is only partially mapped, I start by setting out some of the key questions which, in my view, need addressing. I then briefly sketch the main trends and events of the period. The greater part of the essay consists of a more detailed chronology/analysis of the three sexenios of Presidents de la Madrid, Salinas, and Zedillo (1982–2000) – presidents who may be justly seen as the architects of the neoliberal turn.3 Finally, I try to provide (tentative) answers to the initial questions. Although the focus is on Mexico, the role of the United States is obviously important; and, in passing, I note some comparisons and contrasts with the rest of Latin America (occasionally, with the rest of the world). After all, the neoliberal turn – and the process of globalization of which it formed a part – was a continental, as well as a global, phenomenon, and Mexico, as the second largest country and economy in Latin America, was a key player (thus, in 1994, South Americans reasonably feared the “tequila” effect stemming from Mexico’s mismanaged devaluation).4 But Mexico was also distinctive by virtue of its geopolitical location and its historic “dependence” on the United States (dependence which substantially increased during this period). And Mexico possessed a peculiar political system very different in its origins and modalities from that of other Latin American countries; hence, the starting point of its “transition to democracy” was unusual and, we might surmise, significantly path-dependent.5 Arguably, Mexico also adopted neoliberal reforms more rapidly, fully, and eagerly than many Latin American countries: compared, for example, to Brazil and Argentina, its initial response to the crisis (under de la Madrid) was impeccably orthodox; and its subsequent adoption of neoliberal structural reform (under Salinas) was more rapid 2 3

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See the exemplary parable recounted by Hexter, Doing History, 103–5. As I mention later, it is difficult to avoid a “sexennial” analysis of this process. However, such analysis – which also means a focus on the deeds of male políticos – should not be seen as a capitulation to Carlylean mythology (“history is but a biography of great men”); in fact, my conclusions tend to question their “greatness” and depict them, often enough, as victims of forces beyond their control. Edwards, Crisis and Reform, 297. O’Donnell, “Introduction,” 5. See also the comparison with Chile in González, Dual Transitions From Authoritarian Rule.

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and committed than in those countries.6 The outcome, for Mexico, was arguably a more radical transformation of political economy than elsewhere; and, at the same time, Mexican politics and foreign policy underwent a sea-change. The big questions divide into two general categories: causality (what drove the neoliberal turn?) and outcomes (what effects – social, political, and economic – did it produce)? The first question has the merit of being more “historical” (lodged firmly in the past, albeit the recent past), while the second is open-ended and thus harder to answer. In addition, each question can and should be subdivided. First, causality can – according to conventional (and sensible) historiographical practice – be divided into long-term causal chains (those which stretched over time and were, perhaps, “structural” and ineluctable) and short-term chains, typically the product of immediate (“conjunctural” or “contingent”) events and, perhaps, crises.7 Second, we can try to distinguish between changes that were consciously brought about by policy-makers – thus, were “top-down,” planned, and purposive – and those which were thrust upon policy-makers willy-nilly, often involving erratic or unplanned responses. In doing so, we should confront the perennial but tricky question of the role of ideas in decision-making: do policy-makers – as Keynes famously asserted – take their cue from received opinions (not least of economists), or are such intellectual rationales, at best, just artful window-dressing?8 And, if so, what lies behind them? Third, we can try to unravel the sources of domestic (Mexican) decision-making, evaluating the role not only of policy-makers (politicians and bureaucrats) but also of business, trade unions, and, perhaps, of other collective actors who can be subsumed under the loose label of “civil society.” Finally, we can address the obvious question of domestic (Mexican) as against external (foreign, especially United States) pressure and influence.9

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7 8

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On Mexico’s role as an “early reformer” (along with Chile and Bolivia), see Edwards, Crisis and Reform in Latin America, 1–9, 25. Regarding degrees of reform – what could be crudely called national “neo-liberal ratings” – see Flores-Macías, After Neoliberalism?, which, on the basis of five criteria (privatization, taxation, government spending, trade/financial liberalization, and poverty alleviation) places twenty-first century Mexico (with a rating of +3) second only to Colombia (+4) and alongside Chile; in contrast, Brazil (under Lula) scores +1 and Argentina (under Fernández de Kirchner) –1. Chávez’s Venezuela scores –5. On the concept of “crisis” (a term used much more often than it is analysed), see Knight, “Crisis and the Great Depression.” As Keynes put it: “practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” I return to this (dubious) claim later. FitzGerald and Thorp, eds., Economic Doctrines in Latin America, is a systematic collective effort to unravel the etiology of economic policy-making in Latin America; Peter A. Gourevitch, “Economic Ideas, International Influences, and Domestic Policies,” pp. 23–47, offers a good analytical approach. When it comes to explaining the origins (rather than the consequences) of economic policy, however, I am struck by how much even economists – and other hard-headed social scientists – fall back on hunch, intuition, and “soft” (non-quantifiable) hypotheses.

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Regarding outcome – still, as I mentioned, an open question – there are two big questions that merit attention. First, how did the neoliberal project turn out? Did it achieve its proclaimed goals? (A question that, while it cannot be ducked, really requires the expertise of economists and which, therefore, I will answer only briefly and tentatively). Second – a crucial question, given the focus of this volume and of the series of which it forms part – what was the relationship, in terms of both causality and outcome, between economic reform and political change, specifically democratization? In other words: did neoliberal reform encourage – even mandate – democratization (since free markets and free politics are a necessary combination) and did democratization in turn facilitate neoliberal reform? Or is the relation between the two rather more contingent: to the extent that they coincided, was this, like many historical concatenations, a matter of happenstance rather than necessity?10 All of the above involve complex causal chains which intertwine, so the first essential task is to clarify the chronology of c. 1980–c. 2000, after which I shall attempt a more detailed disaggregation, leading to some tentative conclusions. In the last two decades of the twentieth-century Mexico, like many Latin American countries (and, indeed, many others around the world), followed a course of neoliberal economic reform which, in terms of its proclaimed objectives and – to a lesser extent – its actual outcomes, sought to shrink the state, to privatize state assets, to open the country more fully to foreign trade and investment, thus to allow free-market activity much greater scope and security. In respect of Mexico’s foreign trade, the results were clear-cut: a relatively closed economy became – by national or international standards – an open one.11 A key element in this story was the creation of NAFTA in 1994 (which had been preceded by Mexico’s entry into the GATT eight years earlier): NAFTA channeled Mexico’s trade increasingly toward the United States, recreating a pattern that had briefly held sway during the Second World War and, in doing so, detaching the country from Latin America (and Latin America’s emerging regional blocs), in favor of a new North American orientation.12 Despite trade

10

11

12

Thus, I have elsewhere argued that, regarding Latin American governments and regimes, the direction of change provoked by the Great Depression of the 1930s was often a question of happenstance (who happened to be in power at the [wrong] time) rather than of any inherent politico-economic logic (whereby free markets require liberal politics, or dirigisme demands authoritarianism): Knight, “Panorama general de la Gran Depresión.” Mexican exports as a share of GDP went from around 10% in 1980 to over 30% in 1994 and 38% in 2016. Furthermore, petroleum, which constituted 77% of exports in 1982 fell to 15% in 1993 and now (2018) stands at just 4%. The export of manufactures, many of them produced in the maquiladora (in-bond) industries, followed a reverse trajectory, rising from just 10% in 1981 to 75% in 1993 and 89% today: see Haber et al., Mexico Since 1980, 72; Lusztig, The Limits of Protectionism, 99; Wood and Martin, “Of Paradigm Shifts and Political Conflicts,” 21. This orientation helps explain Mexico’s success at promoting manufactured exports (see n. 11 above). In South America – where the pull of Chinese demand was stronger – the export of

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liberalization (and the provision of “secure commitments,” designed to reassure diffident investors), inflows of foreign direct investment (FDI) hovered around 1.0–1.5% of GDP during the crisis-ridden 1980s; NAFTA produced a sharp boost (to 2.5% in 1995 and 4% in 2000), after which growth stalled.13 Equally, overall growth was sluggish – certainly compared to the rates achieved during the phase of desarrollo estabilizador in the 1950s and ‘60s. Of course, global growth rates were also lower in the neoliberal period: the global economy, like the Mexican, saw a boom in trade, but no comparable growth in per capita GDP. However, the fact remains that Mexico was a star performer in the first period, and something of a laggard in the second. Regarding the political correlates of the neoliberal turn, state-shrinking certainly occurred, as the Mexican government systematically privatized state assets, to the benefit of both Mexican and foreign private enterprise.14 A bigger stronger and more influential private sector thus emerged. State spending as a percentage of GDP fell relative to the bloated figures of c. 1980 but remained over twice as high as it had been back in the 1950s and ‘60s.15 However, there is more to State “strength” than measurable economic activity: a “shrunk” State – if it is suitably lean and effective – may still exert substantial power, just as an “obese” one, encumbered by the weight of its assets and obligations, may stagger from crisis to crisis.16 The Mexican story in these years seems to bear this out. First, the state had to respond to a series of crises, some relatively unexpected: in 1982, 1987, and again in 1994/5. Presidential authority fluctuated dramatically, as erstwhile saviors turned into scoundrels and supposedly safe pairs of hands

13

14

15

16

primary products predominated; for Mexico, however, China was more a competitor than a market. North American economic integration was also accompanied by a marked shift in Mexican foreign policy – from the prickly Third World nationalism of Echeverría to the more emollient stance (regarding, for example, Central America) of De la Madrid and his successors. Haber et al., Mexico Since 1980, 75. By way of comparison, while Mexico outstripped Argentina, Brazil did rather better – according to the same metric – and Chile (where rates reached as high as 10%) did very much better: see https://data.worldbank.org/indicator/BX.KLT.DINV .WD.GD.ZS. The “secure commitments” model is deployed in Haber, Razo and Maurer, The Politics of Property Rights. Edwards, Crisis and Reform, 191–3, notes that about 1,000 state-owned enterprises were privatized in the ten years following 1983; after an initially slow start (1983–7), which involved only 64 “small and medium firms,” the pace quickened and now embraced major companies (telecommunications, aviation, steel and, crucially, the banks). Though the proceeds were “rather modest” ($2.6b.), the process itself was smooth and – as a case study in privatization – “exemplary.” For a more negative analysis, see MacLeod, “Privatization and the Limits of State Autonomy.” On the growth of private sector organization and influence, see Luna, “Business and Politics in Mexico.” Schettino, Cien años de confusion, 414 charts government spending, rising from a little over 10% of GDP in 1970 to over 40% in the early 1980s, then sinking to 20–25% after 1990. Government tax revenue was substantially less, especially from the late ‘70s through the ‘80s; the yawning fiscal gap had to be covered by PEMEX plus loans. An argument I have floated elsewhere: Knight, “State Power and Political Stability in Mexico.”

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proved to be shaky and slippery. Cumulatively, presidential power, which had been the lynchpin of the old PRI regime, was eroded and the newly assertive mass media, reflecting public opinion, cast aside its historic deference toward the president.17 At the same time, halting democratization emboldened the opposition and somewhat shifted power from “the center” to the provinces. On the other hand, as Miles Kahler has stressed, the very process of (global) neoliberal reform often involved substantial state intervention – sometimes, indeed heavy-handed, even authoritarian, measures.18 States have to throw their weight about precisely in order to slim down. That ostensible paradox can involve both overt repressions (the Pinochet regime in Chile being the classic example); or, as in the Mexican case, rather more subtle strong-arming, coupled with substantial patronage and clientelism, as the “reformist” state, formally committed to free-market economics, rewards its friends and punishes its enemies. It cannot be doubted, however, that there was a remarkable sea-change in Mexico’s politics and political economy between 1980 and 2000. Hindsight confirms the judgment of contemporary observers, who repeatedly discerned seismic shifts taking place (even if those same observers habitually misunderstood the nature of those shifts).19 Furthermore, despite the political and economic vicissitudes of post-2000, the basic model has remained more or less intact. Mexico has not relapsed into statism, it has not gone the way of Venezuela, and it avoided the pull of the so-called “pink tide” which washed across South America in recent years.20 Indeed when, in 2000, the ruling PRI finally lost the presidency for the first time, the victors – the loosely ChristianDemocratic PAN – showed no intention of overturning the basic economic model (which they had advocated for decades), hence political alternancia was accompanied by economic continuity.21 17 18

19

20 21

Lawson, Building the Fourth Estate. The so-called “Kahler paradox” (whereby liberalizing/privatizing projects may require strong, “autonomous,” interventionist governments to carry them out) has appeared in several guises in the literature; for a good review – and critique – see MacLeod, “Privatization and the Limits of State Autonomy.” The voluminous UK Foreign Office files for the period (c. 1980–90) are replete with portentous evaluations, usually penned by British ambassadors (the junior diplomats were usually more informed and grounded); the files also include evaluations by Mexican, American and other “experts” which are often not much better. “Experts” include academics (I plead guilty), whose powers of analysis and prediction are also fallible: see, for example, Cornelius et al., eds., Mexico’s Alternative Political Futures. However, the prize for predictive fallibility must go to Henry Kissinger who, at the height of the oil boom, opined that “Mexico seemed “condemned to success”: N. Cox, 21 Jan.1980, FCO 99/523. At least until 2018, when the Left swept to power, in the shape of Andrés Manuel López Obrador and MORENA. I touch on this outcome in conclusion. “As for the right-wing PAN,” an observer noted in 1989, “(President) Salinas had cut the ground from under it by adopting many of its policies, particularly on debt and electoral reform”: J. A. Penney, “Report on Mexico City Visit,” 8 Dec. 1989, FCO 99/3051.

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But the road from PRIísta hegemony and the relatively closed statist economy of c. 1980 to the new neoliberal dispensation of c. 2000 was a rocky one. To chart this road, we should first consider the point of departure. For a generation, starting in the early 1950s, Mexico had lived through a period of sustained GDP (and population) growth, relatively low inflation, rapid industrialization and urbanization, and political stability, under “dominant-party” (PRI) auspices. Contrary to certainly received opinions, the role of the state in this – by its own standards highly successful – economic model was quite limited: the state regulated the market economy (by means of tariffs, quotas, and subsidies), but the state’s share of the economic cake was, by European and even Latin American standards, relatively small. There were few state enterprises (PEMEX being the obvious and iconic exception), taxation represented less than 10% of GDP, and the state payroll (including the army) was small.22 Private investment, both domestic and foreign, exceeded public investment; and the latter – in roads, reservoirs, and (again) PEMEX – tended to serve the interests of the private sector. State finances were managed conservatively. Nevertheless, the PRI regime of the 1950s and ‘60s embodied “developmental” goals and, to some extent, achieved “developmental” outcomes: rising literacy, enhanced life expectancy, and – chiefly thanks to the changing job structure – improved life chances, at least for the majority of Mexicans.23 Most families could reasonably suppose that the younger generation would be (again, modestly) better off than their parents. The desarrollo estabilizador model underwent minor shifts in the 1960s and major changes in the 1970s. During the later 1960s – in Mexico as elsewhere in Latin America – state spending nudged up and, with it, the public debt. But the Mexican model remained intact. In the following decade, fresh challenges prompted more radical new departures. Globally, the first oil-price shock (1973), following the devaluation of the US dollar (1971), marked the end of the post-war Bretton Woods system and triggered a dramatic cycle of global inflation (and, more worryingly, of “stagflation”: inflation that accompanied not boom but bust – or, at best, obstinately sluggish growth). Meanwhile, OPEC’s new-found wealth was recycled in the form of petro-dollars which flowed into Latin America (and elsewhere), sharply increasing the levels of both public and private debt. Coincidentally, Mexico faced a perceived political 22

23

The Mexican military has been somewhat neglected by scholars – who, perhaps, tend to assume that it played a marginal role after c. 1940. However, it is clear that, during the heyday of the PRI, the Mexican military establishment was – by Latin American standards – small and it maintained a low political profile: thus, in the “early 1960s,” military spending as a share of total government spending stood at just 8%, compared to 20% in Argentina, 21% in Chile and 28% in Brazil. See Loftus, Latin American Defense Expenditures, 37. Interestingly, the mid1990s – the heyday of neoliberal reform under Zedillo – saw a “rapid expansion” in numbers (an expansion which preceded by some ten years the wholesale deployment of the army against the narco cartels): see Camp, “Mexico’s Armed Forces,” 356. Knight, “The Mexican Developmental State.”

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challenge, symbolized by the 1968 student protest and repression. The administration of President Luis Echeverría – who, as Minister of Gobernación, carried a heavy responsibility for the Tlatelolco massacre – strove to recoup the lost legitimacy of the PRI, especially among the large and increasingly politicized younger generation, concentrated in the burgeoning cities and public universities. In addition, the PRI faced – again, in the cities – a small but growing electoral challenge from the right-wing PAN, while the PRI-affiliated CTM had to confront (not for the first time) dissident trade unions, like that of the electricians.24 As the latter example suggests, these threats were not altogether new, and they were by no means mortal. Through the 1970s, the economy continued to expand rapidly; and, as birth control (now espoused by the government) became more accessible, population growth crested and began to decline. Although both inflation and the public debt mounted (as they did throughout Latin America in the 1970s), living standards did not suffer and, indeed, the 1970s saw sustained per capita growth and a modest decrease in Mexico’s chronic inequality.25 It would, therefore, be mistaken to see the Mexican politico-economic model hitting the buffers in the 1970s, or the regime of the PRI facing imminent demise (in the way that regimes elsewhere in Latin America clearly did).26 There was still life in the old dog – or, if you prefer, the old dinosaur. However, the successive administrations of Luis Echeverría (1970–6) and José López Portillo (1976–82) did depart significantly from traditional PRI policy, not least in the hope of shoring up the regime’s legitimacy, while maintaining economic dynamism in difficult times. They faced, in particularly acute terms, the historic dilemma of states in capitalist societies: the need, on the one hand, to maintain business confidence, investment, and thus employment (Haber’s commitment question again); and the desire, on the other hand, to foster popular support for the politico-economic system, thus to convince the people that the system is broadly fair and legitimate.27 Squaring the circle of accumulation and redistribution was all the more difficult given the turbulent global context, Mexico’s stubbornly high levels of poverty and inequality, and the egalitarian (“revolutionary”) discourse of the regime – a discourse which, by the 1970s, risked entirely parting company with reality and becoming – and being seen as – mere hollow rhetoric.28

24 25 26

27 28

Gómez Tagle, Insurgencia y democracia. Székely, The Economics of Poverty, 10–13. For analyses which posit the “exhaustion” of the ISI model, see Otero, “Neoliberal Reform and Politics in Mexico,” 6; Centeno, Democracy Within Reason, 46; Kaufman, “Stabilization and Adjustment,” 93–4. O’Connor, The Fiscal Crisis of the State, 6. Almond and Verba, The Civic Culture; Knight, “The Myth of the Mexican Revolution.” For a perceptive eye-witness corroboration, see A. K. Soper, “Last Thoughts on Mexico,” 1 Sept.

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These dilemmas became apparent in the political vicissitudes of the “long” 1970s (by which I mean the period c. 1970–1982). Both Echeverría and López Portillo tacked to and fro: both came into office promising sound, orthodox financial policy, but both ended up boosting state spending, stoking inflation, and piling up public debt.29 Concerned to re-legitimize the regime (López Portillo had been elected in 1976 with no serious opposition), both presidents sought to re-connect with civil society by means of lavish state spending. (It is said that Echeverría set out to emulate the great radical reforming president Lázaro Cárdenas; but he overlooked the fact that, contrary to some stereotypes, Cárdenas had not been an irresponsible “economic populist”).30 Thus, between 1970 and 1982 state spending, the state payroll and public debt all soared; during the 1970s, the fiscal deficit – historically very low – climbed to 6.6% of GDP; by 1982, it had reached “a staggering 14%.”31 Keen to reassure the dissident younger generation, Echeverría gave priority to education, especially higher education; he also strutted his stuff on the world stage, striking radical poses and offending the Americans. His sexenio ended amid crisis, as the President embarked on a radical land reform in the northwest of the country – an emulation of Cárdenas, perhaps, which incurred the hostility of an already aggrieved Mexican bourgeoisie.32 As a result, business interests took fright and began to beef up their corporate organizational power.33 López Portillo’s sexenio followed a roughly similar trajectory. Initially promising – and delivering – orthodox financial policies, he veered to the left, encouraged by the providential windfall of oil revenue, which enabled him to spend and – on the basis of the projected revenue stream – to borrow on an unprecedented scale.34 Mexico’s political economy became more statecentered than at any time since independence. “Parastatal” enterprises proliferated; the public (and private) debt mushroomed; and inflation soared.35 At the

29 30 31 32 33

34 35

1988, FCO 99/2794, which argues that popular disillusionment with the PRI was not “with the principles for which the PRI is supposed to stand, but arose from the feeling that it had betrayed those principles and become purely time-serving and self-seeking.” Kaufman, “Stabilization and Adjustment,” 97. Schmidt, The Deterioration of the Mexican Presidency, offers a good analysis of 1970–6. On the Echeverría/Cárdenas comparison, see Knight, “Cárdenas and Echeverría.” Haber et al., Mexico Since 1980, 58; Schmidt, The Deterioration of the Mexican Presidency, chap. 2. Sanderson, Agrarian Populism. Regarding “bourgeois” attitudes towards Echeverría, Lomnitz and Pérez-Lizaur, A Mexican Elite Family, 201, is revealing. Luna, “Business and Politics in Mexico”; Kaufman, “Stabilization and Adjustment,” 97; ­Centeno, Democracy Within Reason, 68. Another way of putting it would be that the “bankers alliance,” which had successfully underpinned the Mexican “economic miracle” during the 1950s and ‘60s, had collapsed. On that alliance, see Maxfield, Governing Capital. Urquidi, Otro siglo perdido, 346–8. Schettino, Cien años de confusión, 391–2, 398, which shows inflation – hovering around 20% during the early 1970s – reaching nearly 120% in 1983.

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same time, lavish public spending provided ample opportunities for corruption and nepotism.36 Criticism of the President mounted; jokes and jibes that once would have circulated privately now appeared openly in the mass media.37 The “private transcript” of protest was becoming ominously “public.”38 As in 1976, the sexenio ended in crisis.39 In 1982, as oil prices slumped and interest rates rose, the administration was forced into a humiliating devaluation of the peso (which the president had declared he would “defend like a dog”) and, as capital flight accelerated, the president decided – on the basis of scant debate or consultation – to expropriate the private banks and impose exchange controls.40 The accompanying rhetoric – old-style Mexican nationalism spiced with simplistic “dependency” tropes – blamed foreign “­villains” (the bankers especially) for Mexico’s plight.41 Thus, some critics said, López Portillo sought to emulate President Cárdenas (who had expropriated the foreign oil companies in 1938) and to secure his place in history.42 Like Echeverría’s precipitate land reform six years earlier, the bank nationalization shocked the private sector and further ruptured the long-standing tacit alliance between big business and the PRIísta state. It also inaugurated nearly a decade of economic stagnation, government austerity, falling living standards, and increased emigration to the United States. The 1982 crisis – the most severe since 1930 – was followed by a market bust in 1987 and a third severe shock in 1994–5 (to be discussed below). Not surprisingly, the political fortunes of the ruling PRI, its reputation for sound economic management in tatters, went into sharp decline. The ignominious end of the López Portillo administration, therefore, ushered in a new era in Mexico’s political economy, as (late) PRIísta statism – the hypertrophied statism of Echeverría and López Portillo, which went far beyond the cautious, capital-friendly, mildly developmentalist project of the 36

37 38 39

40 41 42

Morris, Corruption and Politics, offers a useful survey. McKinney report, 27 Sept. 1982, FCO 99/1172, observes that “the recent scale of official corruption surpasses anything ever seen in Mexico before,” one explanation being “the size of plunderable resources generated here over six years.” President López Portillo, accused – inter alia – of nepotism, offered a bold public defence: to deny family members legitimate jobs (in his administration) would be an infringement of their human rights; and – a slightly stronger argument – it was better to appoint them upfront, rather than allow them to act as shady wheeler-dealers (“coyotes”) on the quiet: A. Coltman, report of presidential press conference, (of 6 Jan. 1982), 14 Jan. 1982, FCO 99/1171. Lawson, Building the Fourth Estate. The terms are derived from Scott, Domination and the Arts of Resistance. As an illustration of expert fallibility, a report from the British Ambassador reassured readers that “it seems likely that President López Portillo will be able to avoid a crisis of the magnitude which struck his predecessor in the last year of his presidency”: C. Tickell, annual review of 1981, FCO 99/1174. In fact, the crisis was a great deal worse. Espinosa Rugarcía and Cárdenas, eds., La nacionalización bancaria is a pioneering study based on the testimony of protagonists and the comments of experts. C. Tickell, 10 Jan. 1983, annual review of 1982, FCO 99/1592. McKinney report, 27 Sept. 1982, FCO 99/1172.

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1950s and ‘60s – gave way to neoliberal nostrums: state-shrinking, privatization, tariff reduction, and greater opening to foreign investment. And, as the political fortunes of the ruling party slumped, opponents on both the Right and Left made unprecedented electoral gains. Neoliberal economic reforms were therefore accompanied by halting democratization: elections that were more strenuously contested and whose outcomes were not known ex ante; in consequence, genuine party turnover (alternancia) in elected office; and a more robust and critical mass media. In short, several of the key criteria of representative democracy, as defined by Robert Dahl.43 Let me now unpack this complicated story. When discussing the evolving political economy, sexenios (presidential terms) are not always the best units of periodization. However, in this case, when we are dealing with fast-moving events, often involving decisive (which is not to say sensible) political decisionmaking, a sexennial approach makes sense. Roughly, we can see the De la Madrid presidency (1982–88) as reactively neoliberal: economic measures were taken in response to immediate crises and challenges, albeit on the basis of prevalent ideas (of what was the right thing to do) and of contextual pressures, both internal and external.44 At the same time, political measures (relating to elections, the rise of the opposition, and social policy) also tended to be reactive – the government responded to events haphazardly, appearing to lack any consistent or forward-looking plan. The Salinas presidency (1988–94) was much more pro-active, in the sense that it appeared to have a coherent longterm project both to reform the economy (along neoliberal lines) and also to shore up the regime (albeit a regime that, in the best Lampedusan tradition of the PRI, had to change in order to survive).45 Of course, there were continuities between the two: Salinas himself had been a key policy-maker in the De la Madrid administration, and each administration – like all administrations – blended ad hoc decision-making with long-term objectives. But the balance was certainly different: to resort to the old “ship-of-state” metaphor, De la Madrid had to steady the vessel – buffeted by debt, inflation, and capital flight – and prevent it from sinking; Salinas gave it a major refit and confidently steered in a new direction, winning accolades for his decisive helmsmanship. Unfortunately for him and his immediate successor, in 1994/5 the ship again sailed into stormy, shark-infested waters. 43 44

45

Robert Dahl, Polyarchy. Having reached the conclusion that De la Madrid’s neo-liberal “project” might usefully be described as “reactive,” I encountered a similar terminology in Miguel Angel Granados Chapa, “A 25 años de la nacionalización de la banca,” in Espinosa Rugarcía and Cárdenas Sánchez, eds., La nacionalización bancaria, vol. II, 207. That is, “everything needs to change, so everything can stay the same,” from Lampedusa’s novel, The Leopard. Of course, in the real world of twentieth-century Mexico (if not the fictional world of nineteenth-century Sicily), small incremental changes can, eventually and cumulatively, produce a substantial transformation. However, it is also plausible to suppose that, by proceeding in this fashion, the PRI managed to avert a sudden systemic breakdown.

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De la Madrid’s economic policy was dictated by immediate events – the severe crisis of 1982 – and involved emergency measures to stabilize the economy, avert capital flight, restructure the crushing public debt, and defend the peso. His approach, reflecting the make-up of his economic team, was orthodox (Mexico was seen as a “model debtor”) and the initial package of reforms was fairly typical of structural adjustment programs common in Latin America during the postwar period.46 But Mexico – having lived through nearly thirty years of “economic miracle” from the early 1950s through the late 1970s – was not used to such bitter medicine. Furthermore, adjustment was sharp and severe: public subsidies were cut, real wages plummeted, and unemployment rose. The current account deficit was turned around, more by slashing imports (and therefore consumption and capital investment) than by boosting exports. What looked good to the IMF and the banks held little appeal for the mass of Mexican people.47 Furthermore, the recovery was slow and halting. The arduous restructuring of Mexico’s foreign debt – the Baker Plan, the Brady Plan – stretched through the sexenio and beyond.48 Inflation remained stubbornly high, eroding real wages, and it was not until 1987/8, as the new Pact for Economic Stability began to bite, that inflation fell and the outflow of capital was stemmed.49 (As a result, though incoming President Salinas still had to grapple with the intractable problem of debt, in other respects the economy was in somewhat better shape than it had been six years before). Inflation, coupled with austerity and falling real wages – i.e., “stagflation,” inevitably undermined the popularity of the PRI and, by extension, the legitimacy of the entrenched “PRIísta” political system. In addition, the bank nationalization had alienated business opinion, boosting the credentials of the opposition PAN (a longstanding critic of PRIísta statism and advocate of pro-market policies). The PAN, a Christian Democratic party in all but name, also benefited from the increased political profile of the Catholic Church; and it took advantage of the modest window of electoral opportunity created by President López Portillo’s political reform of 1977.50 The latter – a typical piece of Lampedusan triangulation, enacted by the PRI in happier, hegemonic times – gave the opposition a foothold in Congress, thus both a public platform and an incentive to compete for elective office. And, even if voters did not immediately flock to the PAN, they began to desert the PRI in droves; 46 47 48

49

50

Foxley, Latin American Experiments, chap. 1. C. M. James, annual review of 1983, n. d., Jan. 1984, FCO 99/1862. Kaufman, “Stabilization and Adjustment,” 105–6. For a useful analysis, see Van Wijnberger, “Mexico and the Brady Plan,” which concludes, p. 35, that Mexico got a “remarkably good deal,” which made possible renewed growth after 1989. J. Nason, 22 July 1988, FCO 99/2794, reported that the conclusion of the Pact in December 1987 was “undoubtedly the turning point,” which served to curtail inflation and “arrested the sense of drift and indecision on the part of the Government.” Centeno, Democracy Within Reason, 57–8; Gómez Tagle, “Electoral Reform and the Party System.”

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growing abstentionism reflected both public disenchantment with the administration/regime and the latter’s inability to get out the vote in the old, tried, and tested clientelistic fashion. The decline of the PRI was particularly evident in the major cities (including the capital), where electoral fixing was less effective; in the north, where historic suspicion of “the Centre,” particularly among the powerful business elite, was heightened by the bank expropriation; and in the Bajío – roughly, the conservative Catholic center/west of the country – which had never embraced “the Revolution,” even in its post-1946 “institutional” incarnation. Thus, the long-term erosion of the PRI – previously apparent, but still painfully slow – now sharply accelerated: like the Great Barrier Reef, the PRI was slowly eaten away by long-term shifts in the political climate; but, every so often, a particularly severe storm broke off great chunks of the structure. And, during the 1980s and ’90s, the storms came thick and fast: in 1982, 1987, and 1994/5. The administration’s response was tepid. De la Madrid was seen as a dour technocrat, even though his “technocratic” skills seemed unable to bring about rapid economic revival. He was, at least, tolerably honest and he made much of the “moral renewal” that his administration sought, following the perceived excesses of his predecessor.51 (It seems likely that, in the hard times of the 1980s official corruption looked all the more egregious in the eyes of a disenchanted public; and, even if De la Madrid personally avoided conspicuous corruption, the PRI as a whole could not avoid this delegitimizing taint.)52 Meanwhile, presidential authority eroded along with that of the system as a whole. A newly assertive press, eschewing official subsidies (which, in hard times, had been cut back), found that it could survive in the marketplace, so long as it provided unvarnished news and robust critical comment.53 Where the print media led, radio and television would, eventually, haltingly, follow. The president’s dwindling authority was further dented by his lackluster response to the devastating Mexico City earthquake of October 1985: an event which, apart from wrong-footing the government (while revealing how cavalier and corrupt the capital’s building regulations had been), prompted spontaneous civic activism on the part of the chilangos.54 Here was striking evidence that, alongside the 51 52

53 54

C. Tickell, 4 June 1982, FCO 99/1171. It was plausibly suggested that the middle class – facing an economic squeeze of unprecedented severity – was particularly aggrieved by reports of official corruption: it was “the subject which gives rise to most anger and resentment, especially among the middle class.” The source, a British diplomat who had lived with a middle-class family in Mexico City, commented that “never a day passed without the subject of corruption in the government being brought up in discussion”: C. M. James, Review of 1983, FCO 99/1862. Lawson, Building the Fourth Estate. Walker, Waking From the Dream, chap. 6. The British Ambassador reported that “the ordinary people behaved well, and in some cases superbly, with a stoicism and courage which commanded general respect”; the government’s response, in contrast, was “patchy,” and “no one, including the President, gave the clear lead required”: C. M. James, 31 Dec. 1985, FCO 99/2356.

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novel electoral challenge of the opposition, more broadly based “(new?) social movements” were also mobilizing, whether in outright opposition to the PRI or by way of filling the yawning gap left by PRIísta austerity and indifference.55 For there is good evidence that the ruling party was caught unawares; that the historic gap between PRIísta rhetoric and practice had dramatically widened, but that the party leadership remained blinded by hubris and complacency.56 For decades, the regime’s legitimacy had been propped up, not by limpid democratic elections, but by the discursive legacy of the Revolution, by the PRI’s extensive clientelist network, and by its proven management of the economy. Now, all three legitimizing props were being kicked away. De la Madrid’s economic policy was, as I have said, reactive and orthodox; he initiated Mexico’s “neo-liberal turn,” but in response to pressing events and crises, rather than following a long-term, pro-active plan. Furthermore, there was little evidence of a compensatory political program. Government spending was being cut back, so there was no deep populist pork-barrel which the President – the least populist of the PRIísta era to date – could dip into.57 Mexico’s rudimentary social safety net was, in fact, acquiring even bigger holes; so Mexican families – including a newly impoverished middle class – had to look to their own resources in order to survive.58 The so-called “philanthropic ogre” of the PRI was looking a lot less philanthropic, but, like the ogres of legend, it could still throw its weight about. Confronted by the growing electoral challenge of the PAN, De la Madrid opted for the old and trusted methods of electoral fixing, particularly in the north. The 1985 mid-term elections involved “more than usually flagrant fraud”; and the 1986 elections in Chihuahua (a strongly PANista state) proved similarly 55 56

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Joe Foweraker and Ann L. Craig, eds., Popular Movements; and, for a useful critical review of the ample “social movement” literature, Hellman, “Mexican Popular Movements.” J. Nason 22 July 1988, FCO 99/2794, comments on the political shock produced by the 1988 presidential election – and, particularly, the strong performance of the Left, which took advantage of PRIísta abstentions and defections. The PRI leadership “seem to have thought that people who had been brought up in the tradition of the revolutionary family would not vote for any party other than the PRI.” We could call this phenomenon, perhaps, the “hubris of long-standing authoritarian incumbency”; it characterised European Communist regimes in the 1980s and – mutatis mutandis – the regime of Porfirio Díaz in the 1900s. Though much in vogue among political commentators, “populism” is not easy to define and very difficult to measure; however, de la Madrid, seen as a dry, remote, unemotional technocrat, clearly scored very low on any notional “populist” calibration. Of post-1946 presidents, only Díaz Ordaz (1964–70) might rival him for lack-of-charisma. But Díaz Ordaz was no technocrat. Arguably, the middle class – which had grown in numbers and prosperity during the years of the “economic miracle” – were hardest hit by the “lost decade” of the “eighties; compared to the working class, and, especially, the marginal poor, they were less accustomed to economic vicissitudes, they had fewer survival strategies at their disposal, and they may have felt the stigma of poverty more acutely. J. A. Penney, “Report on Mexico,” May 1989, FCO 99/3051, comments on the plight of the “threadbare middle classes.” See also Walker, Waking From the Dream, chap. 5.

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fraudulent, prompting widespread protest, a protest which “exceptionally” brought together the Church, business, and “leading Mexican intellectuals.”59 Foreign opinion, too, frowned on such practices; and, as debt negotiations followed their tortuous course, foreign opinion counted for rather more than it had back in the days of PRIísta supremacy. Meanwhile, unlike Pinochet, De la Madrid could not resort to outright, exemplary repression; rather, like all Mexican presidents, he had to adhere to the electoral timetable, as well as to the PRI’s traditional discourse of “democracy” and social inclusion. Repression – which occurred sporadically – had to be discreet and selective; in terms of Porfirio Díaz’s old dictum, it was better to rely on the pan than the palo (“bread” rather than the “stick”). But the bread was now in short supply. On the other hand (and contrary to certain crude national stereotypes), popular protest, though lively and extensive, was largely peaceful: it took the form of electoral mobilization, of “bottom-up” social movements, of more outspoken and overt criticism of the regime (including from the Church), and of occasional breakaways from the official unions (whose leadership stuck loyally and self-interestedly with the PRI).60 There were, it is true, a series of angry, at times violent, industrial disputes, as the CTM found it increasingly difficult to maintain its historical control of the labor movement. But this was hardly a new phenomenon; rather, old patterns of labor dissent, clearly evident, for example, in the inflationary 1940s, revived in the 1980s under the pressure of austerity, inflation, and falling real wages.61 The CTM lost ground (as it had in the 1940s), but it retained its central role in the Mexican political economy. Fears of a “social explosion” – reasonable enough, given the economic circumstances – proved groundless.62 Foreign observers were struck by the patient stoicism of the Mexican people.63

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C. M. James, 31 Dec. 1985, FCO 99/2356; FCO brief, “Mexico Internal Politics,” July 1988, FCO 99/2794. For a good analysis of the Chihuahua elections in their broader context, see Chand, Mexico’s Political Awakening. Foweraker and Craig, Popular Movements. A perceptive British observer in Chiapas (where a major rebellion would erupt in 1994), noted, in 1988, how the PRI – notorious for its local corruption and repression – lacked popular support; but so too did the Cardenista FDN, i.e., the infant Leftist opposition. Local grievances, though abundant, were expressed through “independent groupings, which are generally quite isolated from the registered political parties”; thus, “Chiapas is renowned for its proliferation of small independent protest groups, committed in the main to fighting for equitable land distribution and for protection of the rural population’s basic human rights”: S. Thomas, 10 May 1988, FCO 99/2794. Cook, The Politics of Labor Reform; Graciela Bensusán, “A New Scenario.” S. Thomas, 6 May 1988, FCO 99/2794, provides an interesting analysis of the independent sindicatos, including the electricians (SME) and university employees (SUNTU). J. A. Penney, “Report on Mexico,” May 1989, FCO 99/3051. J. Morgan, “Annual Review of 1987,” 20 Jan. 1988, FCO 99/2796, comments on the “docility” of the Mexicans, despite “repeated cuts in real wages”; C. M. James, “Review of 1983,” Jan. 1984, FCO 99/1862, rather more perceptively, notes how “the Mexicans have demonstrated great resilience” in the face of harsh austerity.

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The lack of sustained or concerted violence is not, perhaps, that surprising. Although virtually no Mexican of the 1980s could remember the armed Revolution of the 1910s, most Mexicans were aware of the death and destruction it had wrought; and the grim example of contemporary Central America – from which refugees were spilling over into southern Mexico – was an immediate reminder of the risks of armed conflict (risks that would be chiefly borne by the common people).64 Subsequent – relatively free – elections confirmed that fears of social upheaval weighed heavily on the minds of Mexican voters. And, even in its now somewhat sclerotic state, the PRI still deployed effective measures of social control (which did not involve root-and-branch repression, Chilean-style): the ejidal system helped deliver a bloc vote for the PRI in poorer, rural regions; and the CTM and its affiliated unions moderated wage demands while offering modest perks and protection for those who toed the official line.65 The ogre was still an ogre; so contestation was best done cautiously and institutionally. J. K. Galbraith once commented that the United Kingdom was the best place to attempt a radical monetarist experiment – as Prime Minister Margaret Thatcher did – because it had a strong, stable, legitimate state and a population committed to peaceful electoral politics rather than forms of street protest and direct action (France was the obvious comparison). The same could be said, mutatis mutandis, of Mexico, within the Latin American context: the state was strong, the army was loyal, the armed insurrection was largely a thing of the past, and popular protest, though it occurred, tended to be peaceful. The De la Madrid administration thus ended, if not in outright crisis, at least in serious disarray. Austerity undercut the popularity of the PRI but failed to generate economic revival (at best, its proponents might argue, it staved off complete collapse). Inflation remained stubbornly high and real wages had fallen by some 50%. In 1986–7, as inflation reached triple figures, the Mexican stock market slumped and GDP fell by over 4%. In response, the administration devised the Pact for Stability and Economic Growth (PECE): a heterodox plan to curb price rises and manage wage demands.66 Over time, the Pact achieved positive results (which means that incoming President Salinas faced a gradually improving economic scenario when he took power in 1988). But De la Madrid’s six years of austerity and incipient – “reactive” – neoliberal reform had achieved very modest results; the PRI’s reputation for economic competence had taken a severe hit; and, within the party itself, internal strains were becoming more severe. 64 65

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Seligson and Stevenson, “Fading Memories of the Revolution.” The rural/ejidal bloc vote had been a staple of Mexican politics for decades: González C ­ asanova, Democracy in Mexico. In 1988, at the time of the contentious presidential election, that vote was still mobilized (or concocted) in favour of the PRI, in order to offset the opposition vote (both Leftist and Rightist) in the cities: Reding, “Mexico at a Crossroads,” 622–5. Centeno, Democracy Within Reason, 195–6.

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In this contentious context, the PRI faced the presidential election of 1988. De la Madrid’s choice of successor – his erstwhile Minister of Budget and Planning, Carlos Salinas de Gortari – clearly represented a commitment to neoliberal continuity.67 Indeed, Salinas and his team, several of them (like De la Madrid) products of American graduate programs, were strongly identified with neoliberal policies.68 But, given its capacious “hegemonic” character, the PRI was, and had always been, a broad church, spanning a range of political opinions and policy currents. Successive presidents had to balance internal factions: in the 1940s and 1950s, Cardenistas against Alemanistas; in the 1980s, the – usually younger – neoliberals against those who cleaved to more traditional statist and nationalist positions. This last distinction is often construed as a conflict between “technocrats” and “politicians” – labels that were regularly used at the time and which have since been mulled over, refined, and re-defined by several expert analysts.69 While I do not intend to delve into their sophisticated typologization, a word about these “organizing concepts” is in order. While it is true that the neoliberals were “technocratic” in the sense of possessing claims to expertise (especially in economics), while often lacking experience of elected office, it seems somewhat misleading to deny them “political” status in the broader sense, since most of them had political c.v.’s (they were not parachuted in from business, as some of President Vicente Fox’s allies and appointees were after 2000); they typically held successive political offices; and, in a few cases – such as Salinas himself – they were adroit political operators. An alternative description, therefore, might be “buropolíticos”:70 their style of politics was that of insiders who had scant direct experience of the rough-and-tumble of Mexican electoral politics and who, in many cases, could fairly be criticized for lacking the common touch; but they were far from being the anonymous elite civil servants of the kind who, for example, headed the great institutions of State in France, the United Kingdom, or Japan. On the contrary, their rise to 67 68

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Salinas was seen as “the man (De la Madrid) considered most likely to continue the economic reform”: Nason, 22 July 1988, FCO 99/2794. Centeno, Democracy Within Reason, 14, cites The Economist, which “chose to remind readers that “Harvard-Educated-Economist” was not the new president’s middle name.” On the impact of foreign (American) education in the field of neo-classical economics, see Babb, Managing Mexico, chaps. 7 and 8. Again, however, I would – pace Keynes – caution against an overly “idealist” interpretation of Mexico’s neo-liberal turn: for neo-classical economics to be translated into practical policy, a great many other crucial factors – political, economic and social – had to come into play. Furthermore, the direction of the causal arrows is debatable: the paradigm shift in Mexican economic thinking (evident in the rise of institutions like ITAM) was made possible by broader shifts in political economy (on both the supply and the demand side). The ideas, we might say, often followed the money. Centeno, Democracy Within Reason, chap. 5; Camp, Mexico’s Mandarins, chap. 8. The term has been used – perhaps, was coined? – by Zermeño, La sociedad derrotada, chap. 15. Zermeño’s usage, as I understand to, is similar, but not identical, to mine. Centeno, Democracy Within Reason, 105, also works with a category of “burócratas políticos.”

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power required navigating the notorious camarilla system of the ruling PRI – a system that was not only part Weberian/bureaucratic but also (perhaps in greater part) Machiavellian/political.71 However, even within this key group, there was an important subdivision. Luis Echeverría was a classic buropolítico, who rose through the political hierarchy, cleaving to his camarilla, and never running for elected office. Like most of that ilk (we could also include Presidents López Mateos and Gustavo Díaz Ordaz), he was educated in Mexico, had studied Law, and was uncomfortable in English. His springboard to the presidency was Gobernación, the political ministry tasked with social control and – when necessary – electoral “alchemy.” He was a político to his fingertips, but his means of ascent came via camarillas within the party/state nexus. And the “official mind” of buropolíticos of this kind tended to be statist, authoritarian, and often nationalist; they did not care much for the United States but realized the practical need to collaborate with the coloso del norte. By the 1980s, however, a new, younger, typically US-educated elite entered the corridors of power: they, too, were buropolíticos, who had risen – very rapidly – through the official ranks (so, they owed nothing to popular constituencies and they often regarded the lower echelons of the PRI with some contempt). But their training was typically in economics and they belonged to the transnational “epistemic community” of policy-makers versed in neoclassical economic thinking (thinking which was now putting down deep roots in Mexican institutions of higher education like ITAM).72 For want of a more specific qualifier, I shall refer to Echeverría as his kind as “traditional buropolíticos,” Salinas and his cohort (Pedro Aspe, Jaime Serra Puche) as “modern buropolíticos.” Though both groups achieved power thanks to their camarillista connections and had scant direct experience of grassroots politics, the “traditionals” were schooled in the arts – often the dark arts – of political fixing, while the “moderns” focused on technocratic solutions, preferring to delegate the political fixing to others, even hoping that a new politically and economically liberal Mexico might be able to dispense with fixing altogether. De La Madrid’s evident preference for “buropolíticos,” which was franked by his choice of Salinas as successor, progressively alienated the – loosely – nationalist/statist/Cardenista wing of the PRI (who had been unhappy at De la Madrid’s own candidacy back in 1982).73 Needless to say, this alienation stemmed not only from ideological differences over policy but also from frustrated personal ambitions. In 1987 the dissidents, led by Cuauhtémoc Cárdenas and Porfirio Muñoz Ledo, broke away and formed the FDN (which, a year

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Smith, Labyrinths of Power; Camp, Politics in Mexico, chap. 5. Babb, Managing Mexico, chap. 6. C. Tickell, “Annual Review of 1981,” FO 99/1174.

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later, became the PRD).74 This was not the first serious schism in the ruling party: presidential successions had provoked similar splits in 1940, 1946, and, most starkly, 1952. But, since 1954 (a generation ago), party discipline had prevailed, based on the rational calculation that there was no political salvation outside the PRI and that it made sense to accept temporary reversals in the hope of future rewards. The fact that a substantial fraction of the PRI no longer made that calculation suggested that a significant sea-change in elite politics was taking place; it would eventually produce the fractious and fissiparous party system of post-2000. The 1987 schism was also significant since it involved dissidents who – in terms of their proclaimed ideology rather than their gnawing ambition – stood loosely on the Left, at least in the sense of favoring more statist and nationalist policies than their neoliberal opponents.75 As a result, the PRI now faced political fire on two fronts: from a right-wing opposition (traditionally antiPRI) which had gathered strength during the mid-1980s; and a new more vigorous Left, combining the PRIísta breakaways of 1987 and the congeries of small Leftist (sometimes Marxist) parties who, for years, had stood against the system.76 An enduring feature of contemporary Mexican politics was thus established: a loosely three-party system (Right/Centre/Left, respectively, PAN/ PRI/PRD) in which the revived Left embodied an uneasy coalition of independent Leftists and ex-PRIístas. Because of the 1987 schism, the 1988 presidential election was unusually competitive and contentious. Nothing like it had been seen since at least 1952, perhaps 1940.77 The final results – delayed because of a suspicious computer crash – gave Salinas, the PRI candidate, a clear victory; but allegations of fraud were rife and the (Left) opposition claimed that the FDN candidate, Cuauhtémoc Cárdenas, had been robbed of the presidency.78 Salinas, therefore, entered office under a cloud, facing an aggravated version of the accumulation vs. legitimacy dilemma mentioned earlier. He was clearly committed to pushing ahead with the neoliberal economic project (of which he had been a key architect), but he also had to shore up the now shaky legitimacy of both the PRI and the presidency. Though a “modern” buropolítico, he had to show 74 75

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Luis Javier Garrido, La Ruptura offers a detailed (and sympathetic) account of the birth of the FDN/PRD. They also called – “somewhat disingenuously” – for greater democracy, even though “many of its leaders had participated in and benefited from … [the PRI’s] exclusionary policies for several years”: Centeno, Democracy Within Reason, 59–60. A third, less important, component consisted of the minor “satellite” parties of the PRI, such as the PARM, PPS and PFCRN, who had sucked on the teats of the PRI for years and now looked for alternative sustenance. J. Nason, 22 July 1988, FCO 99/2794, preferred 1940. The opposition also gained a much bigger presence in Congress, substantially reducing the PRI’s majority and thus making Salinas “the first postrevolutionary president who had to genuinely negotiate with Congress”: Centeno, Democracy Within Reason, pp. 61–2.

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more political flair than his predecessor, and he was careful to appoint some “traditional” buropolíticos (like Manuel Bartlett) to high office, thus ensuring that technocratic expertise was backed up by mastery of the dark arts.79 If we review the Salinas sexenio – six years of fairly frantic reform, politicking, and protest – a plausible conclusion might be that it witnessed a significant advance and entrenchment of the incipient neoliberal project.80 A “reactive” project became “pro-active,” pushed ahead such that it became “the only game in town.” But, alongside the economic reform, the Salinas sexenio also saw a series of important political initiatives: detente with the PAN, marginalization of the PRD, enhancement of the presidency, birth of the National Solidarity Programme (Programa Nacional de Solidaridad – PRONASOL), and propagation of the new-fangled doctrine of “social liberalism.” Like previous sexenios, however, it ended in disarray and its ending further tarnished the PRI’s reputation for expert and efficient government. Though the PRI remained in power for a further six years (1994–2000), it was living on borrowed time. As the main architect of the neoliberal economic reforms of the mid-1980s, Salinas, now President, carried forward and consolidated the project. The initial priority was to settle the vexed question of the foreign debt and to cut the rate of inflation. In both respects, the administration was broadly successful: the United States – possibly fearful of the resurgent Mexican Left – was ready to cut a deal with Salinas on the debt; and, by maintaining the Economic Stability Pact, the administration bore down on inflation (which meant, of course, curtailing wage increases). Beyond these immediately pressing concerns, Salinas undertook major structural reforms: trade barriers were lowered, state assets privatized, and foreign direct investment was eagerly courted. By the end of the sexenio, Mexico had become an open economy and foreign investment was again flowing into the country.81 A key item of this ambitious agenda was NAFTA, the creation of a North American free trade area, which further tightened Mexico’s intimate economic relationship with the United States. A key point concerning NAFTA is that

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Though considered a rival of Salinas in the De la Madrid years, Bartlett became Minister of Education in the new administration; a cynical (but plausible) explanation was that he “knew too much about what really happened in the (1988 presidential) election” and might “threat[en] to spill the beans”: A. Soper, 6 Nov. 1989, FO 99/3052. It should be made clear, however, that Salinas himself – a prolific author – denies that his administration was “neo-liberal,” and sees it as a kind of third way, neither neo-liberal (like his successor Zedillo) nor populist (like Cuauhtémoc Cárdenas and Andrés Manuel López Obrador, successive “Mayors” of Mexico City). His case rests in part on his administration’s social policy (to be discussed below), which he considers “solidary” rather than “neo-liberal” or “populist.” The case is coherent, if debatable. It is less clear why his economic policy should be denied the “neo-liberal” label which analysts – almost without exception – choose to give it. See Salinas de Gortari, La “década perdida”, 15–20. Cárdenas Sánchez, El largo curso, chap. 12; Haber et al., Mexico since 1980, 73–4; Carlos Salinas de Gortari, México, parts 1, 2, 5.

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it was a Mexican initiative – and one which flew in the face of traditional Mexican policy, at least in theory. No Mexican president could be seen to truckle to the United States and most Mexican presidents – Porfirio Díaz being a classic case – sought to offset the overweening power of the United States by forging closer relations with Europe (and, later, Japan). Though the days of serious Great Power geopolitical rivalry in Mexico were long gone (arguably, they ended with the First World War), the economic competition continued and Mexico traditionally sought to offset the predominant role of the United States by striking deals with Europe (and Japan). Salinas followed this line, at least to begin with: he nurtured a personal interest in Japan, sent his children to a Japanese school in Mexico City, and, as a presidential candidate, he had talked up the Japanese connection.82 But the dream of commercial diversification was never realized, chiefly because, post-1989, European – above all, German – eyes turned to Eastern Europe, to the challenge and opportunity of incorporating post-Communist countries into the European economic orbit.83 By default, there remained the United States. Here, Salinas’s reasoning was impeccably logical. If Mexico was to remain locked within the American economic sphere, better that confinement should be governed by clear-cut bilateral rules which protected the weaker party (better, too, that Canada should be involved as a modest counterweight to the United States, thus making the rules trilateral). In this way, arbitrary North American unilateralism – evident, for example, in President Nixon’s devaluation and tariff-hike – would be inhibited. As late as 1988–9 Salinas had explicitly discounted a free-trade agreement with the United States.84 But, having sized up the situation in Europe, he abruptly changed tack; the notional agreement now became a Mexican proposal that had to be approved not only in Mexico but also – a much stiffer challenge – in the United States, by a Congress of protectionist leanings. To cut a very long story short, NAFTA was finally approved by the US Congress in late 1993.85 Like the Battle of Waterloo, it was a “near-run thing”; and the Salinas administration, having invested heavily and creatively in lobbying in the United States, heaved a collective sigh of relief when NAFTA finally – narrowly – secured Congressional approval.86 The capstone of the neoliberal project was now in place. NAFTA led to an immediate boost in US investment in Mexico and consolidated the ongoing process of commercial integration between the two countries – a process that particularly affected the border and northern Mexico.87

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Gabriel Székely, “Mexico’s International Strategy,” 163–5. Salinas de Gortari, México, 49–50 recounts how the Davos meeting in February 1989 was the turning point. J. Nason, n.d., April 1989, FCO 99/3051. Policy wonks can follow the process in the 1,061 pages of Garcadiego et al., eds., El TLC día a día. Carlos Salinas, interviewed 22 July 2019, London. Haber, Mexico Since 1980, 77–87; Villareal, “NAFTA and the Mexican economy.”

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It also proved providential when, a year later, Mexico was hit by its third economic crisis in the space of twelve years and President Clinton rapidly stumped up a $52 billion rescue package.88 Absent NAFTA, it would have been much harder for the US administration to engineer that rescue. We could further hypothesize that the recent gyrations of President Trump on the matter of NAFTA (now rather meaninglessly re-branded as USMECAN) are further evidence that the NAFTA system has put down deep roots, which cannot be easily and arbitrarily pulled up. NAFTA thus served to lock in free-trade policies on both sides of the border, to Mexico’s distinct advantage.89 NAFTA was advantageous for Mexico not because it led to the wholesale exploitation of gullible Americans (the shrill complaint of Ross Perot in the 1990s and Donald Trump in the 2010s),90 but because it deepened and formalized the process of North American integration, making it less vulnerable to global economic shocks and individual political caprice (even, as we see today, President Trump’s). NAFTA also had important and durable consequences in Mexico: it helped lock in place basic elements of the neoliberal project, protecting them from political upheavals south of the Río Grande; and it affected the country’s political economy, favoring and strengthening certain regions (the border, the north) as well as certain business sectors (those closely linked to the US market, such as commercial agriculture and the border maquiladoras; of course, Mexico’s drug cartels also benefited from the boom in cross-border trade and migration).91 NAFTA thus formed part of a seismic shift in Mexico’s domestic political economy – a major rearrangement of the terrain which, under Salinas, became irreversible. To clarify: since nothing lasts forever, the neoliberal project of the 1980s/90s is clearly not immutable and, indeed, as I later mention, the current López Obrador administration is flirting with policies designed, in part, to roll back the market and revive the power of the state. However, the stubborn inertia of the economic status quo will not make that easy: like King Henry VIII’s dissolution of the monasteries, we might say, neoliberalism has now created powerful vested interests (economic as well as political and ideological), which will strenuously resist any attempt to turn back the clock, to revert to pre-Reformation times. Furthermore, even during the 1980s and ‘90s, as the “Reformation” took shape, it was clear that the forces of statism and nationalism – chiefly

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Boughton, Tearing Down Walls, chap. 10. Mexico’s rapid recovery from the crisis – and the lack of demands for renewed protectionism (in Mexico) – were “a measure of how wellentrenched [free market] reforms were”: Lusztig, The Limits of Protectionism, 79, 93–4. When President Trump threatened to tear up – or radically transform – the existing NAFTA arrangements there was broad consensus in Mexico that Trump should be resisted; and – radical nationalist – President López Obrador showed no desire to throw NAFTA to the wolves. Lusztig, The Limits of Protectionism, 2. Villareal, “NAFTA and the Mexican economy”; McKibben, “NAFTA and Drug Trafficking.”

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represented, in Mexico, by the infant PRD – were on the defensive. Regarding the pressing question of the foreign debt, they were vague and ambivalent; their opposition to NAFTA was vocal but fairly ineffective; and, while they could condemn the iniquities of neoliberalism, they found it hard to present a viable and cogent alternative. After all, what would that alternative be? A nostalgic return to radical Cardenista corporatism? The name of Cárdenas still resonated powerfully with some sectors of Mexican society (hence, in part, the initial success of the FDN/PRD) but the carrier of that name, Cuauhtémoc Cárdenas, proved unable to articulate a clear and persuasive counter-project.92 A return to the protectionist bunker of old-style ISI? Global trends were heading in a different direction and, as Mexico tracked those trends, free-trade lobbies grew in strength: manufacturers locked into North American production chains (e.g., automobiles), agricultural exporters looking to the burgeoning American market, and middle-class consumers who could now enjoy a range of cheaper foreign imports.93 Or, a belated lurch toward a now discredited Marxism-Leninism, at a time when the Soviet Union was in terminal collapse and Cuba was entering the travails of the “special period”?94 As elsewhere in the world, the advocates of neoliberalism could confidently – if falsely – claim that “There is No Alternative.”95 Salinas’s bold reversal of historic Mexican policy in respect of NAFTA had parallels in his domestic economic policy. He systematically reversed the statist initiatives of the 1970s and early ‘80s, privatizing both the banks and the (monopolistic) telephone system and selling off a slew of parastate enterprises.96 PEMEX remained in the hands of the state (it was still a valuable cash cow for the state and privatization might have incurred a severe political cost); however,

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A. Soper, June 19, 1989, FCO 99/3051, having met and observed Cárdenas, found him to be “honest, sincere and capable,” but lacking “any trace of charisma” and overly reliant on “outdated populist slogans.” On the key question of the foreign debt he seemed vague and contradictory – caught, it seems likely, between a nationalist urge to declare a moratorium and a realistic appreciation of the havoc that a moratorium might wreak on the Mexican economy. Centeno, Democracy Within Reason, 25, similarly notes that Cárdenas came across as “anachronistic.” An important aspect of contemporary Mexican society rightly stressed by Castañeda, Mañana Forever?. To recall the timing: Salinas took office at the end of 1988; the Berlin wall came down in 1989; the USSR broke up in late 1991; and Cuba’s “special period” – the years of acute austerity brought on by the withdrawal of Soviet support – started in 1991 and lasted throughout the decade. “There Is No Alternative” (sometimes abbreviated to “TINA”): the mendacious claim of Margret Thatcher and her acolytes in the United Kingdom. The phrase was echoed in Mexico at the time. Cárdenas Sánchez, El largo curso, 713–721. Privatizations had the additional benefit – in the eyes of the government – of funding social policy (notably PRONASOL, to be mentioned shortly) and of helping to reduce public debt and interest payments, thus balancing the budget: Haber et al., Mexico Since 1980, 74; Schettino, Cien años de confusión, 424–6.

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Salinas opened Mexico’s electricity sector to private interests.97 Tariffs, subsidies, and quotas – the traditional instruments of ISI during the years of the economic miracle – were also severely cut back; imports boomed, to the advantage of consumers, but to the disadvantage of domestic producers; as a result, Mexico’s trade balance worsened, making it imperative to attract foreign capital and to boost exports.98 Business opinion – increasingly vocal during the 1980s – was divided; but big business, especially northern big business, welcomed Salinas’ rise to power and his espousal of pro-market policies; and few businessmen, large or small, looked favorably on the Cardenista alternative.99 Salinas’ self-professed aim was a slimmer, more efficient state, which largely confined its economic activities to (modest) taxation, regulation, and basic infrastructure. Overall, the “weight of the state” was reduced; yet, arguably, President Salinas exercised greater authority than his two immediate predecessors. Toward organized labor, a central supportive pillar of the PRI old regime, Salinas was selectively reformist. His presidential candidacy had been overtly opposed by the CTM leadership; and, in Mexico as elsewhere, decisive neoliberal reforms typically required an assault (whether frontal or more deviously flanking) on the power of organized labor. The first victim was the longstanding leader of the oil workers, Joaquín Hernández Galicia (“La Quina”), who was known to be sympathetic to Cárdenas and hostile to Salinas.100 In a “meticulously planned and executed” strike, army commandos blasted La Quina’s front door with a bazooka, confiscated a minor arsenal (said to include 200 Uzi machine guns), and marched the disgraced leader off to gaol.101 A compliant crony took his place; the oil workers’ union were reportedly “cowed” by this bold assertion of presidential power; and public opinion broadly approved

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Wood and Martin, “Of Paradigm Shifts and Political Conflicts.” Cárdenas Sánchez, El largo curso, 711–3; Schettino, Cien años de confusión, 429–30. 99 On business reactions, see Lusztig, The Limits of Protectionism, pp. 94–102. One feature of this PRI/business detente was the recruitment of businessmen as PRI candidates for political office, evident as early as 1988 (when “the number of businessmen/financiers included in the lists of PRI candidates for the Senate and Chamber of Deputies would appear to reflect Salinas’s wishes’); similarly, the PRI’s Committee for International Affairs now included a “number of figures from the world of finance and commerce”: A. Soper, 16 Feb. and 8 March 1988, FCO 99/2794. But the most notorious example of PRI/business cohabitation came in February 1993, when President Salinas dined with Mexico’s leading businessmen at the house of ex-Minister of Hacienda Antonio Ortiz Mena, where he solicited – and was pledged – a huge contribution to the PRI’s electoral war-chest: Casar and Ugalde, Dinero bajo la mesa, 38. 100 “Rumours about La Quina’s sympathy for Cárdenas might have something in them, if only because something was bound to stir in the heart of an oil worker at the mention of that name”: R. Wilkinson, 10 March 1988, FCO 99/2794. 101 A. Morgan, Jan. 1989, and Canadian political report, 10 Jan. 1989, FCO 99/3051. Morgan also reports that, according to the Soviet Ambassador, Salinas “had proposed a similar operation four years ago,” but that “President De la Madrid had. been too timid to agree.” Whether true or not, the anecdote says something about contrasting perceptions of De la Madrid and Salinas. 98

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(over-mighty union barons were no more popular in Mexico than they were in the United Kingdom).102 Another “producer group” thus fell victim to the onward march of market reform. The leader of the powerful teachers’ union, Carlos Jonguitud Barrios, was similarly, if less spectacularly, defenestrated.103 Public opinion appears to have welcomed, or at least tolerated, these syndical decapitations: and, significantly, the CTM did not spring to the defense of La Quina and Jonguitud. Having spent a long career collaborating with successive PRI presidents, its octogenarian leader, Fidel Velázquez, was not suddenly going to stand up to presidential power. However, in 1988, his endorsement of Salinas (as presidential candidate) had been grudging, while the CTM’s efforts to get out the PRI vote, especially in big cities like Mexico City, had been sadly deficient (This failure represented both the leadership’s low opinion of Salinas and the CTM’s objective loss of mobilizing power). Characteristically, Salinas combined stick and carrot (Don Porfirio’s “pan o palo”). The deposed union bosses were replaced by “new” leaders of not-so-different stripes, but leaders who knew that they owed their position to Salinas (notably Elba Esther Gordillo, La Maestra, the new leader of the teachers’ union, who would play a central political role until her own belated defenestration in 2013).104 In addition, the president lent his support to Hernández Juárez, the young-ish leader of the Electricians Union (traditionally, a militant sindicato), who became, for a time, the new, modern and acceptable face of Mexican trade unionism.105 These were not the only heads to roll in the early days of the Salinas administration: a prominent businessman (Eduardo Legorreta) was arrested for fraud; a leading drug lord (Félix Gallardo) was gaoled; and the notorious Mexico City Chief of Police (Miguel Nazar Haro) was deposed.106 The technocratic new President was seen to be surprisingly decisive; and the even-handed choice of targets – a businessman and labor boss, a drug lord and a police chief – jibed with the official discourse of reform and renovation. Along with the stick and the carrot, Salinas wielded – it seemed – an effective broom. Organized labour, a traditional pillar of the regime, was thus truncated. At the same time, Salinas turned his beady reformist eye on the agrarian reform 102

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J. Nason, 17 July 1989, FCO 99/3051, which also comments that President Salinas now appeared to be “a decisive leader, firmly in charge.” Almond and Verba, The Civic Culture, noted low popularity ratings for Mexico’s labour leaders. Middlebrook, The Paradox of Revolution, 295. A. Soper, 5 June 1989, FCO 99/3051, handed a hostage to fortune when he reported the fall of Jonguitud Barrios, commenting that “Elba Esther (Gordillo], whom the PRI imposed after Jonguitud Barrios as head of (the) SNTE, (is) unlikely to be as strong.” La Maestra’s role in Mexican politics included setting up her own political party (PANAL: Partido Nueva Alianza, 2005) which, in 2012, polled nearly 2 million votes in congressional elections, securing ten seats. Middlebrook, Paradox of Revolution, 285, 296. J. Nason, Feb. and April 1989, FCO 99/3051.

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program, historically the great accomplishment of the Revolution (as well as a key source of clientelist support for the regime). The distribution of land in the form of ejidos was halted; agrarian policy would now consist of regularizing property titles (again, in the interests of market efficiency and “secure commitments”); and ejidatarios would be able to convert their existing usufruct rights into outright freehold.107 The impact, both politically and economically, was less than might have been anticipated. For decades, land distribution had lost impetus; ejidos were riddled with graft and growing inequality; and the ejidal sector – as a percentage of the population and of the productive economy – had been shrinking.108 It was therefore hard for clear-eyed radicals to spring to the defense of the ejido. There was plenty of rhetorical protest, but scant active mobilization. Furthermore, the ejidatarios themselves reacted, we might say, skeptically and stoically. There was no rush to privatize; the ejidal sector lived on, a dwindling appendage of the burgeoning private agrarian sector.109 Salinas’s proclivity for slaying the old dragons of the “revolutionary” landscape (and often getting a positive press for doing so) was also evident in respect of both Church/State relations and education.110 The revolutionary generation (c. 1910–40) had included prominent “jacobins,” who saw the Catholic Church as an instrument of reactionary interests and an obstacle to enlightened, secular progress. Since the 1940s the anticlerical edge of the regime had been blunted, but the old shibboleths remained, chiefly in theory (for example, restrictions on Catholic schooling), sometimes also in practice (e.g., the ban on avowedly confessional parties). Thus, as in the realms of labor and agrarian reform, traditional “revolutionary” commitments were maintained in theory but often ignored in practice. Salinas decided to update official discourse in line with contemporary reality. Catholic education would now be legally tolerated; Pope Jean-Paul II was twice given a lavish official welcome, in 1990 and 1993.111 Again, the sky did not fall in; on the contrary, Salinas’s popularity, and his reputation for political adroitness, were enhanced.112 107 108 109

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Cornelius and Myhre, eds., The Transformation of Rural Mexico. Sanderson, Agrarian Populism, chap. 6; Chevalier, “The Ejido and Political Stability.” Cornelius and Myhre, “Introduction,” 18–19; Haber et al., Mexico Since 1980, 86. On the other hand, there is evidence that, over a longer period, a (small) minority of ejidatarios who took advantage of privatization subsequently adopted more conservative voting patterns: neo-liberal reform (again) created constituencies who would reward the “reformers”: de Janvry, González-Navarro and Sadoulet, “Are Land Reforms Granting Complete Property Rights Politically Risky?”. In the opinion of José Córdoba, Salinas’s influential adviser, the Church – like the ejido – was a “hornets’ nest,” which had to be handled “with extreme caution”: M. Simpson-Orlebar, 21 Nov. 1989, FCO 99/3052, account of lunch with Córdoba and EEC ambassadors. The papal visits would merit a discussion by themselves. The 1990 visit is amply covered in FCO 99/3300. A. Coltman memo., 13 April 1989, FCO 99/3051, observed that Salinas “bought some popularity by cultivating the Catholic Church.” Certainly the critics – the residual and diminishing anticlericals of the PRI, for example – were greatly outnumbered by the Catholic faithful. It is

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In respect of education, the President’s departure from “revolutionary” orthodoxy was clear-cut, if largely discursive rather than institutional. Structures remained intact (though private higher education flourished as never before); and the powerful teachers’ union, now headed by a Salinas ally, retained its pre-eminence. But the administration set out to reformulate the “official” vision of Mexican history – above all, how that history was presented in school textbooks.113 The Revolution, the supposed source of the “revolutionary” regime of the twentieth century, was downplayed. (Emiliano Zapata, the agrarian leader of the south, was a notable and significant exception).114 In particular, Lázaro Cárdenas, radical president and father of opposition leader Cuauhtémoc Cárdenas, was cut down to size.115 The new official syllabus gave Salinas a prominent role; and, by way of affording him historical legitimacy, it vaulted over the Revolution and hit upon the radical liberals of the mid-nineteenth century – second-rank figures like Ponciano Arriaga – who represented so-called “social liberalism” (roughly, liberalism with a human face and a social conscience).116 The attempt to re-jig the school syllabus largely failed: the new “social liberal” textbooks provoked protest and were warehoused. Dethroning or downplaying the Revolution suggested – so leftists critics alleged – a rehabilitation of Porfirio Díaz and his clique of business-friendly Científicos, who now seemed reincarnated in the shape of Salinas and his technocratic cronies.117

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interesting to note, too, that Mexico’s recently resurgent populism – represented by AMLO – is not just averse to anticlericalism, but is at times overtly religious. Gilbert, “Rewriting History.” Salinas (who named one of sons “Emiliano’) was at pains to stress his admiration for Zapata, whose popular agrarianism chimed in with the President’s notions of solidarity and popular empowerment: T. Duggin, 6 Feb. 1989, FCO 99/3051. Vizcaino notes that Salinas was happy to invoke the Revolution, but in suitably flexible – some would say casuistic – ways: like Salinas himself, the Revolution opposed “inmovilismo” and, regarding his reform agenda, Salinas declared that “we make changes because we wish to make a reality of the Revolution”: Vizcaino, El nacionalismo mexicano, 135. It was suggested that Salinas nurtured a particular resentment against Cárdenas (less wellknown was De la Madrid’s alleged personal antipathy to Cárdenas” close ally Porfirio Muñoz Ledo, a sentiment which had existed “since they were students’): J. Nason, 1 Aug. 1988, FCO 99/2794. Vizcaino, El nacionalismo mexicano, 131, notes the disappearance of (Lázaro) Cárdenas from official discourse. Knight, “Salinas and Social Liberalism.” In the Mexican context, the term “social liberalism” was coined by the distinguished historian and PRIísta ideologue Jesús Reyes Heroles, who used it to describe the more radical, socially conscious liberals of the mid-nineteenth century. In other (e.g., European) contexts, its meaning is somewhat different; and, in Latin America, it has again been used in a different sense (see Ames, Political Survival, 92–3, who includes Brazil’s Dutra and Nicaragua’s Luis Somoza in the “social liberal” category). Popular discourse picked up on “Científico” as a pejorative term to describe Salinas and his ilk: Gilly, Cartas a Cuauhtémoc Cárdenas. The opposition also denounced Salinas’s ­policy towards the Cananea Copper Co. as following in the footsteps of Díaz: T. Duggin, 11 Sept. 1989, FCO 99/3052.

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But the “social liberalism” band-wagon involved more than re-writing history text-books: the term peppered public discourse and was plugged by the new politico-cultural apparatus of the state, such as the PRI’s Cambio XXI Fundación México (1990).118 Furthermore – beyond the field of education – the Salinas administration set up an ambitious program premised on the principles of “social liberalism”: the National Solidarity Programme (PRONASOL).119 Formally, Solidarity or PRONASOL was an extensive program of public works and investment (in roads, clinics, schools, drainage, and other projects), funded by the Federal government, but encouraging and drawing on local, “bottom-up” community participation. It carried the personal hallmark of the president (indeed, its rationale was to be found in his Harvard doctoral thesis).120 Salinas toured the country tirelessly, promoting the National Solidarity Programme and inaugurating its projects; Chalco, the teeming, impoverished informal urban settlement on the east side of Mexico City, became the showpiece of the program.121 Despite bold claims of novelty, PRONASOL fell within an established Mexican tradition, whereby footloose presidents toured the provinces, distributing largesse and – it was hoped – forging closer ties between state and civil society.122 (Ironically – though perhaps deliberately – the classic case was President Lázaro Cárdenas, father of Salinas’s great political rival, Cuauhtémoc Cárdenas.) In similarly traditional fashion, the National Solidarity Programme involved ample discretionary spending on the part of the President. Critics alleged that the program was premised on budgetary sleight-of-hand (funds were diverted from existing programs to support PRONASOL); that it bolstered the prestige of the president (which it certainly did) at the expense of the party and its provincial representative, such as the state governors; and that it served as a modest salve for those who had been seriously hurt by neoliberal austerity. It was, in Denise Dresser’s neat formulation, a “neo-populist solution to neo-liberal problems.”123 To which the answer might be: “so what”? PRONASOL may have irked state governors and other PRI functionaries, but it bolstered the popularity of a president who, of course, had entered Los Pinos in the shadow of the contentious 1988 election. It did not fundamentally affect Mexico’s historic levels of inequality (at best, it slowed the existing growth in inequality); but it brought concrete benefits and – to a degree that is hard to determine – it genuinely involved local communities in decision-making.124 Five years after taking

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O’Toole, The Reinvention of Mexico, 54. What follows relies heavily on Cornelius, Craig and Fox, eds., Transforming State-Society Relations. Salinas interview, 22 July 2019. R. Wilkinson, 23 May 1988, FCO 99/2794. Knight, “Solidarity.” Denise Dresser, Neopopulist Solutions. Knight, “Solidarity,” 39.

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office, Salinas’s poll ratings were buoyant, while foreign experts and observers (some, it should be said, carefully cultivated by the Mexican government) lauded the president to the skies.125 A final ingredient of Salinista politics deserves mention (and here we touch upon the putative link between economic liberalization and democratization). The 1988 election, as I have said, signaled the birth of an effective three-party system – albeit one in which the PRI was still dominant. Salinas, therefore, faced a more vigorous opposition to both Left and Right, including a more rambunctious Congress than any since the 1920s.126 At the same time, De la Madrid’s recent (mid-1980s) promises of fair and free elections had scarcely been honored. Salinas’s response was calculating and astute. In a display of what the New York Times called “selective democracy,” he trained his fire on the Left (that is, the infant PRD), while offering an olive branch to the Right (the PAN).127 He did so because, as 1988 showed, the PRD was, for the time being, the greater electoral threat; and, as a party claiming fidelity to the principles of the Revolution (albeit the “Democratic Revolution”), it was also ideologically hostile to several key Salinista initiatives regarding labor and land reform, privatization, and NAFTA. (Some also suggest a personal antagonism between Salinas and Cárdenas; more importantly, the PRD owed its existence to a schism within the PRI, and PRI loyalists feared and disliked such schismatics even more than they feared and disliked the PAN).128 The PRD, as it sought to convert an ad hoc electoral coalition into an effective party of opposition, complained of systematic official obstruction, electoral malpractices, and outright repression; PRD activists – and outspoken journalists – ran the risk of death and “disappearance.”129 If, on the other hand, a “loyal opposition” was to be cultivated, it made sense to opt for the PAN. In terms of economic policy, the PRI’s own neoliberal turn had taken it into PANista territory.130 Politically, though the PAN boasted bastions of support in the north and the Bajío, it lacked a 125 126 127 128

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Centeno, Democracy Within Reason, 19, 66–7. Ugalde, The Mexican Congress, chap. 6. J. Nason, 17 July 1989, FCO 99/3051, citing The New York Times. Bruhn, Taking On Goliath, offers a good analytical account of the rise (and incipient decline) of the PRD, stressing, p. 221, the “conspicuously hostile” stance of the PRI towards its new Leftist rival. Bruhn, Taking On Goliath, 201–2; Cárdenas, Sobre mis pasos, 306–10. Apart from outright violence, the PRI also had a repertoire of dirty tricks (“fraud and electoral manoeuvring”) which it could use to undermine FDN/PRD campaigns: T. Duggin, 22 Dec. 1989, FCO 99/3052. A perceptive British observer witnessed these during elections in Tabasco in 1988, when “the electoral authorities, controlled by the PRI, gave the opposition a hard time by placing as many obstacles in their way as possible”; one victim – “quite young, obviously bright and interesting to chat with” – was an FDN activist/candidate by the name of Andrés Manuel López Obrador: A. Soper, 17 Nov. 1988, FCO 99/2794. “Salinas’s economic ideology largely mirrored (the PAN’s) own”: J. Nason, 22 July 1988, FCO 99/2794.

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pervasive national presence. Meanwhile, as its numbers had grown, especially among the middle class, so internal factions had emerged, some still intransigently opposed to the old PRIísta enemy, but some – the so-called “neo-PANistas” – advocating cautious collaboration. The sudden death of the PAN’s tub-thumping and rabble-rousing leader, Manuel Clouthier, in October 1989, helped tip the balance from confrontation to collaboration.131 Pragmatic neo-PANismo thus prevailed: a key indicator was the PAN’s support of a PRIísta electoral reform which, in the interests of supposed “governability,” guaranteed the major party in Congress a working majority.132 In return, the administration, while cracking down on PRD activism, gave the PAN a somewhat freer hand. In 1989, the PAN was “allowed” to win a gubernatorial election for the first time: the prize was Baja California – a remote state, of scant political weight – but the precedent was important, and was soon followed by PAN victories elsewhere, such as Guanajuato, in 1991.133 In this case, the PAN won thanks to a so-called “concertacesión,” whereby the Federal government intervened in a disputed election and, unusually, ruled in favor of the opposition, to the detriment of the local PRI. No such consideration was extended to the PRD, which continued to face official hostility and, at times, harassment. As Salinas’s star rose, that of the PRD sank. Like Leftist parties elsewhere in the world, the PRD’s inability to formulate a coherent and credible alternative to neoliberal reform (including, in Mexico’s case, NAFTA) cost it support. Its leader, Cuauhtémoc Cárdenas – “a dour personality and wooden campaign performer” – could appeal to certain constituencies (such as ejidatarios and students), but his position on key questions like NAFTA and the foreign debt was opaque.134 Furthermore, the infant PRD, lacking resources and organization, now had to contend with a smart political operator (Salinas), backed by 131

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Clouthier, who died in a car crash (a genuine accident, it seems) in his home state of Sinaloa, had favoured confrontation with the PRI – including, in the wake of the 1988 election, “a campaign of civil disobedience”; in this, he was more radical (regarding political tactics) than Cuauhtémoc Cárdenas: J. Nason, received 8 Aug. 1988, FCO 91/3051. On divisions within the PAN, see Domínguez and McCann, Democratizing Mexico, 119, 121–2. The “governability” measure – part of a bigger package of electoral reforms – gave any party which gained over 35% of the (congressional) vote a guaranteed majority in the Chamber of Deputies: Centeno, Democracy Within Reason, 63. To many – including the more doctrinaire PANistas – this looked like a sell-out, a pragmatic step too far. But one observer proved prescient: “the new relationship between the PAN and the PRI is interesting. I believe the PRI have got the better of the compromise in the short term, but I am not so sure in the long term. The PAN have given a signal that they are prepared to cooperate in matters … of national interest. They may be able to cash in on this if, or when, Salinas eventually runs into trouble.”: J. Nason, 16 Nov. 1989 FCO 99/3052. Domínguez and McCann, Democratizing Mexico, 121, 165–72. The basic reason why the PRI conceded to the PAN in Baja California was that it would have required “massive fraud” to keep them out: J. Nason, 17 July1989 FCO 99/3051. Nason 22 July 1988, A. Soper, 1 Sept. 1988, FCO 99/2794.

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the resources of the Federal government and buoyed by favorable mass media coverage (television especially).135 But the PRI was not altogether pleased by the turn of events either. Local activists objected when PRI victories were overturned to the benefit of the PAN, as in Guanajuato; what, from the top (or the center) looked like enlightened reformism seemed, from the grassroots (or the periphery) like political betrayal. The “modern buropolíticos” in Mexico City were turning their backs on provincial party stalwarts.136 The anti-poverty program PRONASOL (Programa Nacional de Solidaridad) compounded these concerns: for all its claims to bottomup autonomy and self-help, it was a Federal program, deploying Federal funds, and it bolstered the presidency at the expense of the party. (The PRD similarly saw PRONASOL as an official vote-buying machine.)137 Toward the end of his sexenio, Salinas was even suspected of planning his own re-election (thus subverting a cardinal rule of the PRIísta political system) and/or preparing to ditch the PRI in favor of a new party, notionally to be named “Solidarity.”138 Salinas thus entered the final year of his presidency (1994) in triumphalist style. The neoliberal reform program had been advanced and consolidated, crowned by NAFTA. In March, Mexico joined the OECD. PRONASOL seemed to cement the state’s – and, especially, the president’s – legitimacy in the eyes of civil society. The once buoyant Leftist opposition was in retreat, while the Right increasingly played the part of a loyal opposition, allowed to make electoral progress, while broadly endorsing the official project. In the 1991 mid-term elections, the PRI had won handily.139 Mexico was now economically much more liberal, and politically somewhat more democratic; but the economic reform outstripped the political (in the jargon of the day, PRIstroika took precedence over Glasnost);140 and the democratization was, in part, contingent, conditional, and partisan. 135 136

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Lawson, Building the Fourth Estate, 29–31, 39. Regarding provincial PRIísta resentment at central control (especially when it meant conceding victories to the opposition), the “mayor” of Mexico City, Manuel Camacho Solís – a keen “moderniser” – argued that reform could advance so long as the PRI was seen to be winning overall; but, if the losses mounted, the “dinosaurs” would “close ranks and allow no further concessions to the opposition”: M. Simpson-Orlebar, 1 Dec. 1989, FCO 99/3052. In fact, the PRI did continue to win through 1988–94; it was in the following sexenio that the electoral wheels came off. Incidentally, in this same conversation Camacho claims to have invented the famous “dinosaur” metaphor. Knight, “Solidarity,” 40–1. On the electoral rationale of PRONASOL, see Molinar Horcasitas and Weldon, “Electoral Determinants and Consequences of National Solidarity.” A change of name was, apparently, under consideration: Salinas intervew, 22 July 2019. On the PRI’s – or, rather, Salinas and PRONASOL’s – “remarkable comeback” in 1991, when the Party won 61.5% of the congressional vote, see Centeno, Democracy Within Reason, 66–7. Domínguez and McCann, Democratizing Mexico, 164–70, evaluates the degree of fraud evident in the 1991 gubernatorial elections, concluding that it happened, but probably wasn’t decisive to the outcome. P. Fearn memo., comparing Mexico and the USSR in these terms, July 1988, FCO 99/2794.

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Then came 1994, the PRI’s annus horribilis. Future historians will no doubt rake over the ashes of that year for decades to come; here, I can present only a very brief synopsis, focusing on the outcome. On January 1, 1994, just as NAFTA came into force, a popular rebellion erupted in the southern state of Chiapas. Bearing the iconic name of Zapata, it claimed to re-assert the values of the Mexican Revolution (popular democracy, patriotism, land, and labour reform), while denouncing neoliberal apostasy – especially NAFTA. In these respects, the neo-Zapatista movement had a traditional, nationalist, even nostalgic ring; both ideologically and practically it was poles apart from the Maoist extremism of Peru’s Sendero Luminoso. However, its bold affirmation of indigenous rights, on the part of a largely indigenous rank-and-file, was relatively new, signaling both a continent-wide prise de conscience as well as long-standing local grievances in the poor, boss-ridden state of Chiapas.141 The rebellion was soon contained; but if, militarily, it could not seriously challenge the Federal state and army, it posed a significant political challenge, which involved an adroit use of the media both within Mexico and abroad. There followed, in March 1994, the assassination of the PRI’s newly chosen presidential candidate, Luis Donaldo Colosio. Repeatedly, presidential successions had proved the Achilles” heel of PRIísta politics; and now Salinas’s hopes of finessing the process and securing the uncontentious election of his chosen successor were frustrated. The image of a political elite riven by internecine disputes was compounded when, six months later, José Francisco Ruiz Massieu, Secretary-General of the PRI, and Salinas’s brother-in-law, was assassinated. Amid the upheaval, the President had to select a new candidate: Ernesto Zedillo, another US-trained “technocrat,” possessed of impeccable neoliberal credentials. Zedillo duly won in a reasonable fair and free election: a tribute to the continued, if tarnished, popularity of the President and PRONASOL; to the disarray of the opposition (a disarray no doubt artfully encouraged by the PRI); to the recovery of the economy; and to the “voto miedo,” the “fear vote,” which meant that, in times of political upheaval, the PRI was still seen by many as the least bad option.142 However, the most severe blow was yet to come. During the tense electoral year of 1994, the Mexican economy registered brisk growth; but in the process, imports were sucked in (helped by an overvalued peso); and the foreign debt, much of it now dollar-denominated, grew ominously. While the ensuing 141

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Amid the plethora of “studies” – many of them flimsy and ephemeral – which emerged after 1994, Womack, Jr., “Chiapas,” stands out for being solid and historically grounded. On political context, see Harvey, The Chiapas Rebellion. On the 1994 election, see Domínguez and McCann, Democratizing Mexico, 176–209. It is worth clarifying that the “fear” which may have affected voting in 1994 concerned macropolitical events (political assassinations and the Chiapas revolt); the underlying homicide rate had remained roughly constant under Salinas and went on to fall under Zedillo and Fox; the real upsurge in homicides came under Calderón, from 2006/7 onwards: Trelles and Carreras, “Bullets and Votes.” Of course, public perceptions do not faithfully reflect objective trends.

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story is much contested, it seems clear that the administration sought to postpone any politically contentious devaluation; and the devaluation, when it came, immediately after Zedillo took office, was mishandled, leading to a currency crisis, capital flight, and a serious recession.143 Blame has been placed on Salinas and his team (for seeking to leave office with his economic record and reputation intact) and on Zedillo – and his team – for botching the devaluation when it finally came. However blame is to be allocated, it is ironic that, in the end, the Salinas sexenio ended amid financial and economic turmoil, even though the problem of the political succession had been successfully navigated. A supposedly “technocratic” administration had, arguably, got its political management right but its financial management wrong. I shall treat the Zedillo sexenio (1994–2000) briefly, by way of an epilogue, before presenting some broader conclusions. The sexenio is best seen as a rearguard action, as the new president, a quintessential technocrat, who – for better or worse – lacked Salinas’s political pzazz, set out to shore up the economy, while maintaining, as a secondary priority, the political fortunes of the PRI. Regarding the first goal he was successful, thanks in large part to NAFTA and the swift bail-out provided by the Clinton administration. After a year of severe recession in 1995, characterized by wage cuts, tax hikes, and further privatizations, the economy began to recover.144 Thereafter, the broad program of neoliberal reform, hesitatingly initiated by De la Madrid and aggressively advanced by Salinas, was maintained and, indeed, consolidated. But there was a severe political price to pay; by presiding over the third major economic crisis in a dozen years (1982, 1986/7, 1994/5), the PRI forfeited yet more of its dwindling reputation for economic competence. In addition, plausible allegations of corruption against senior members of the Salinas administration had all the more impact when the country was undergoing yet another bout of belt-tightening. The economy recovered; nevertheless, in the mid-term elections of 1997 – conducted relatively freely and fairly – the PRI for the first time lost control of Congress.145 Furthermore, Zedillo showed neither the will nor, perhaps, the capacity to restore the party’s flagging fortunes. Following a familiar Mexican pattern, the new administration sought to distance itself from its discredited predecessors. The Solidarity juggernaut ground to a halt and was replaced by more targeted (and less ambitious) programs designed – on an individual rather than collective/community basis – to combat extreme poverty.146 But

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Cárdenas Sánchez, El largo curso, 733–71, and Lustig, “The Mexican Peso Crisis,” are ­balanced and accessible accounts of this highly contentious episode. González Gómez, “Crisis and Economic Change,” provides a useful synopsis. In the same electoral “earthquake” the PAN won two more governorships (raising its tally to six) and Cárdenas won the important mayoralty of Mexico City: Rubio, “Coping with Political Change,” 33–4. Trejo and Jones, “Political Dilemmas of Welfare Reform.”

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dismantling PRONASOL did not signal any new-found presidential concern for the historic party of government. On the contrary, Zedillo proclaimed a “healthy distance” between himself and the PRI, thus further alienating party stalwarts and confirming his reputation as an ultra-technocrat who – unlike Salinas – preferred to float above the hurly-burly of partisan politics. Zedillo’s distaste for the PRI rank-and-file was reciprocated. Discursively, too, Zedillo embodied pure technocracy: he eschewed evocative historical references in favor of dry statistics and policy pronouncements; when straying beyond economics, he harped on the values of “democracy” rather than “nation” or “sovereignty.”147 In slighting history, he set a precedent which the next – and possibly last – PRI president, Enrique Peña Nieto (2012–18), would follow, albeit without matching Zedillo’s intellectual mastery of the dismal science. Discursively committed to “democracy,” Zedillo set out to reform Mexico’s skewed electoral system, creating an independent institution (IFE) to monitor elections. The chief beneficiary of this levelling of the political playing field was the PAN, who could justifiably claim some credit for the new neoliberal status quo, without incurring direct responsibility for its failings.148 In 2000, when the PRI finally – and not entirely unexpectedly – lost the presidency, it was the PAN, rather than the leftist PRD, which was the beneficiary. And its candidate, Vicente Fox, the outspoken and overtly Catholic ex-Governor of Guanajuato, was also an ex-executive of Coca-Cola (Mexico). Catholicism and Coke, we might say, symbolized the character of the PAN: its historic repudiation of the principles of the Mexican Revolution and its combination of traditional Mexican values and the new, free-market consumerism of the post-NAFTA era.149 To conclude: over the last forty years or so, Mexico has experienced transformative political and socio-economic change. The result has been a genuine degree of democratization, including alternancia at all levels, electoral uncertainty (i.e., elections whose outcome is not known ex ante), and a broader context of open debate, free expression and greater media independence. Mexican democracy is a very imperfect democracy (aren’t most of them?) but nevertheless it is a democracy in a way that it clearly wasn’t in, say, 1970.150 During the same period, the country’s political economy was also substantially transformed, such that it is now more open, market-oriented, and tightly integrated into the global, especially the North American, economy. But, since the 1980s, growth has been modest and, along the way, there have been recurrent crises, leading to bouts of severe austerity and falling real wages. Structural inequality has also remained stubbornly entrenched. This is no neoliberal nirvana. 147 148 149 150

Vizcaino, El nacionalismo mexicano, 139–40. As one observer had loosely predicted: see n. 132 above. I admit to recycling a previous allusion: Knight, “Myth of the Mexican Revolution,” 273. I pick 1970 almost at random: it happens to be (nearly) half a century ago; and it also happens to be the first year when I spent substantial time in Mexico.

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Of course, things may change. At the time of writing (2019), both Mexico and the United States have administrations which, in their different ways, are committed to subverting elements of the neoliberal order. President López Obrador, harking back to the Revolution and promising a “Fourth Transformation,” is groping toward more statist and nationalist policies. So far, the “Transformation” has involved some statist tweaks, but nothing like a full-scale counter-revolution. Any such counter-revolution would be strenuously resisted by powerful vested interests in Mexico, by institutions and opposition parties which cannot (as yet) be casually brushed aside, and by foreign actors (both private companies and multilateral organizations) who can seriously sanctions any statist backsliding.151 Venezuela stands as a dire warning and there is scant evidence (as yet) that Mexico is heading in a Venezuelan direction. It is noteworthy that this multidimensional transformation has been fairly peaceful and incremental. There have been crises, but no political or societal breakdown. Despite recurrent predictions, there has been no major revolution, no social “implosion.” The biggest armed challenge – by the EZLN in 1994 – relied more on computer software than military hardware (of which the EZLN had very little). It was no Sendero Luminoso. Furthermore, though the EZLN was influential, it did not transform Mexico’s political trajectory. As for the recent (post-2006) spike in crime and violence (which, however serious, has not reduced the Mexican state to systemic “failure”), that spike occurred after market reforms were firmly established and democratization was well under way. Crime and violence may be partially and indirectly related to economic and political liberalization (a busy open border facilitates narco operations; political alternancia may have fueled both regional narco turf wars and narcopolitical corruption); however, it is plainly nonsense – and historically illiterate – to claim a direct causal connection between democratization and criminal violence.152 What, then, of the supposed link – the “elective affinity,” perhaps – between democratization and economic reform? To the extent that reform was the product of changing global trends and pressures, coupled with recurrent domestic economic crises, the PRI happened to be in the wrong place at the wrong time. (Just as, during the preceding decades of desarrollo estabilizador, it happened to be in the right place at the right time.) In South America, the “lost decade” of the 1980s had a democratizing effect, since incumbent regimes were mostly authoritarian (e.g., Argentina, Brazil, Chile). Mexico was 151

152

President Trump’s failure to match bombast with action in respect of NAFTA indicates the inertial strength of pro-NAFTA interests in the United States; Mexico’s vested interests are probably just as strong. Oddly (and perhaps irrelevantly) the most striking contemporary example of the “relative autonomy of the state” and its capacity to override such interests is to be seen in the United Kingdom, in the Gadarene rush over the Brexit precipice. On the links between alternancia and violence, see Trejo and Ley, “Why Did Drug Cartels Go to War.” The notion that liberalization leads to violence is not (to my knowledge) a scholarly proposition, but I have encountered vox pop. versions, even in the company of supposedly educated and intelligent people.

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different, but PRIísta “inclusionary authoritarianism” was similarly vulnerable to economic vicissitudes (some of its own making). The long-term erosion of the party’s hegemony was therefore decisively accelerated. No doubt, like all hegemonic parties (the Italian Christian Democrats, the Japanese Liberals, the CPSU), the PRI was destined, sooner or later, for the dustbin of history, but the economic travails of the 1980s and ‘90s meant that it would be sooner. Future historians may also conclude that Peña Nieto squandered the last best chance for a PRIísta comeback. Beyond this argument-from-happenstance, we could identify some limited causal connections between economic and political liberalization. A slimmer state, divested of its bloated assets, had less discretionary patronage at its disposal, so politics became somewhat fairer and more transparent. (Of course, established democracies, whether slim or obese, still have plenty of patronage to dispense: consider US congressional log-rolling, not to mention US diplomatic appointments.) On the other hand, the process of market reform has often been accompanied by heavy-handed social control: if Chile under Pinochet is the classic (Latin American) example, Mexican buropolíticos, too, were prepared to use the power of the state to “reward their friends and punish their enemies” – for example, leaning on the mass media or cracking down on the PRD while giving the (more compliant and congenial) PAN an easier ride. Some PRIísta reformers – the “modern buropolíticos,” sensitively attuned to foreign public opinion – may have genuinely favored democratic reforms. But their priority was economic restructuring: PRIstroika preceded glasnost. In this, the comparison with Porfirio Díaz’s Científicos, if far-fetched and polemical, contains a measure of truth: though separated by a century, both sets of experts believed that it was crucial to get the economy right before essaying liberal democratic reforms. But whereas Díaz and the Científicos spectacularly miscalculated (since they incurred a social revolution), today’s “neo-Científicos” at least managed to push through their reformist project without provoking a revolutionary debacle – an outcome which, I suspect, had much less to do with their superior political skill (though some of them were undoubtedly politically adroit) than with the make-up of Mexican society at the end of the twentieth-century, compared to a century earlier. Late twentieth-century Mexico was not a bad place to attempt neoliberal reforms: it had a long record of political stability, a small apolitical army, and a population resistant to the siren song of revolutionary adventurism. The successive economic crises of the period, some partly attributable to buropolítico mismanagement, may even have reinforced Mexicans’ aversion to risk and their repudiation of violence. Finally, as regards the etiology of the reformist project (in both its political and economic dimensions), it combined both reactive happenstance and proactive intentionality. Following the severe crisis of 1982, De la Madrid felt obliged to liberalize, the alternatives (national bankruptcy, autarky, a

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“proto-Venezuelan” melt-down) being demonstrably worse. Compared to, say, Brazil, Mexico liberalized faster and more fully – location, geopolitics, and the “official mind” all played a part. Absent the crisis (which, I think, also means absent Echeverría, López Portillo, and the unsustainable oil-fueled boom of the late ‘70s), liberalization might well have happened, but probably more slowly, incrementally and partially (as in Brazil). Under Salinas, “reactive” neoliberalism became “pro-active”: more purposive, forward-looking, and, we might say, “foundational.”153 Neo-liberal policies were not simply imposed on a recalcitrant Mexico by foreign actors; in several respects (notably NAFTA) Mexico now made the running. By 1994, the neoliberal die was cast; Zedillo and Calderón consolidated the project, demonstrating that it now enjoyed a measure of bipartisan (PRI/PAN) backing. And – until 2018 – the Left failed to present a cogent and broadly appealing national alternative.154 But when it came to politics and political liberalization (or, more strictly, democratization), the PRI’s commitment was tepid, especially at the lower echelons of the Party.155 Nevertheless, political processes, like economic trends, acquired a momentum of their own, which the incumbents of Los Pinos could not closely control, but rather, at best, tactically manage. Previous political reforms – like that of 1977 – gave the opposition a strategic foothold; prolonged hard times eroded the PRI’s popularity; and successive crises boosted the opposition’s appeal. In response, the PRI could yield or repress. They did a bit of both, but root-and-branch repression, à la Pinochet, was not an attractive option, so the PRI fought a long rearguard action, finally relinquishing national power in 2000. That decorous withdrawal enabled it to live to fight another day: twelve years later, after two successive PANista sexenios, the PRI was swept back to power in a broadly free and fair election, with a convincing mandate. Unfortunately – for them – they gratuitously squandered the opportunity to show that they could govern as an honest, responsible, reformist centrist Party. As a result, in 2018 – thirty years after the nationalist Left had, allegedly, been egregiously cheated of electoral victory – a somewhat similar Left, including independent radicals and ex-PRIístas, swept to power, in the shape of MORENA. Time will tell whether MORENA poses a mortal challenge to the new neoliberal order. My guess, as I have said, is that they may tweak the status quo, but they will not transform it. But then, as a distinguished historian of Scotland once put it, “the future is not my period.” 153

154 155

I borrow this term from the old debates about Latin American authoritarianism, in which analysts distinguished between military coups – leading to authoritarian regimes – which were reactive and short-term in their objectives (they sought to eject the left, avert chaos, crush the Communsts, etc.) and those which, like Pinochet’s, proposed far-reaching “foundational” projects that would transform state and society. True, AMLO and the PRD came close in the tight presidential election of 2006; but their 35.6% fell far short of the 53.2% attained in 2018. Salinas, interview, 22 July 2019, attested to grassroots hostility to reform among the PRI. Of course, cynics may say that blaming the grassroots is a convenient excuse for political leaders.

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Almond, Gabriel A., and Sidney Verba. The Civic Culture: Political Attitudes and Democracy in Five Nations. Princeton, NJ: Princeton University Press, 1963. Ames, Barry. Political Survival: Politicians and Public Policy in Latin America. Berkeley: University of California Press, 1987. Babb, Sarah L. Managing Mexico: Economists from Nationalism to Neoliberalism. Princeton, NJ: Princeton University Press, 2001. Bensusán, Graciela. “A New Scenario for Mexican Trade Unions: Changes in the Structure of Political and Economic Opportunities.” In Dilemmas of Political Change in Mexico, edited by Kevin J. Middlebrook, Chapter 8. London and San Diego: Institute of Latin American Studies, University of London/Center for US-Mexican Studies, University of California, San Diego, 2004. Boughton, James M. Tearing Down Walls: The International Monetary Fund, 1990– 1999. Washington, DC: International Monetary Fund, 2012. Bruhn, Kathleen, Taking On Goliath: The Emergence of a New Left Party and the Struggle for Democracy In Mexico. University Park, PA: Pennsylvania State University Press, 1997. Camp, Roderic Ai. “Mexico’s Armed Forces: Marching to a Democratic Tune?.” Dilemmas of Political Change in Mexico, edited by Kevin J. Middlebrook, 353–72. London and San Diego: Institute of Latin American Studies, University of London/Center for US-Mexican Studies, University of California, San Diego, 2004. Camp, Roderic Ai. Mexico’s Mandarins: Crafting a Power Elite for the Twenty-First Century. Berkeley: University of California Press, 2002. Camp, Roderic Ai. Politics in Mexico: The Democratic Consolidation. New York: Oxford University Press, 2007. Cárdenas Sánchez, Enrique. El largo curso de la economía mexicana: de 1780 a nuestros días. México, DF: Fondo de Cultura Económica/El Colegio de México, 2015. Cárdenas, Cuauhtémoc. Sobre mis pasos. México, DF: Aguilar, 2010. Casar, Maria Amparo, and Luis Carlos Ugalde. Dinero bajo la mesa: financiamiento y gasto ilegal de las campañas políticas en México. México: Grijalbo, 2019. Castañeda, Jorge G. Mañana Forever? Mexico and the Mexicans. New York: Alfred A. Knopf, 2011. Centeno, Miguel Angel. Democracy within Reason: Technocratic Revolution in Mexico. University Park, PA: Pennsylvania State University Press, 1994. Chand, Vikram K., Mexico’s Political Awakening. Notre Dame, IN: University of Notre Dame Press, 2001. Chevalier, François. “The Ejido and Political Stability in Mexico.” In The Politics of Conformity in Latin America, edited by Claudio Veliz, 158–91. London: issued under the auspices of the Royal Institute of International Affairs by Oxford University Press, 1967. Cook, Maria Lorena. The Politics of Labor Reform In Latin America: Between Flexibility and Rights. University Park, PA: Pennsylvania State University Press, 2007. Cornelius, Wayne A., Ann L. Craig, and Jonathan Fox, eds. Transforming StateSociety Relations in Mexico: The National Solidarity Strategy. San Diego: Center for U.S.-Mexican Studies, University of California, San Diego, 1994.

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Cornelius, Wayne A., and David Myhre, eds. The Transformation of Rural Mexico: Reforming the Ejido Sector. La Jolla: Center for U.S.-Mexican Studies, University of California, San Diego, 1998. Cornelius, Wayne A., Judith Gentleman, and Peter H. Smith, eds. Mexico’s Alternative Political Futures. San Diego: Center for U.S.-Mexican Studies, University of California, San Diego, 1989. Dahl, Robert A. Polyarchy: Participation and Opposition. New Haven: Yale University Press, 1971. Domínguez, Jorge I., and James A. McCann. Democratizing Mexico: Public Opinion and Electoral Choices. Baltimore, MD: Johns Hopkins University Press, 1996. Dresser, Denise. Neopopulist Solutions to Neoliberal Problems: Mexico’s National Solidarity Program. La Jolla, CA: Center for U.S.-Mexican Studies, University of California, San Diego, 1991. Edwards, Sebastian, Crisis and Reform In Latin America: From Despair to Hope. New York, N.Y.: Published for the World Bank by Oxford University Press, 1995. Espinosa Rugarcía, Amparo, and Enrique Cárdenas, eds. La nacionalización bancaria, 25 años después: la historia contada por sus protagonistas. 2 vols. México, DF: Centro de Estudios Espinosa Yglesias, 2008. FitzGerald, Valpy, and Rosemary Thorp, eds. Economic Doctrines In Latin America: Origins, Embedding and Evolution. Basingstoke: Palgrave Macmillan in association with St. Antony’s College, Oxford, 2005. Flores-Macías, Gustavo A. After Neoliberalism? The Left and Economic Reforms in Latin America. Oxford: Oxford University Press, 2012. Foweraker, Joe, and Ann L. Craig, eds. Popular Movements and Political Change in Mexico. Boulder, CO: L. Rienner Publishers, 1990. Foxley, Alejandro. Latin American Experiments in Neoconservative Economics. Berkeley: University of California Press, 1983. Garciadiego, Javier, Begoña Hernández, María del Rayo González, Érika Reta and Beatriz Zepeda, eds. El TLC día a día: crónica de una negociación. México: M.A. Porrúa Grupo Editorial, 1994. Garrido, Luis Javier. La ruptura: la corriente democrática del PRI. México, DF: Grijalbo, 1993. Gilbert, Dennis. “Rewriting History: Salinas, Zedillo and the 1992 Textbook Controversy.” Mexican Studies/Estudios Mexicanos 31, no. 2 (1997): 271–97. Gilly, Adolfo, ed. Cartas a Cuauhtémoc Cárdenas. México, DF: Ediciones Era, 1989. Gómez Tagle, Silvia. “’Electoral Reform and the Party System, 1977–90.” In Mexico: Dilemmas of Transition, edited by Neil Harvey, Chapter 2. London: Institute of Latin American Studies, University of London and British Academic Press, 1993. Gómez Tagle, Silvia. Insurgencia en los sindicatos electricistas. México, DF: El Colegio de México, 1980. González Casanova, Pablo. Democracy in Mexico. Translated by Danielle Salti. Oxford: Oxford University Press, 1970. González Gómez, Mauricio A. “Crisis and Economic Change in Mexico.” In México under Zedillo, edited by Susan Kaufman Purcell and Luis Rubio, 37–66. Boulder, CO: Lynne Rienner, 1998. González, Francisco E. Dual Transitions From Authoritarian Rule. Institutionalized Regimes in Chile and Mexico, 1970–2000. Baltimore: Johns Hopkins University Press, 2008.

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Haber, Stephen H., Armando Razo and Noel Maurer. The Politics of Property Rights: Political Instability, Credible Commitments, and Economic Growth In Mexico, 1876–1929. Cambridge and New York: Cambridge University Press, 2003. Haber, Stephen, Herbert S. Klein, Noel Maurer, and Kevin J. Middlebrook. Mexico Since 1980. Cambridge and New York: Cambridge University Press, 2008. Harvey, Neil. The Chiapas Rebellion: The Struggle for Land and Democracy. Durham, NC: Duke University Press, 1998. Hellman, Judith Adler. “Mexican Popular Movements, Clientelism and the Process of Democratization.” Latin American Perspectives 21, no. 2 (1994): 124–42. Hexter, J. H. Doing History. Bloomington and London: Indiana University Press, 1971. Janvry, Alain de, Marco Gonzalez-Navarro, and Elisabeth Sadoulet. “Are Land Reforms Granting Complete Property Rights Politically Risky? Electoral Outcomes of Mexico’s Certification Program.” Journal of Development Economics 110, (2014): 216–25. Kaufman, Robert R. “Stabilization and Adjustment in Argentina, Brazil and Mexico.” In Economic Crisis and Policy Choice: The Politics of Adjustment in Developing Countries, edited by Joan M. Nelson, 63–112. Princeton and Oxford: Princeton University Press, 1990. Knight, Alan. “Cárdenas and Echeverría: Two “Populist” Presidents Compared.” In Populism in Twentieth-Century Mexico: The Presidencies of Lázaro Cárdenas and Luis Echeverría, edited by Amelia M. Kiddle and María L.O. Muñoz, 15–37. Tucson: University of Arizona Press, 2010. Knight, Alan. “Crisis and the Great Depression in Latin America.” In Crises In Economic and Social History: A Comparative Perspective, edited by A.T. Brown, Andy Burn, and Rob Doherty, Chapter 1. Woodbridge: Boydell Press, 2015. Knight, Alan. “Panorama general de la Gran Depresión en América Latina.” In La Gran Depresión en América Latina, edited by Paulo Drinot and Alan Knight, Chapter 10. México: Fondo de Cultura Económica, 2015. Knight, Alan. “Salinas and Social Liberalism in Historical Context.” In Dismantling the Mexican State?, edited by Rob Aitken, Nikki Craske, and David E. Stansfield, 1–23. London: Palgrave Macmillan, 1996. Knight, Alan. “Solidarity: Historical Continuities and Contemporary Implications,” in Transforming State-Society Relations in Mexico: The National Solidarity Strategy, edited by Wayne A. Cornelius, Ann L. Craig, and Jonathan Fox, Chapter 2. San Diego: Center for U.S.-Mexican Studies, University of California, San Diego, 1994. Knight, Alan. “State Power and Political Stability in Mexico.” In Mexico: Dilemmas of Transition, edited by Neil Harvey, Chapter 1. London: Institute of Latin American Studies, University of London and British Academic Press, 1993. Knight, Alan. “The Mexican Developmental State, c.1920-c.1980.” In State and Nation-Making in Latin America and Spain: The Rise and Fall of the Developmental State, edited by Miguel Angel Centeno and Agustín E. Ferraro, 238–265. Cambridge and New York: Cambridge University Press, 2019. Knight, Alan. “The Myth of the Mexican Revolution.” Past & Present 209, no. 1 (2010): 223–73. Lawson, Chappell H., Building the Fourth Estate: Democratization and the Rise of a Free Press In Mexico. Berkeley: University of California Press, 2002.

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Loftus, Joseph E., Latin American Defense Expenditures, 1938–1965. Santa Monica, CA: RAND Corporation, 1968. Lomnitz, Larissa Adler de, and Marisol Pérez Lizaur. A Mexican Elite Family, 1820– 1980: Kinship, Class, and Culture. Translated by Cinna Lomnitz. Princeton, NJ: Princeton University Press, 1987. Luna, Matilde. “Business and Politics in Mexico.” In Dilemmas of Political Change in Mexico, edited by Kevin J. Middlebrook, 332–52. London and San Diego: Institute of Latin American Studies, University of London/Center for US-Mexican Studies, University of California, San Diego, 2004. Lustig, Nora. “The Mexican Peso Crisis: The Foreseeable and the Surprise.” Washington, DC: Brookings Institution, June 1995. Lusztig, Michael. The Limits of Protectionism: Building Coalitions for Free Trade. Pittsburgh: University of Pittsburgh Press, 2004. MacLeod, Dag. “Privatization and the Limits of State Autonomy in Mexico: Rethinking the Orthodox Paradox.” Latin American Perspectives 32, no. 4 (2005): 36–64. Maxfield, Sylvia. Governing Capital: International Finance and Mexican Politics. Ithaca, NY: Cornell University Press, 1990. McKibben, Cameron. “NAFTA and Drug Trafficking: Perpetuating Violence and the Illicit Supply Chain.” Council on Hemispheric Affairs, March 20, 2015. Middlebrook, Kevin J. The Paradox of Revolution: Labor, the State, and Authoritarianism in Mexico. Baltimore: Johns Hopkins University Press, 1995. Molinar Horcasitas, Juan, and Jeffrey Weldon. “Electoral Determinants and Consequences of National Solidarity.” In Transforming State-Society Relations in Mexico: The National Solidarity Strategy, edited by Wayne Cornelius, Ann Craig and Jonathan Fox, Chapter 7. La Jolla: Center for US-Mexican Studies, University of California, San Diego, 1994. Morris, Stephen D. Corruption & Politics in Contemporary Mexico. Tuscaloosa, AL: University of Alabama Press, 1991. O’Connor, James. The Fiscal Crisis of the State. New York: St. Martin’s Press, 1973. O’Donnell, Guillermo. “Introduction.” In Transitions From Authoritarian Rule. Latin America, edited by Guillermo O’Donnell, Philippe C. Schmitter and Laurence Whitehead: 3–18. Baltimore and London: The Johns Hopkins University Press, 1993. O’Toole, Gavin. The Reinvention of Mexico: National Ideology In a Neoliberal Era. Liverpool: Liverpool University Press, 2010. Otero, Gerardo. “Neoliberal Reform and Politics in Mexico: An Overview.” In Neoliberalism Revisited: Economic Restructuring and Mexico’s Political Future, edited by Gerardo Otero, Chapter 1. Boulder, CO: Westview Press, 1996. Reding, Andrew. “Mexico at a Crossroads: The 1988 Election and Beyond.” World Policy Journal 5, no. 4 (1988): 615–49. Rubio, Luis. “Coping with Political Change.” In México under Zedillo, edited by Susan Kaufman Purcell and Luis Rubio, 5–36. Boulder, CO: Lynne Rienner, 1998. Salinas de Gortari, Carlos. La “década perdida” 1995–2006: neoliberalismo y populismo en México. México, DF: Debate, 2008. Salinas de Gortari, Carlos. México: un paso difícil a la modernidad. Barcelona: Plaza & Janés Editores, 2000. Sanderson, Steven E. Agrarian Populism and the Mexican State: The Struggle for Land In Sonora. Berkeley: University of California Press, 1981.

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Schettino, Macario. Cien años de confusión: México en el siglo XX. México, DF: Taurus, 2007. Schmidt, Samuel. The Deterioration of the Mexican Presidency: The Years of Luis Echeverría. Tucson: University of Arizona Press, 1991. Scott, James C. Domination and the Arts of Resistance: Hidden Transcripts. New Haven: Yale University Press, 1990. Seligson, Mitchell, and Linda Stevenson. “Fading Memories of the Revolution: Is Stability Eroding in Mexico?” In Polling for Democracy: Public Opinion and Political Liberalization In Mexico, edited by Roderic Ai Camp, Chapter 6. Wilmington, DE: SR Books, 1996. Smith, Peter H. Labyrinths of Power: Political Recruitment in Twentieth-Century Mexico. Princeton, NJ: Princeton University Press, 1979. Székely, Gabriel. “Mexico’s International Strategy: Looking East and North.” In Japan, the United States, and Latin America, edited by Barbara Stallings and Gabriel Szekely, 149–70. London: Palgrave Macmillan, 1993. Székely, Miguel. The Economics of Poverty, Inequality and Wealth Accumulation In Mexico. Hampshire: Macmillan, 1998. Trejo, Guillermo, and Claudio Jones. “Political dilemmas of welfare reform: Poverty and inequality in Mexico.” In Mexico under Zedillo, edited by Susan Kaufman Purcell and Luis Rubio, 67–100. Boulder, CO: Lynne Rienner, 1998. Trejo, Guillermo, and Sandra Ley. “Why Did Drug Cartels Go to War in Mexico? Subnational Politics, the Breakdown of Criminal Protection and the Onset of LargeScale Violence.” Comparative Political Studies 51, no. 7 (2012): 900–37. Trelles, Alejandro, and Miguel Carreras, “Bullets and Votes: Violence and Electoral Politics in Mexico.” Journal of Politics in Latin America 4, no. 2 (2012): 89–123. Ugalde, Luis Carlos. The Mexican Congress: Old Player, New Power. Washington, DC: CSIS Press, 2000. Urquidi, Víctor L. Otro siglo perdido: las políticas de desarrollo en América Latina, 1930–2005. México, DF: Colegio de México/Fondo de Cultura Económica, 2005. Van Wijnberger, Sweder. “Mexico and the Brady Plan.” Economic Policy 6, no. 12 (1991): 13–56. Villareal, M. Angeles. “NAFTA and the Mexican Economy.” Washington, DC: Congressional Research Service, June 3, 2010. https://sgp.fas.org/crs/row/RL34733.pdf. Vizcaíno, Fernando, El nacionalismo mexicano en los tiempos de la globalización y el multiculturalismo. México: Universidad Nacional Autónoma de México, 2004. Walker, Louise E. Waking from the Dream: Mexico’s Middle Classes after 1968. Stanford, CA: Stanford University Press, 2013. Womack, John. “Chiapas, the Bishop of San Cristóbal, and the Zapatista Revolt.” In Rebellion in Chiapas: An Historical Reader, edited by John Womack, 3–59. New York: New Press, 1999. Wood, Duncan, and Jeremy Martin. “Of Paradigm Shifts and Political Conflicts: The History of Mexico’s Second Energy Revolution.” In Mexico’s New Energy Reform, edited by Duncan Wood, 17–35. Washington, DC: Mexico Institute, Woodrow Wilson International Center for Scholars, 2018. Zermeño, Sergio. La sociedad derrotada: el desorden mexicano del fin de siglo. México, DF: Siglo Veintiuno Editores, 1996.

4 Rise of the Neoliberal State in Spain? Fiscal Shortcomings of a Popular Narrative Lars Döpking

4.1  introduction Neoliberalism, as presented in the writings of central theorists and their commentators, is not anti-state. Although it aims ideologically to depoliticize economic decisions and reach them based exclusively on market mechanisms, in principle, this does not mean that the state is dismantled; rather, a specific model of statehood is installed.1 As Quinn Slobodian notes, “the real focus of neoliberal proposals is not on the market per se but on redesigning states, laws and other institutions to protect the market.”2 Therefore, the neoliberal model of statehood, like any other, refers to a specific fiscal order. This order determines how financial resources and other goods are provided for the activities that are still required of an “institutionally organized political enterprise (Anstaltsbetrieb).”3 In contrast to the liberal state of the nineteenth century, which was financed by customs duties, indirect taxes, and domains,4 and the developmental state of the twentieth century, which (again) tried to access the incomes of its citizens directly and taxed capital extensively,5 the neoliberal state – at least according to prevalent views – is characterized by policies aimed at containing inflation and the market-distorting effects of progressive taxation. To finance its expenditures, it relies on low corporate, flat income, and value-added taxes, all of which it regards as technically sophisticated taxes that 1

2 3 4 5

Centeno and Cohen, “The Arc of Neoliberalism”; Plant, The Neoliberal State; Amable, “Morals and politics”; Peck, “Neoliberalizing States”; Blyth, Austerity; Prasad, The Politics of Free Markets; Biebricher, The Political Theory of Neoliberalism, 33–78. Slobodian, Globalists, 6. Weber, Economy and Society, 135–36; 322. Cf. Swedberg, Max Weber, 59–70. Ferraro and Herrera, “Friends’ Tax.” Centeno and Ferraro, “Authoritarism, Democracy and Development”; Caldentey, “The Concept and Evolution”; Silva, “The Chilean Developmental State.”

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broaden its tax base without harming its economic competitiveness.6 These measures are deeply anchored in the neoliberal project. In particular, tax cuts are expected to lead to further reforms that will finally abolish the Keynesian welfare state.7 Whether as a political strategy or an ideology, neoliberalism therefore never seems to thrive without a fundamental reorganization of fiscal orders – it theoretically presupposes the “dethronement of politics.”8 Inspired by this notion of neoliberalism, sociologists, economists, and political scientists have put forward many interpretations that decipher recent developments in political economies and states as processes of neoliberalization.9 What is striking about much of this work is, independent of whether the authors address the capitalist world in general or the Spanish case in particular, they assume that neoliberalization is a process that occurs simultaneously in many places, albeit in different forms. Furthermore, tax policy is regarded as a central characteristic of neoliberalism. It would play a major role in opening up the path to neoliberal dystopia. Wolfgang Streeck, for example, identifies the tax state’s functional problem – “namely, its tendency to fall short in extracting from a society of private owners the means it requires to perform its growing tasks” – that purportedly promoted the mixed market economy’s transformation. Fernando López-Castellano and Fernando GarcíaQuero describe Spain as a laboratory of neoliberalism, in which the economic capacities of the Spanish state were dismantled.10 These authors are aligned with a broad literature that has interpreted the history of Spanish democracy through the lens of neoliberalization theory. Unsurprisingly, the economic program of the PSOE has consistently been described as a neoliberal project since the mid-1990s. This perspective has in turn informed the argument that a “collapse of concertation” at the end of the 1980s caused Spain’s transition from social democracy to neoliberalism. In the same vein, some commentators have detected paths that lead directly from Franquismo to some form of “embedded neoliberalism.” In contrast, others point out that neoliberal policies went hand in hand with an expanding welfare state.11 More recently, and in the wake of the protests against the austerity measures after the so-called euro crisis, a radical version of the 6

Buggeln, Dauton and Nützenadel, “The Political Economy of Public Finance”; Streeck, “A New Regime.” 7 Gamble, “Neoliberalism and fiscal conservatism,” 59; Prasad, Starving the Beast. 8 Harvey, A Brief History of Neoliberalism, 36; Prasad, The Politics of Free Markets, 113–16; Jones, Masters of the Universe, 242–71. 9 Madariaga, Neoliberal Resilience; Crouch, The Strange Non-death of Neoliberalism; Brown, Undoing the Demos; Baccaro and Howell, Trajectories of Neoliberal Transformation. 10 Streeck, Buying Time, 63; 70–75; López-Castellano and García-Quero, “The Euro System,” 179–83. 11 Holman, Integrating Southern Europe, 80–84; Royo, From Social Democracy to Neoliberalism, 214–26; McVeigh, “Embedding Neoliberalism”; Encarnación, Spanish Politics, 60, 118–27; Ban, Ruling Ideas.

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neoliberalization narrative has gained traction. While many protestors – indignados and public service workers alike – have criticized the PSOE’s neoliberal turn,12 it also seems evident to academic observers that a “neoliberal critical juncture” has been reached in Spain.13 Trade unionists even refer to “the nightmare of Mediterranean neoliberalism.”14 In light of this literature, it is impossible to ignore that, in the course of the last thirty years, the Spanish state has implemented various neoliberal policies, in particular labor market reforms to commodify the workforce. But the extent to which these programs have given rise to a neoliberal state is an entirely different question, one that is deeply connected to fiscal sociological considerations. Interestingly enough, recent analyses have failed to tackle this question by considering taxation issues in more detail. The reluctance to address the role of taxation in Spain is conspicuous in so far as recent work in the fields of fiscal sociology, fiscal historiography, and comparative political economy has laid out arguments contesting the descriptive and explanatory potential of the concept of neoliberalism in Western Europe and the United States. From a historical perspective, Martin Daunton points out that even the tax reforms of the Thatcher government – which are inextricably linked to the narrative of profound neoliberalization – were based on the Meade Report. The report was prepared for Harold Wilson’s third Labor government and therefore also included non-neoliberal policy proposals.15 Regarding the Reagan tax cuts of the 1980s, Monica Prasad argues that the Republican Party’s strategic considerations played a more critical role in shaping its tax policy than a coherent neoliberal ideology.16 Furthermore, Marc Buggeln, in his comparative study of the United States, Great Britain, Germany, Sweden, and France, concludes that although there was pressure to change national tax systems, institutional traditions absorbed these pressures in many different ways.17 In a similar vein, Elliot Brownlee, Gisela Hürlimann, and Eisaku Ide suggest that the Worlds of Taxation first identified by Guy Peters still exist.18 Philipp Genschel and Laura Seelkopf also reach a similar conclusion. They deplore the fact that critics of neoliberalism, in particular, prioritize convergence over divergence when interpreting macroeconomic data and argue that mainstream political economists tend to overestimate the economic pressure on states, which has led them to postulate the rise of the (­neoliberal) competition state.19 12 13 14 15 16 17 18 19

Romanos, “Late Neoliberalism,” 131–67. Porta et al., Movement Parties, 46–49. Cf. Banyuls and Recio, “Spain.” Daunton, “The Tax Reforms,” 34–37. Prasad, Starving the Beast, 19–54. Buggeln, “Taxation in the 1980s,” 125. Brownlee, Hürlimann and Ide, “The Political Economy of Taxing,” 13; Peters, The Politics of Taxation, 225–45. Genschel and Seelkopf, “The Competition State,” 250.

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This body of historical and comparative literature casts grave doubts on the notion that Spain’s fiscal history followed the leitmotif of neoliberalization and raises the question of why such a process purportedly occurred there, of all places. If specific tax and fiscal politics are indeed irreplaceable components of neoliberalism, then I would contend that one should be cautious about subsuming the Spanish state’s recent history under the narrative of the rise of neoliberal statehood. Furthermore, the absence of specific tax policies linked to neoliberalism may indicate that the model’s heuristic usefulness is limited. This chapter addresses these problems by interrogating the connection between neoliberalism and fiscal policies with a comparison of historical developments in Latin America and Spain. It explores the extent to which the neoliberal statehood model was implemented in Spain after 1990 by reviewing descriptive macroeconomic data and comparing the developments in Spain to those in Latin America and, in particular, Chile. It concludes that, if the concept of neoliberalism has any analytical value, it does not appear to offer convincing causal explanations for the development of the fiscal orders in both Latin America and Spain. The chapter lays out three arguments: First, a specific tax and fiscal policy is a central “proposition” of neoliberalism. Second, Spain’s post-1990 fiscal history does not follow neoliberal patterns of interpretation. Third, in the last quarter of the twentieth century, fiscal and tax policy policies in Latin America and, in particular in Chile, “the birthplace of neoliberalism,”20 were marked by neoliberal characteristics that cannot be detected in Spain. The chapter is structured as follows: The second section reviews the fiscal, monetary, and tax policy components associated with the model of the neoliberal state. Based on these categories, the third section examines the extent and significance of the process of neoliberalization in Spain. Because the findings contradict the theoretical model, the fourth section retraces the historical trajectory of the Spanish tax state, highlighting its institutional resilience. The fifth expands the analysis by comparing Spain and Latin America in general, and Chile and Spain in particular, from a fiscal-sociological perspective. Referring to the results of this analysis, the conclusion suggests that neoliberal narratives about the Spanish state offer a misleading interpretation.

4.2  neoliberalism

and neoliberalization

Any attempt to comprehend neoliberalism as an ideology and extract its central “propositions” from its protagonists’ writings inevitably leads one – despite the many schools and “varieties of neoliberalism” – to recognize their widespread consensus regarding tax and fiscal policies.21 After reviewing 20 21

See Patricio Silva’s contribution to this volume. Plant, The Neoliberal State; Biebricher, The Political Theory of Neoliberalism. For the ­underlying concept of ideology see Freeden, “European Liberalisms.”

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neoliberals’ constant emphasis on the role of taxes and public finances (4.2.1), this section will differentiate between the masterminds of neoliberalism and its practical implementation and reconstruct various attempts to gauge the extent of neoliberalization (4.2.2). 4.2.1  Neoliberalism: A Tale of Tax and Liberty Whether the concept of neoliberalism lends itself to grasp the political and economic theories associated with it as an “ideology” is a matter of controversy. Michael Freeden argues that the term neoliberalism at best indicates the degeneration of the already fluid ideology of liberalism. According to Freeden, neoliberalism had so little in common with classical or new liberalism that its central representatives, such as Friedrich A. von Hayek, Milton Friedman, or James M. Buchanan, would have to be excluded from the liberal family.22 Their “emaciated liberalism” is “artificially detached from many of the values and political ends it needed to promote.”23 If we (deliberately but indulgently) ignore these doubts and instead take note of the fact that these theorists nevertheless seem to have something in common, it is reasonable to assume that one decisive common ground is to be found in their attitude toward the state and its taxes. In contrast to classical liberals such as John Stuart Mill or representatives of new liberalism such as Leonard T. Hobhouse, who do not discuss taxes and freedom as fundamentally antagonistic,24 neoliberal theorists are in every sense of the word opponents of distributive fiscal and tax policy instruments. Their argument goes so far as to identify fundamental contradictions in the fiscal order of contemporary states. Instead of guaranteeing freedom, they contend, progressive taxation driven by Keynesianism and fiscal policies based on ideals of equity continuously undermines and jeopardizes the foundation of a free society, which is equated with the market. To cite just a few examples, for Hayek, the Keynesian preference for full employment over monetary stability threatens the basic order of a liberal society: “governmental monetary monopoly […] has without exception been abused to defraud and deceive the citizens.” Furthermore, Hayek advocates excluding tax policy from democratic, for example, majoritarian, rule, because the expected adoption of progressive taxation by the majority of non-haves would help to “perpetuate existing inequalities and eliminate the most important compensation for this inequality which is inevitable in a free enterprise society.”25

22 23 24 25

They should instead be assigned to “economic libertarianism”; see Gamble, “Economic Libertarianism.” Freeden, “European Liberalisms,” 24. Mill, Essays on Economics, 702; Hobhouse, Liberalism, 12; 97; Ekelund and Walker, “J. S. Mill on the Income Tax.” Hayek, The Political Order, 57; Hayek, The Constitution of Liberty, 448; Spicer, “On Friedrich Hayek.”

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He even argues “that the whole principle of progressive taxation is, by its very nature, pernicious, an error which, for various reasons, leads almost inevitably to the destruction of the free-market system.”26 Friedmann presupposes not only “tax avoidance as an essential prerequisite for economic growth” but generally conceives of taxation as “diametrically opposed to personal freedom.”27 Buchanan seems convinced of having identified a dangerous social law. Because governments in principle lack a long-term perspective and provide public goods at disproportionately high levels out of short-term opportunism, they always fall into the “high-tax trap” and create an “inverse relationship between tax rates and total tax revenues.” This constellation should be rejected by all rational actors because, first, it paralyzes economic growth and, second, reduces tax revenues rather than increasing them.28 One can find further examples of such statements in all schools of neoliberalism. Whether in Chicago, Virginia, Vienna, or Geneva: neoliberals everywhere are united in their aversion to taxes and inflation. However, the neoliberal project is also characterized by the fact that, despite these harsh criticisms of current tax and fiscal politics, there is no demand that the state is abolished completely. Instead, neoliberals advocate restricting the democratic legislative horizon and excluding specific fiscal topics from the political realm. As Raymond Plant points out, they often discuss tax and monetary policy issues solely from the perspective of legality, yet rarely as policies that can vary, depending on political majorities.29 To exclude the influence of popular politics on tax policy, neoliberals devise different strategies – and the encasement of democracies, in particular, enjoys broad support. Quinn Slobodian points out that the Geneva School of neoliberalism dissolves the notion of congruence between national economies and nation-states and focuses on how to design institutions – such as trade agreements, legal systems, or the international monetary system – that are supposed to protect the single world economy from the dangers of national democracies.30 The Virginia School, in contrast, pursues an encasement of democracy at the national level.31 Although there are further differences among the various schools of neoliberal ideology concerning concrete measures, its protagonists are united by their desire to eliminate the marketdistorting effects of fiscal policy and taxation. They hold that the dominium (or catallaxy) of private property claims must always be isolated from the imperium of secular rule.32

26 27 28 29 30 31 32

Hayek, “Die Ungerechtigkeit der Steuerprogression,” 509, my translation. Friedman, Capitalism and Freedom, 170, 172. Brennan and Buchanan, The Power to Tax, 86. Plant, The Neoliberal State, 173–92. Slobodian, Globalists, 5–16, 121–45. MacLean, Democracy in Chains; Buchanan, The Limits of Liberty, 53–73. Slobodian, Globalists, 13–16; Cf. Schmitt, Der Nomos.

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Overall, the dismantling of the tax state, which includes the rejection of redistributive taxation and the call for implementing taxes that are as neutral as possible, as well as the critique of expansive fiscal and monetary policy, that is, policies that promote inflation and increases in government debt, can be defined as the key elements of neoliberalism. These motifs run through the literature and are even present in marginal works. When Robert Nozick assails taxation as forced labor or Ludwig von Mises equates the “power to tax” with the “power to destroy” and discusses taxation under the title “interference by taxation,” this may sound more or less radical, but it readily fits the furniture of the neoliberal kitchen.33 At the same time, opposing views are completely absent. No representative of neoliberalism calls for higher taxation or fiscal interventions in the distribution of wealth within society; such measures are rather perceived as a communist threat and the end of individual freedom. To stick with a metaphor of Michael Freeden: the strong demand for the dismantling of the redistributive tax state is like a stove. It tells us that we are definitely in the neoliberal kitchen, or at least on the neoliberal terrain. Consequently, a potent tax state fundamentally contradicts neoliberal ideology: where it flourishes, neoliberal utopia withers away. 4.2.2  Neoliberalization: Symptoms of an Ongoing Process? Given this broad consensus, it is hardly surprising that scholars of comparative political economy have analyzed the ongoing neoliberalization in various states by consulting the extensive and well-prepared data sets compiled by governments’ treasury departments.34 Rather than defining neoliberalism as an ideology, these researchers prefer perceiving it as a paradigm or a regime that is manifested in specific tax and fiscal policies.35 In research practice, this differentiation has the decisive consequence that empirically observable instruments or policies are the most visible expression of a paradigm or regime.36 Where there is smoke, there was at some point fire. This useful simplification has inspired a whole series of works. Monica Prasad, like Wolfgang Streeck, suggests that the quantity and composition of tax revenues should reflect the retreat of the Keynesian post-war order, the rise of neoliberalism, and the introduction of free-market policies. Both argue that not only decreasing but also stagnating tax rates can indicate such a process. In the case of stagnating tax rates, the state might not be able to keep pace with the rising reproduction costs of capitalist accumulation.37 33 34 35 36 37

Nozick, Anarchy, State, and Utopia; Mises, A Treatise, 733, 730–35. Simmons, Dobbin and Garrett, “Introduction”; Swank, “Tax Policy”; Widmaier, Economic Ideas. Hall, “Policy Paradigms,” 279; Pierson, “From Expansion to Austerity,” 57. Streeck, “A New Regime”; Döpking, “Fiskalregime.” Prasad, The Politics of Free Markets, 10–14; Streeck, Buying Time, 47–72.

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For Streeck, whose interventions into current debates highlight the role of the tax state, national debt, the containment of inflation, and long-term interest rates are also relevant variables. They serve as a means of heightening the pressure of the Marktvolk on the Staatsvolk to neoliberalize other areas of the state’s activity, such as institutions of the welfare state. Genschel and Seelkopf even go one step further by testing the “competition state” hypothesis, i.e., the idea that there is a tendency for a specific model of statehood to spread.38 A state that has undergone such a transformation would compete with its peers for foreign investments, in hopes that it would bring growth and prosperity to its national economy. And because a neoliberal state is essentially no longer a Keynesian state, it curbs inflation, avoids debt, and pursues a neutral tax policy that interferes with the market distribution of income as little as possible and thus works under the assumption that it offers incentives for innovation and investment. Genschel and Seelkopf propose that the extent of such a transformation can be gauged by analyzing the development of corporate tax rates, total tax revenue, and the proportion of corporate taxes levied in relation to a state’s gross domestic product (GDP). In a further study, Hakelberg and Rixen address the question of whether neoliberalism is still spreading by identifying a clear set of neoliberal tax policies: Neoliberal tax systems feature low rates and uniform structures. The tax burden on capital owners, as reflected in taxes on dividends, interest, and top incomes, is small to provide incentives for saving and investment. In contrast, indirect taxes on consumption may be increased to achieve uniformity. The overall aim is a tax system interfering as little as possible with the “natural” working of the market.39

Other authors also refer to the decreasing overall progressivity of the tax system, its (diminishing) effects on the Gini coefficient, or the existence and level of wealth or inheritance taxes as typical elements of neoliberal tax policies.40 Independent of the variables cited, researchers are in agreement that the extent of neoliberalization in a specific state can only be determined comparatively; since 1980, the United Kingdom or the United States usually serve as yardsticks for such comparisons. All in all, clear criteria for assessing a state’s neoliberalization emerge from this literature. In the realm of fiscal policy, measures are taken to curb the inflation rate and reduce government debt. From a tax policy point of view, neoliberalization involves a shift toward indirect taxes, the significant reduction of the top marginal income tax rate and of taxes on capital and corporate profits, and measures taken to ensure that the overall tax-to-GDP ratio decreases or 38 39 40

Genschel and Seelkopf, “The Competition State,” 239–40. Hakelberg and Rixen, “Is neoliberalism still spreading?” 4. Prasad and Deng, “Taxation”; Swank, “Tax Policy”; Ganghof, The Politics of Income Taxation.

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at least stagnates. Neoliberalization lowers the progressivity of the tax system and simultaneously restricts fiscal intervention in market processes.

4.3  the

spanish tax state after the era

of the developmental state : ongoing processes of neoliberalization ?

Whether Spain should be regarded as a prime example of a country that has systematically and tenaciously pursued a course of neoliberalization is controversial. On the one hand, some authors perceive the country’s recent development as the archetype of supranationally enforced neoliberalization triggered by the Maastricht Treaty of 1992:41 Strict budgetary rules and membership in the European Monetary Union have had negative impacts, both in quantitative and qualitative terms, on the Spanish labor market, whereas the competitive center of Europe with its export-oriented companies has benefited disproportionately from the common market. Furthermore, due to the so-called euro crisis, the Spanish state has disarmed itself fiscally and in part relinquished its powers to use taxation as a public policy tool, which is why the country’s public finances are plagued by serious troubles.42 According to the IMF’s Index of Competition, Spain has indeed undergone a long-term process of liberalization, in which, since 1978, it liberalized access to its capital and financial markets and to agricultural and key industries, thus increasingly exposing itself to international competition.43 Therefore, as López-Castellano and García-Quero argue, the Spanish state should be conceptualized as a laboratory of neoliberalism, in which the feasibility of neoliberal techniques is tested and improved. On the other hand, some authors discuss the Spanish case as an example of “embedded” neoliberalism.44 Following Ban’s investigation of the introduction of neoliberal ideas into the Spanish context since the 1970s, the late Franco regime, like the emerging PSOE, was orientated toward a scaled-down version of neoliberalism imported particularly from Germany’s Social Democratic Party. In Ban’s opinion, this form of localized neoliberalism can be described as “embedded” because Spanish economists and politicians, from the central bank to the socialist party apparatus, never believed in the natural upward mobility of low-income groups espoused by prominent neoliberal figures. Instead, they were convinced that the welfare state and progressive tax policies 41

42 43 44

López-Castellano and García-Quero, “The Euro System,” 174; Buendía, “A Perfect Storm,” 423–25. For similar, albeit even harsher critics of European integration, see Streeck, Buying Time; Blyth, Austerity; Hermann, “Neoliberalism in the European Union”. López-Castellano and García-Quero, “The Euro System,” 179. Ostry, Prati, and Spilimbergo, Structural Reforms; Royo, “Lessons from Spain and Portugal,” 29–36. Ban, Ruling Ideas; McVeigh, “Embedding Neoliberalism.”

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had to mediate the market distribution of income. The consensus around these ideas was broad. Thus, even the conservative governments of Aznar and Rajoy never dared to interfere with progressive taxation as the central pillar of “embedded neoliberalism.” While the priority of budgetary stability, the privatization of state industries, and the commodification of labor corresponded to the neoliberal paradigm, tax policy, in contrast, remained progressive.45 From the 1980s until the great recession, Spain formed the counter-thesis to a British, Eastern European, or US model of neoliberalization. Weighing up these two arguments and relating them to macroeconomic data suggests that one should go one step further than Ban. If we apply the criteria outlined above, there is no evidence of a stringent process of neoliberalization in Spain. First, the ratio of tax revenues to GDP rose from 31.6 to 36.4% between 1990 and 2007. No shrinking or stagnation can be observed, especially since this ratio has even doubled since the end of the Franco regime. And while it fell to 29.7% in the wake of the Spanish real estate crisis of 2008, its growth has resumed since then. By 2018, it reached 34.4% and was thus higher than in 1990. Even though Spain’s tax-to-GDP ratio places the country in midfield among OECD members and in the lower half of the eurozone group, its development reflects an expansion of the Spanish state’s extractive and economic capacity rather than the erosion suggested by neoliberalization theory and literature.46 Second, the structure of tax revenue also does not meet the expectations of neoliberal provenance. After its peak in 1999 (30.64% of total revenue), the share of indirect taxes steadily fell to 25.5% in 2007, before slowly returning to the value of the early 1990s. For a long time, Spain has been at the bottom of the EU 28 with its indirect taxation share. Nowadays, taxes on goods and services have gained more importance, but their share is still not comparable to the figures for Portugal, Greece, or Eastern Europe.47 Contrary to these countries, the Spanish treasury relies on extensive direct taxation and social security contributions. During the period under investigation, even revenue from property taxation increased its share from 5.5% in 1990 to 8.95% of total revenue in 2007; albeit this has to be attributed to the real estate bubble that burst a short time later. Furthermore, the importance of income taxes remains constant over the entire period, with slight losses after the millennium turn. On average, income taxes make up around 22% of total revenue. Finally, the share of corporate taxes almost tripled between 1994 and 2007, exceeding the OECD average in this period. Before the real estate and construction crisis, corporate taxes were responsible for 12.9% of total revenue. From 2008 on, the ratio decreased, and in 2017 amounted to 6.9% of total revenue, placing Spain in the lower midfield of the EU 28. Figure 4.1 summarizes these 45 46 47

Ban, Ruling Ideas, 47, 58–60, 185, 203. López-Castellano and García-Quero, “The Euro System,” 180. Eurostat, Taxation Trends; Hernández de Cos and López, “Tax Structure,” 26.

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40% 35% 30% 25% 20% 15% 10% 5%

19 7 19 0 72 19 7 19 4 7 19 6 78 19 8 19 0 8 19 2 8 19 4 8 19 6 8 19 8 9 19 0 9 19 2 9 19 4 9 19 6 9 20 8 0 20 0 0 20 2 0 20 4 0 20 6 08 20 1 20 0 12 20 1 20 4 1 20 6 18

%

Tax on Personal Income

Tax on Corporate Proftis

Tax on Property

Social Security Contributions

Tax on Goods and Services

figure 4.1  Structure of Spanish tax revenue as share of GDP, Central Government, 1990–2017. Source: OECD

developments and shows how stable the tax revenue structure has remained since the 1990s. Third, the development of the Spanish fiscal order, i.e., its legal institutions, reinforces distrust of the narrative about massive neoliberalization. Although neoliberalization theory would lead us to expect a stringent rollback of progressive taxation, the Spanish tax system’s overall progressivity in fact increased during the period under investigation. While democratization did not bring redistribution, European integration somehow did. In 1990, the Gini index increased after accounting for taxation effects – as it did in 1970. In 2014, the index decreased, thus equalizing income distribution only through taxation – an effect observable even if we use other measures, such as the P90/ P10 ratio.48 This phenomenon is rather surprising because the development of top tax rates suggests a different dynamic: the value-added tax standard rate rose steadily, from 12% in 1990 to 21% in 2020. Simultaneously, the personal income tax rate fell from 56% to 45%; capital gains were excluded from its tax base in 2000 and subsequently subjected to continuously lower tax rates. Finally, although the corporate tax rate remained stable from the mid-1990s until the great recession, it subsequently fell and now stands at 25%, 10% less 48

Torregrosa Hetland, “Limits to Redistribution,” 325–26; “Income, consumption and wealth inequality,” 361–64.

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152 60% 50% 40% 30% 20%

0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

10%

VAT Standard Rate

Corporate Tax Rate

Top Income Tax Rate

Capitals Gains Top Tax Rate

figure 4.2  Top tax rates in Spain, 1990–2017, Source: Eurostat.

than in 1990. But in contrast to these tendencies, the Spanish state is one of the few states in the world that levies an annual wealth tax, which was implemented in 1977. In the interim, the wealth tax base was eroded, before the tax was abolished due to efficiency and fraud issues in 2008 and then suddenly reintroduced in 2011. It is levied on the subnational level. Given that there is probably no fiscal institution that neoliberals oppose more strongly, this was an unexpected turn of events (Figure 4.2).49 To make sense of this rather contradictory development, we have to take a closer look at the tax state’s legal institutions and how they have changed over time. Because this chapter focuses on whether the tax system was subject to a specific dynamic, we can limit ourselves here to the three taxes that indicate neoliberalization: value-added taxes (VAT), personal income taxes, and corporate taxes. The Spanish treasury increased the VAT rate in small steps during the 1990s, from 12% in 1990 to 15% in 1992 and 16% in 1995. It remained at this level until 2010 when it was set at 18% and finally reached its current level of 21% in 2012. But in this period, a critical reform took place that is invisible if we consider only the standard rate.50 In 1993, Spain, like most European countries, abolished the higher VAT rate for luxury products. But a super-reduced rate of 3% was introduced simultaneously and raised to 4% two years later. 49

50

Pablos Escobar, “Personal Wealth Taxes”; Durán-Cabré, Esteller-Moré and Mas-Montserrat, “Behavioural Responses,” 4–8; Alvaredo and Saez, “Income and wealth concentration,” 1157–60. Taxud and European Commission, “VAT rates,” 18.

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Today, this rate still applies for medical supplies, books, and most foodstuffs, although not for beverages or meat, which are taxed at the regular reduced rate of 10%. The super-reduced rate has not changed since 1995. As a result, within the EU 27, only Luxembourg citizens pay less tax than their Spanish counterparts for their groceries. German citizens, for example, have to pay VAT rates of between 7 and 19%, and people in Denmark even pay 25% on every vegetable they buy. Accounting for the fact that lower-income percentiles save less and spent a large part of their disposable income on daily consumption items, one has to conclude that the Spanish system of indirect taxation is more progressive than the standard VAT rate seems to suggest. Moreover, the standard rate is still on par with the European median. And except for Luxemburg, every other EU state with a lower standard rate than Spain taxes daily consumption more heavily. Furthermore, personal income tax would seem to show signs of a similar neoliberalization dynamic. Its top marginal rate remained stable until José María Aznar took power in 1996, after which it was lowered in a series of reforms. First, the Aznar administration decreased the top marginal personal income tax rate from 56% to 48% in 1998. Later, the Zapatero government made further reductions in 2002 (45%) and 2007 (43%). Subsequently, there was another change in income tax policy. In 2012, Mariano Rajoy’s conservative administration raised the top income tax rate to 52% for a short period as part of its countermeasures to the so-called euro crisis. It was later lowered to 45% and now lies, at 43.5% in 2020, in the lower midfield in Europe. But how exactly does a falling top marginal income tax rate relate to the tax system’s increasing progressivity? To answer this question, we have to once again scrutinize the tax law more closely. In 1990, the Spanish tax system knew sixteen tax brackets. Today, five are left. But what appears to be and is often regarded as a neoliberal cutback of progressive taxation is actually the opposite.51 The 1998 income tax reform not only reduced the top marginal tax rate but also decreased the income threshold for the highest tax bracket and increased the income threshold for the declaration of income threefold. By creating a “vital minimum” that the state could not tax at all, the conservative government “exempted more than five and a half million taxpayers from having to file a tax return.”52 Four years later, the next tax reform added additional income allowances for children or the disabled and lowered the minimum tax rate to 15%.53 Later reforms, especially those enacted between 2008 and 2013, followed the path already taken and steadily enhanced the tax system’s overall progressivity.54 Therefore, the small decreases in income tax revenue after 1998 must not be interpreted as a sign of neoliberalization. They indicate quite the opposite. 51 52 53 54

Buendia, “A Perfect Storm,” 429. Jordán and Sanz-Sanz, “Personal Income Taxation,” 167. Jordán and Sanz-Sanz, “Personal Income Taxation,” 165–70. Martí and Pérez, “Spanish Public Finances,” 544–48.

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Finally, the corporate tax rate proved to be stable until the financial crisis. In 2007, Raquel Paredes Gómez, after reviewing the increasing importance of corporate taxes for the Spanish treasury, even recommended “a reduction of the general tax rate by no less than two points” because Spain had fallen significantly behind comparable rates in Europe and thus might have been at a competitive disadvantage.55 The tax rate indeed dropped to 30% in 2008 and 25% in 2016 but is still above the EU average of 22.5%. And although this could be considered evidence of a neoliberalization dynamic, one should not overlook that, in 2019, Spain still had the second-highest effective tax rate on large corporations in the non-financial sector in the EU. The EU average rate was 19.7%; the Spanish state ones was 31.4%. In addition, Spain had already implemented legislative measures against base erosion and profit shifting. It ranks 28th out of 36 in the Tax Foundations International Tax Competitiveness Index and is 22nd out of 70 on the tax justice network’s corporate tax haven index.56 Spain is thus hardly a neoliberal utopia. However, one should not conclude that the Spanish democracy gave birth to a particularly progressive tax state. That was certainly not the case. But the institutional dynamic at its core and the incremental changes one can observe did not lead to drift, conversion, layering, or displacement of the tax state in the sense neoliberalization theory would suggest.57 In the instance of all three institutions, the dynamic was more complex and often indicated quite the opposite. Fourth, a steadily pursued, moderate fiscal and monetary policy accompanied the long-term stability of the Spanish consensus on tax policy. As shown in Figure 4.3, the Spanish central bank succeeded in further reducing the inflation rate before Spain entered the monetary union. Since then, despite robust economic growth, the inflation rate only rose above 4% in 2008; in 2009 and from 2014 to 2016, the price trends were deflationary. The Spanish central bank thus carried on with its earlier policy and curbed inflation from 2008 on which also meant that the Spanish treasury abandoned the previously prevalent public financing techniques based on seignorage and financial ­repression.58 Moreover, the government maintained a restrictive budgetary stance. Although the Spanish state’s general government debt ranked seventh within the EU in 2019 at 117.3% of GDP, this should not be interpreted as an expression of a long-standing “Southern mentality.” It is a recent phenomenon. By 2007, the Spanish state had reduced its general government debt to 42.4% – from 74.6% in 1996 – not least through household surpluses that were reached between 2005 and 2007. It was only between 2008 and 2012, 55 56 57 58

Paredes Gómez, “The Evolving Role.” European Commission, “Effective Tax Rates”; Tax Foundation, “2020 International Tax”; Tax Justice Network, “Corporate Tax Haven Index.” Anghel et al., “Income, consumption and wealth inequality,” 360–4. Boix, Political Parties; Battilossi, Escario and Foreman-Peck, “Economic Policy”; Battilossi, “Structural Fiscal Imbalances.”

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20.00% 15.00% 10.00%

0.00% –5.00%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

5.00%

–10.00% –15.00% Inflation, Annual Growth Rate (%)

General Government Deficit (%)

Long-Term Interest Rates (% per annum)

Annual GDP Growth (%)

figure 4.3 Spanish fiscal and monetary policy, central indicators, 1990–2017. Source: OECD

in the context of the financial crisis, that new deficits absorbed about 10% of the country’s GDP annually. From 2013 on, the rising deficit curve slowly flattened out, and in 2019 new obligations amounted to only 2.9% of the GDP. Finally, the deficit’s dramatic increase during the financial crisis was also due to rising interest rates. By the end of the century, the interest rate on ten-year Spanish government bonds had fallen significantly from 14.7% (1990) to 4% (2009), thus aligning itself with the European average. Significant deviations from this figure occurred only between 2010 and 2013. In 2012, the Spanish treasury found buyers for its ten-year bonds only if it securitized them at an interest rate of 5.8%. This figure has been normalized since 2014 and reached 0.7% in 2019. Figure 4.3 shows these developments and includes the development of the gross domestic product as a point of reference. In summary, we can observe a combination of factors in Spain that do not appear to follow any comprehensive logic. Since 1990, on the one hand, the Spanish state, in concert with its independent central bank, has curbed inflation and government debt. On the other hand, it has increased the overall progressivity of its tax system. If this was not an “embedded” process of neoliberalization, what did happen?

4.4  making

sense of institutional resilience

If historical processes do not align with the predictions and expectations of a single theoretical model like neoliberalism, two options prevail. Either we can search for different ideas that, in one way or another, counteract neoliberal

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ideology, or we can consider other theoretical approaches that do not favor idealistic explanations in principle. Both options can be applied to Spanish development. And, as is so often the case, only a combination of the two offers the prospect of a more plausible narrative. For one thing, Spanish fiscal policy was not based on neoliberal ideologies alone. Instead, as Ban has shown in detail, it referred to a form of ordoliberalism shaped by social democratic thinking, which the Friedrich Ebert Foundation (associated with the German Social Democratic Party) propagated among Spanish socialists.59 Furthermore, the theoretical stance adopted by Spanish fiscal technocrats on tax politics had broader European roots. In the 1960s, Spanish fiscal technocrats followed the debates on harmonizing the European taxation systems. They referred to the Neumark Report in their policy papers and analyzed the Spanish tax system’s inadequacies and backwardness from a decidedly European perspective.60 Miguel Ángel Fernández Ordóñez, the national finance minister in the post-Franco administration of Adolfo Suárez, was a staunch advocate of “fairness in the distribution of sacrifices.”61 Enrique Fuentes, the author of the two central technocratic papers on the Spanish tax system’s reform, the so-called Green and White Papers, firmly believed that any modern tax system also had to fulfill a redistributive function. Seen in retrospect, these attitudes did not lack a certain irony. During the 1970s, a global paradigm shift took place within public finance, which fiscal technocrats in Spain did not fully anticipate.62 They thereby advocated a taxstate model that had already been deemed obsolete by some economists. But in sharp contrast to the tax systems that were introduced in Eastern Europe after 1989 or, as we will see below, in Latin America after 1973, Spanish fiscal technocrats referred to a different, older, and in a certain sense anachronistic ideational horizon that was not unequivocally neoliberal. Technocrats and politicians interpreted the fiscal order of their time precisely through this lens. Compared to the tax models adhered to in northern European countries, the Spanish system of their period seemed outdated. For various reasons, it was not suited to financing even the cautious projects pursued by an organic democracy, let alone a modern welfare state: First, the tax system was regressively organized and did not grow in step with economic development. Second, tax evasion was so widespread that even an adjustment of nominal tax rates promised little added value. Third, a rising public deficit and rampant inflation put pressure on the public sector (and financial repression and seignorage proved inadequate as measures to counteract it) – a disastrous dynamic exacerbated by the OPEC shock. 59 60 61 62

Ban, Ruling Ideas. Comín, “Reaching Political Consensus,” 14–24; Jordán and Sanz-Sanz, “Personal Income Taxation,” 152–3; Menéndez, “Neumark Vindicated.” Torregrosa Hetland, “Limits to Redistribution,” 325, 324–6. Musgrave, “Public Finance.”

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All in all, the tax system had to change.63 The Moncloa Pacts enacted in Spain in 1977, therefore, included specific tax policies that proposed, for example, the introduction of a progressive income and wealth tax.64 To become a member of the EU, Spain also had to implement a VAT. Although the fiscal technocrats, due to various political blockades, were unable to fully realize these plans until 1982, respectively 1986, they did lay the groundwork for tax and fiscal policies that created specific institutional dependencies and the basis for the incremental implementation of redistributive taxation. So, instead of blindly following the neoliberal model of statehood, the Iberian tax state’s architects oriented themselves toward a European tax state model; this was a political consensus that, although fragile in the early years of the republic, was maintained from 1982 on.65 In light of this, it makes sense to divide the recent history of the Spanish tax state into three phases: a long phase of economic capacity growth, a short but profound crisis after 2007, and a phase of consolidation after 2013 signaling a historically unprecedented further economic capacity growth of the Spanish state.66 From 1982 on, the Iberian tax state extracted an ever-increasing share of the country’s growing economic wealth, while at the same time reducing the interest payable on its debt, which was minimized over the same period. Government spending amounted to $30 billion in 1980 and increased by a factor of 14 by 2007 (see Figure 4.4). The Spanish state certainly benefited from a booming economy but was also able to build the institutional capacity to extract revenues faster than the economy grew (see Figure 4.1). To achieve this, its growing economic capacity had to be accompanied by an increase in the state’s “infrastructural” and “symbolic power.”67 In 1977, the Spanish tax administration was a centralized organization with only a few branches. There was only one tax office in each of the fifty regions, with a total staff of just 9,000. The result was a somewhat erratic administrative practice, which offered many opportunities for evasion. While those opportunities certainly did not disappear but did diminish, the administrative staff and the organizational structure expanded. By 2003, Spain’s tax authority, the Agencia Estatal de Administración Tributaria (AEAT) had grown to 30,000 employees, while the number of taxpayers increased by a factor of 40. The AEAT maintained 17 regional, 56 provincial, and 240 local tax offices, with parts of its infrastructure already outsourced to the largely autonomous

63 64 65 66 67

Torregrosa Hetland, “Limits to Redistribution,” 322; Alvarendo and Saez, “Income and wealth concentration,” 1146. Comín, “Reaching Political Consensus”; Albi, “The Business Community”; González Páramo and Cos, “Tax Reform.” Ban, Ruling Ideas. Centeno and Ferraro, “State and Nation Making,” 7–8. Centeno and Ferraro, “Authoritarism, Democracy and Development,” 5–9.

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158 600 500 400 300 200

0

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

100

General Government Revenue (in billions of €)

General Government Spending (in billions of €)

figure 4.4 General government revenue and spending in Spain, 1980–2020. Source: IMF

regions of Navarre and the Basque country.68 Today, about 25,000 civil servants are responsible for tax extraction.69 The administrative staff’s expansion went hand in hand with an increase in bureaucratic efficiency. Within the EU, only Malta and Estonia spent less money on their tax authorities in relation to their GDP in 2015. At the same time, only the (much) larger economies of Italy, the United Kingdom, France, and Germany recorded higher tax revenues than the Spanish state. If the tax collection costs are offset against their yields, the AEAT generates an income of €267 for every euro spent. Such a performance puts it in second place within the EU. In comparison, the German tax authorities extracted only €136 per euro invested.70 The Spanish tax authorities, therefore, constitute one of the most efficient tax administrations in the European Union, a clear sign of the state’s growing infrastructural capacity, despite lingering problems. Furthermore, one could observe an increase in the Spanish state’s symbolic capacity. One of the best indicators of this capacity is the willingness of citizens to be taxed. Comparative research on the evolution of tax morals, i.e., the individual intrinsic motivation to pay taxes, shows that, while it decreased during the late Franco years until 1978, it increased after the coup attempt in 68 69 70

Onrubia, “The Reform of the Tax Administration,” 489, 521; Gray, “A Fiscal Path to Sovereignty,” 66–8. Registro Central de Personal, Boletín Estadístico. Murphy and Guter-Sandu, Resources Allocated, 33–45.

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1981. From then on, a steadily growing portion of the population stated in interviews that cheating on taxes was never justified. This broad consensus weakened a bit after 1995. Still, it remained intact until 2010, when around 80% of Spaniards surveyed stated that it was never or almost never justified to cheat on tax payments; this figure was higher than the result for Swedish citizens responding in the same study.71 However, this apparent growth of the state’s infrastructural power and the dynamic developments of its symbolic capacity should not lead us to overlook the fact that the Spanish tax state’s territorial power was eroding. The federalism reform of 1997 triggered an immense rise in the share of taxes extracted by the regions. It increased sixfold from 5% in 1995 to 32.4% in 2012. Within Europe, this is one of the highest rates. Especially in those regions subject to the Concierto Económico and the Convenio Economico (Basque Country and Navarre), it fueled existing conflicts about a possible secession from the central state.72 The combination of growing economic, infrastructural, and symbolic power capacities ended in 2007. But at the beginning of the second phase, the previous fiscal discipline and the tax state’s expansion meant that Zapatero’s government was able to intervene decisively against the great recession.73 While a large part of the budget deficit that exploded during this period is attributable to the burst of the real estate bubble and the resulting collapse in tax revenues, especially from the property and corporate taxes, the state was simultaneously able to allocate a 174.3 billion euro bailout package to support its banking and real estate sector, of which 61.9 were used.74 In absolute figures, Spain thus ranked fourth among the EU countries with respect to the financial volume of measures taken to counteract the impact of the crisis and spent 24% of its 2008 GDP on rescue measures by 2010.75 The Spanish government also attempted to spread the burden of the cost of these rescue measures by introducing a new income tax bracket and reintroducing the wealth tax. For a short period, the Spanish state’s “emergency Keynesianism” diverged from the earlier fiscal policy path and reacted expansively to the financial crisis. Meanwhile, tax policy maintained its established course.76 However, the limitations of the Spanish state’s economic capacity soon became apparent.77 Because, among other things, the European Central Bank and the European Union, under the lead of the German government, acted procyclically and thus undermined the 71 72 73 74 75 76 77

Alm and Torgler, “Culture Differences,” 238–9; Martinez-Vazquez and Torgler, “The ­Evolution of Tax Morale,” 7–8; World Value Survey, “Justifiable.” Eurostat, Taxation Trends, 147; Alemdra, “Fiscal Federalism,” 467–75; Gray, “A Fiscal Path to Sovereignty?”; Cf. Mathias vom Hau’s Chapter in this volume. Blyth, Austerity, 64–69. Millaruelo and Río, “The Cost of Interventions,” 5. Tooze, Crashed, 166. Ban, Ruling Ideas, 203; Hall, “The Political Origins,” 142. Royo, After the Fiesta”; Martí and Pérez, Spanish Public Finances,” 529–40.

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Spanish treasury’s countercyclical interventions, there was an enormous rise in the national deficit accompanied by simultaneous deflation.78 During this short phase, the transfer of fiscal policy powers to supranational institutions took its toll. Although Spain, in contrast to the equally hard-hit Portugal and Greece, demonstrated its economic capacity and did not take a loan from the European Financial Stability Facility (EFSF), it introduced the budgetary golden rule into its constitution in 2011. Shackling its own ability to implement deficit spending, it fulfilled a central demand of neoliberal ideology, as the second country in Europe to introduce such a mechanism.79 While the reform was put into effect at enormous speed – only eight days passed between the debate in the Congress of Deputies and the Senate’s final vote – its longterm effects remain to be seen. Since the golden rule’s introduction, generous interpretations of its exception paragraphs have allowed the Spanish government to run higher deficits than foreseen by constitutional norms for every year since 2011.80 In 2012, the Spanish treasury took out a loan from the European Stability Mechanism (ESM) to recapitalize its banks. But what might look at first sight like a collapse of economic capacity appears in a different light on closer inspection. Spain only needed half of the sum offered and repaid its debt earlier than obliged.81 The social costs of the crisis were high indeed – youth unemployment rose to 56.2% in 2013, and in 2012 Spanish banks initiated nearly 50,000 foreclosure proceedings82 – but the financial consequences for the state remained moderate. By increasing taxation through higher income and value-added taxes, the Spanish state was able to maintain its economic capacity while enacting harsh austerity measures in other policy fields, which brought its rising debt to a halt.83 But this was not without costs. In the World Value Survey 2017–2020, one could observe a substantial drop in tax morality to the levels of the early 1980s. The austerity measures implemented during the so-called euro crisis took their toll and resulted in a decreasing symbolic capacity of the tax state.84 Nonetheless, the VAT gap in Spain also decreased from over 31% in 2009 to 6.0% in 2018.85 Despite much talk about evading taxation, opportunities have dwindled.86 The third phase began after 2012 in the wake of the ECB’s low-interest-rate policy and quantitative easing presaged by Mario Draghi’s famous 2012 “Whatever it takes” speech. Since then, the relevance of high public budget 78 79 80 81 82 83 84 85 86

Cf. Buendía, “A Perfect Storm”; Tooze, Crashed. Miró, “Abolishing Politics,” 8–9. Kasperskaya and Xifré, “Reform or resist?” 495–98. European Commission, Post-Programme. Banco de España, “Nota informativa.” Fishman, “Anomalies of Spain’s Economy.” World Value Survey, “Justifiable.” European Commission, Study and Reports, 30; European Commission and TAXUD, Study to Quantify, 84. Bäumler Escobar, “The Fiscal Commons,” 65–73.

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deficits has declined, and there are signs that the state’s economic capacity is expanding. This dynamic is also reflected in its increased ability to tax higherincome percentiles via wealth and inheritance taxes levied on the regional level. In July 2020, the Spanish government even announced increases in corporate and individual income taxes to finance the enormous fiscal stimulus necessary to combat the COVID-19 pandemic – a measure every neoliberal would oppose.87

4.5  torn

apart : taxation in latin

american and chile since

1973

How little the history of the Spanish tax state corresponds to neoliberal expectations becomes even more evident if we compare it to the financial developments that have taken place in Latin America since the end of the era of the developmental state. Especially occurrences in Chile and Argentina are frequently regarded as the first examples of abrupt and massive neoliberalization.88 Unsurprisingly, these processes came with unequivocally neoliberal tax and fiscal politics. Because the Latin American states and Spain still had comparable fiscal structures in the mid-1970s, Latin America offers an excellent contrast to the Iberian development. Customs duties and indirect taxes formed a large part of the tax revenue and an effective income tax was lacking in both Latin America and Spain.89 At the beginning of the 1970s, the overall tax revenue in Latin America was around 13% of GDP, with indirect taxes accounting for the lion’s share of it. In 1975, the Spanish treasury extracted tax revenues amounting to 17.95% of its GDP. Approximately, 40% of this income was derived from direct taxes, with gifts and estate taxes as well as corporate taxes accounting for a significant share. Furthermore, inflation was an urgent political problem for both Spain and Latin American countries.90 A proposal made by Atria, Groll, and Valdes for dividing recent Latin American fiscal history into four phases is useful when comparing Spain and Latin America. In their view, 1973 marks the decisive turning point from the first phase’s developmental policies to the supply-oriented economic programs of the second, which caused significant economic turbulence, high inflation rates, and stagnating tax revenues in Latin America. In the third phase from 1990 until the turn of the millennium, Latin American governments redesigned their fiscal orders to fit the neoliberal model, with symbolic reference to the Washington Consensus and organizational support from the IMF.91 They 87 88 89 90 91

“Fiscal reforms and hikes.” Teubal, “Rise and Collapse”; Ruckert, Macdonald and Proulx, “Postneoliberalism”; Madariaga, Neoliberal Resilience; Buggeln, “Wie wichtig.” Alvaredo and Saez, “Income and Wealth Concentration,” 1146–49; Atria, Biehl and Labarca, “Towards a Fiscal Sociology,” 140–2. Comín, “Reaching Political Consensus,” 14–21; Atria, Groll and Valdés, “Introduction,” 13–5. Atria, Groll and Valdés, “Introduction,” 4–5.

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“set out to strengthen the VAT, reduce or eliminate taxes on international trade, decrease rates in income tax, and broaden tax bases.”92 Since 2002, the so-called pink tide led to a proliferation of new tax policies and initiated the fourth phase, in which modernized tax agencies enabled many Latin American states to profit from the commodity boom. Rather than assuming that developments in Spain and Latin America were simultaneous, I will focus on the second and third phases in Latin America (i.e., from 1973 to approximately 2002), which were the stages of unequivocal neoliberalization, and compare them to developments in Spain from 1990 on, when the “Mediterranean nightmare” mentioned above purportedly occurred. If we look at these periods, four significant differences stand out. First, neither the level nor the trajectory of the tax-to-GDP ratios in Latin America and Spain coincides. As Huber and Solt stated in 2004, “the dominant pattern of tax reforms, though, has reduced marginal tax rates and not increased income tax collection. It has shifted more weight to value-added taxes, which tax lowerincome earners also. In general, Latin American populations remain undertaxed.”93 According to calculations by Atria, Groll, and Valdes, Latin America did not return to and permanently exceed its 1973 level of average tax revenue until 2002. At the end of the neoliberal era, it stood at 13%, which corresponds to almost one-third of the Spanish quota. Second, the composition of tax revenue in Spain and Latin America differs considerably. In 1990, the average share of indirect taxes in total tax revenue reported by 18 Latin American countries was 52%, and indirect taxes still accounted for 49.7% of all taxes in 2017.94 This rate is almost twice the average for Spain over the period covered here. Moreover, individual income taxes account for a minimal share of all taxes in Latin America. In 2007, after the era of post-neoliberalism had begun, income taxes accounted for only 7.7% of total tax revenue (whereas in Spain it hovers around 21% over the entire period under study).95 Third, Spain’s inflation and interest rates differ markedly from those in Latin American countries. Ben Bernanke, the former chair of the United States’ Federal Reserve, was certainly not thinking of Spain when he stated that “a measure of price changes in nine of the most populous Latin American countries shows that inflation in the region averaged nearly 160 percent per year in the 1980s and 235 percent per year in the first half of the 1990s.”96 As outlined above, inflation had not been a problem in Spain since the 1990s, and the rate hardly exceeded 4% after the end of the Cold War. Fourth, the Spanish tax system is much more progressive in design and distributes incomes more efficiently. Taxation in Spain reduced the Gini coefficient by 0.06 points from 0.43 to 0.37 in 2014, whereas in 92 93 94 95 96

Atria, Groll and Valdés, “Introduction,” 4–6; 5. Huber and Solt, “Successes and Failures,” 160. IDB, CIAT, ELCAC and OECD, “Revenue Statistics”; Atria, Groll and Valdes, “Introduction,” 5. Ruckert, MacDonald and Proulx, “Postneoliberalism.” Bernanke, “Inflation in Latin America”; Atria, Groll and Valdes, “Introduction,” 13–5.

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Latin America it remained at 0.50 in 2010 (after calculating the effects of taxes and transfers).97 A comparison of six Latin American countries shows that, in 2008, they succeeded in reducing the coefficient by only 0.01 through taxes. The Spanish tax authorities redistributed income through taxes about six times as effectively over the same period.98 Fiscal and tax policy in Spain and Latin America thus developed in different directions during the periods considered here; it would appear that completely different processes emerged after the end of the era of the developmental state. This finding is confirmed if we compare individual states instead of a country and a continent. It is well known that Chile was probably the most potent tax state in the region and is generally regarded as the archetype of stringent neoliberalization, so it seems a suitable comparative case.99 And indeed, after Pinochet’s coup of 1973, the new government passed a tax reform that explicitly followed neoliberal principles in 1974: The principal features of this reform include the replacement of cascade sales taxes with a flat rate value-added tax at a 20% rate; a full indexation of the tax system; an elimination of exemptions and subsidies; a unification of the corporation and non-corporation income taxes into a flat business tax; and the integration of the personal and business income taxes.100

It seems obvious that the Spanish state, with its lower-rated and non-flat VAT, a general progressive income tax, and relatively high corporate and property taxation, took a completely different fiscal path. The tax figures reflect this difference. In 1975, the Chilean state extracted taxes worth 20.2% of its GDP, which exceeded the Spanish tax revenue of 17.95%. But while the Spanish treasury doubled its tax revenues between 1975 and 2007, the Chilean revenues stagnated. By 1990, the tax-to-GDP ratio had fallen to 16.9%, but it then steadily climbed, reaching 19.1% in 2002. Over the long term, the tax-to-GDP ratio did not grow in Chile, in keeping with the expectations of neoliberalization theory.101 The argument also holds if we analyze the structure of tax revenue. In Chile, revenue from personal income taxes did not exceed 8% of total revenue until 2002. In contrast, revenue from personal income taxation skyrocketed in Spain after the successful income tax reform of 1979, accounting for 12% of total revenue in 1973 (including wage taxes) and 32% in 1980.102 Corporate tax revenues followed a slightly different trend. They increased steadily in Chile 97

Jiménez and López Azcúnaga, “Disminución de la desigualdad,” 11; Goñi, López and Servén, “Fiscal Redistribution”; Anghel et al., “Income, consumption and wealth inequality,” 361. 98 Goñi, López and Servén, “Fiscal Redistribution,” 8–12. 99 Cf. Fairfield, Private Wealth; Bergman, Tax Evasion; Madariaga, Neoliberal Resilience. 100 Edwards and Edwards, Monetarism and Liberalization, 31. 101 Cf. Cominetta, “Chile,” 186–89, 197–201; Cheyre “Analysis of Tax Reforms”; Sanchez, Mobilizing Resources. 102 Comín, “Reaching Political Consensus”; 50.

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164 70.00% 60.00% 50.00% 40.00% 30.00% 20.00%

2018

2016

2017

2015

2014

2013

2012

2011

2010

2009

2008

2007

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2005

2004

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Chile, Taxes on Goods and Services in Total % of Taxation Spain, Taxes on Goods and Services in Total % of Taxation Chile, Taxes on Personal Income in Total % of Taxation Spain, Taxes on Personal Income in Total % of Taxation Chile, Taxes on Corporate Profits in Total % of Taxation Spain, Taxes on Corporate Profits in Total % of Taxation Chile, Tax Revenue, Total, % of GDP Spain, Tax Revenue, Total, % of GDP

figure 4.5  Structure of tax revenue in Chile and Spain, 1990–2018. Source: OECD.

45 40 35 30 25 20 15 10 5

19 7 19 0 72 19 7 19 4 7 19 6 7 19 8 8 19 0 8 19 2 8 19 4 8 19 6 8 19 8 9 19 0 9 19 2 9 19 4 9 19 6 9 20 8 0 20 0 0 20 2 0 20 4 0 20 6 0 20 8 1 20 0 1 20 2 1 20 4 1 20 6 1 20 8 20

0

Chile, General Government Revenue (Percent of GDP) Spain General Government Revenue (Percent of GDP)

figure 4.6  Tax revenue in Chile and Spain, 1970–2020. Source: IMF.

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165

after the end of the Pinochet junta and even boomed during the pink tide and the commodity boom.103 The 2007 quota of 29.4% tops the levels seen in any period in Spain. But the picture has to be put into perspective by referring to the different growth models and examining the tax-to-GDP ratio. This reveals that corporate taxes did not become more important for the economy as a whole in Chile until after 2005, in contrast to Spain. In other words, this development occurred in the era of post-neoliberalism. Finally, taxes on goods and services are consistently much more relevant in Chile than in Spain. In 1999, they peaked and were responsible for 65.2% of total revenue. In fiscal terms, Chile and Spain have gone separate ways during the era of the neoliberal state and remained far apart during the 1990s. They have established completely different tax states as shown in Figures 4.5 and 4.6.

4.6  conclusion :

toward an alternative

narration of the spanish tax state

If the old saying, according to which the history of the state is the history of its finances, and public finance bears the thunder of history still holds,104 then the history of the Spanish state is incompatible with an interpretation that relies on terms like neoliberalism or neoliberalization. A comparison of the historical developments in Spain with Latin America, and in particular Chile, clearly supports such an understanding. In Chile, where the Chicago Boys were allowed, from September 11, 1973, on to do their own thing and forcibly shape economic reality according to their utopian ideals, the development was fundamentally different from what occurred in Spain. In the latter country, political and technocratic elites were also inspired in various ways by the neoliberal zeitgeist, but obviously never completely forgot their socialist and European heritage and therefore never abandoned the fiscal policy path that had been embarked on with the Moncloa Pacts. While the Spanish state’s economic, infrastructural, and symbolic capacity grew enormously between 1980 and 2007, and it remains to be seen whether it can completely overcome the aftershock of the great recession and the COVID-19 pandemic, such growth has not been observed in Chile or Latin America. Fiscally speaking, different developments characterized the history of the tax state on the Iberian Peninsula and in Latin America. But why and how did Latin America and Spain adopt different fiscal paths from 1973 onwards? In considering these differences, one should avoid the pitfall of explaining them by referring to vague ideological variations. Hegemonic ideas were indeed crucial for selecting a fiscal path, but institutional as well as geopolitical contexts were even more decisive – implementing 103 104

See Pía Riggirozzis contribution to this volume. Schumpeter, “The Crisis of the Tax State”; Martin, Mehrotra, and Prasad, “The Thunder of History,” 2.

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tax harmonization and the Neumark plan in Spain as part of the EU integration process differed fundamentally from the integration of Latin American countries into the US empire by the Department of Economics of the University of Chicago. But how these processes played out was ultimately determined by how the respective contexts interacted with a state’s internal structure. In Spain, supranational cooperation, subnational decentralization, cycles of politicization, the dynamics of moral economies, and the learning processes of bureaucracy are intertwined to an extent that makes it impossible to argue that the contemporary tax state emerged in linear and continuous development, especially if we call that development neoliberalization. bibliography

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5 Guatemala States and Homicidal Ecologies* Deborah J. Yashar

Central Americans have been fleeing the Northern Triangle. These states do not provide the security, welfare, or freedoms that we expect of democratic regimes. Faced with the choice of living a life of violent insecurity and economic precarity, many have chosen to risk traversing dangerous paths through Central America and Mexico toward the United States – in caravans, with coyotes, in small groups, as individuals. They have no certainty along the way. They know that they might face further violence and mistreatment. And they know that the US government is likely to be unwelcome. Yet they continue to stream north with knowledge of the formidable obstacles that they are likely to face – including the possibility that they will be extorted and raped in Mexico; that they might die along the way (as they ride the Bestia in Mexico;1 as they swim across rivers; as they lack for food and medicine; as they face scorching heat); that they could be separated from their family and locked up in cages even if they successfully cross the US border (or sent back to wait in a “safe country” while their forms are processed); and even if they find their way to the interior of the United States, that they might be deported if they lack certain documents. *

1

This chapter draws extensively on Yashar, Homicidal Ecologies (2018), where I thank many research assistants. For this chapter, I especially thank Diana B. Sandoval Simán for her excellent work in updating this chapter. La Bestia is a colloquial reference to the Mexican freight trains that travel from the Guatemalan border to the United States. U.S.-bound migrants, including children, have taken the risk of riding atop these trains, a dangerous route that has left many physically injured or even dead. For this reason, the train is commonly referred to as “the beast” or “death train.” Those riding the train have also been subject to extortion and violence by gang and organized crime. For more, see: www.npr.org/sections/parallels/2014/06/05/318905712/riding-the-beastacross-mexico-to-the-u-s-border; www.theguardian.com/us-news/gallery/2017/dec/13/mexicocentral-american-migrants-la-bestia-pictures.

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As I wrote this chapter, an image haunted me (one of many). On June 25, 2019, Óscar Alberto Martínez Ramírez and his 23-month-old daughter, Valeria, drowned trying to cross the Rio Grande. The searing photograph by Julia Le Duc/Associated Press immortalizes the life-threatening choices people make when they reside in states that do not protect them and as they try to move to countries whose states refuse to offer them legal entry. “The image represents a poignant distillation of the perilous journey migrants face on their passage north to the United States, and the tragic consequences that often go unseen in the loud and caustic debate over border policy.”2 These are the realities that motivate this chapter’s focus on the Central American countries that people are fleeing. I will not refer to psychology or individual choice. Rather, this is a chapter concerned with the structural violence in contemporary Central America and the failure of these states to provide and defend the rule of law or provide law and order. Latin American homicide rates are the world’s highest. The 2017 global average homicide rate was estimated at 6.1 per 100,000 people; homicide rates were reported as 17.2% in the Americas, followed by 13% in Africa, 3% in Europe, 2.8 in Oceania, and 2.3 in Asia.3 Of the 464,000 people reported as intentionally killed in 2017, the Americas claimed the highest percentage at 37.4% of the total.4 The Northern Triangle countries of El Salvador, Guatemala, and Honduras have been particularly afflicted by high homicide rates, alongside other forms of violence; they have become part of the most violent areas in the world. In particular, Central America (along with Southern Africa) has claimed the dubious distinction of being the most violent subregion in the world, with an estimated homicide rate of four times the global average.5 Otherwise stated, these countries have suffered from homicidal ecologies – structural conditions that are likely to generate high homicide rates.6 El Salvador, Honduras, and Guatemala all have had among the highest rates among the Central American cases, although all have witnessed some spikes, fluctuation, and decline in recent years (most precipitously in El Salvador). Across these three high-homicide cases, Guatemala’s rates have generally been less extreme in the twenty-first

2 3 4 5 6

www.nytimes.com/2019/06/25/us/father-daughter-border-drowning-picture-mexico .html?module=inline U.N.O.D.C., Global Study on Homicide: Executive Summary, 11. U.N.O.D.C., Global Study on Homicide: Executive Summary. United Nations Office on Drugs and Crime, Global Study on Homicide 2013: Trends, Context, Data, 12. In Yashar, Homicidal Ecologies, I set out to explain where and why homicidal ecologies emerge – structural conditions that make some places more likely to experience high homicidal violence. I argued that exceptionally high levels of homicidal violence are driven by the concatenation of three factors: weak and complicit states, the rise in illicit organizations that are predicated on territorial control; and organizational competition to control those territories. No one factor alone drives the violence; but the tripartite combination has proven fatal. This essay focuses on the first of these: the weak and complicit states that allow these illicit organizations to thrive.

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Homicide Rate (homicide/100,000 pop.)

HOMICIDE RATES IN CENTRAL AMERICA PER 100,000 (2000–2018, PER UNODC) 120 100 80 60 40 20 0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Costa Rica

Guatemala

Nicaragua

El Salvader

Honduras

Panama

figure 5.1  Homicide rates in the Americas per 100,000 (2000–2018 per UNODC) (updated from Yashar 2019: Figure 1.2). Original graph created for this project by Daniela Barba-Sánchez in June 2016 using Stata. Current graph created in July 2020 by Diana Sandoval Simán July 2020. Source: UNODC 2014b. See www.unodc.org/ gsh/data.html. United Nations Office on Drugs and Crime. “Global Study on Homicide 2019.” Vienna, Austria, July 2019. www.unodc.org/unodc/en/data-and-analysis/globalstudy-on-homicide.html.

century, although significantly higher than the southern countries of Costa Rica, Panama, and Nicaragua (see Figure 5.1).7 To address this structural violence, this chapter takes a geographic and temporal step back from the horror taking place on the US Southern Border to revisit the state of Guatemala – from which many people are still fleeing north. The Guatemalan state (alongside those in El Salvador and Honduras) has not been able to ensure law and order – often ceding ground to other actors, including illicit organizations that often assume territorial control over cities, ports, roadways, and borders. While in some cases the state is weak; in others, it is complicit. This chapter unpacks the state by focusing in particular on the police (as the bureaucratic state agency charged with protecting citizens 7

2022 homicide rates are considerably lower in the Northern Triangle than in 2017. Honduras reported 35.8 homicides per 100,000 (still among the highest rates in the Americas). The 2022 rates in Guatemala and El Salvador declined more significantly to 17.3% and 7.8%, respectively. Notably, President Bukele oversaw a brutal anti-gang crackdown in El Salvador. It is hard to ascertain the comparative impact of the global pandemic on these rates. See Insight Crime’s 2022 Homicide Roundup (https://insightcrime.org/news/insight-crime-2022-homicide-round-up/; accessed March 26, 2023).

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against disorder and crime) and situating it vis-à-vis the military and courts. In this regard, the chapter tackles the “neoliberal” state by analyzing where, how, and why its coercive institutions neglect to protect the very liberal right (freedom from harm) that is commonly seen as foundational to the state’s contract with its citizens. In this regard, Guatemala’s state has “low capacity” – understood as the limited organizational capacity to implement governing projects – separate from the political will to deploy it.8 This chapter is organized as follows. Part I situates this paper in the context of this volume’s central concern – debating if and how neoliberalism, relative to an earlier historical period, left weak and complicit states in the region. I argue that historical institutional legacies that predate neoliberalism are key to explaining Guatemala’s contemporary state – even if neoliberal ideas legitimated and were compatible with it. Part II constitutes the core of the paper and focuses on the institutional features of the Guatemalan state – highlighting the failure to uphold the rule of law and its complicity in the homicidal ecologies prevalent in the region. I argue that historical institutional factors explain the persistence of corrupt and complicit states, especially law and order institutions that predate democratization and were largely sustained even as these countries transitioned away from authoritarian rule (and in some cases subsequently enacted peace accords). The conclusion revisits the question of (neo)liberalism and the states’ failed promise to defend and protect its citizens. part i   central american states : neoliberal reforms meet historical institutionalism

The focus of this volume is the neoliberal state in Latin America. Neoliberal reforms (NLR) generally reference economic reforms that radically restructured the role of Latin American states in the market and social welfare provision. In the market, the state stepped back from ISI policies, sold off state-owned industries, devalued currencies, and reduced subsidies and credit, among other issues. In social welfare, the state initially cut back social programs – including education and health. The changes left an urban and industrial population that was less protected from the vagaries of the market – although hagiography aside, we know that only certain sectors were advantaged by the earlier policies, in particular those in the public sector and formal, urban labor market.9 This depiction is more apt for some Latin American countries than others, however. Starting and end points for each country varied on either side of the neoliberal reform period. On the one hand, Latin American countries varied in the degree to which they had an activist state in the pre-neoliberal 8 9

Centeno, Kohli, and Yashar, “States in the Developing World,” Chapter 1. See, among others, Collier and Collier, Shaping the Political Arena; Garay, Social Policy Expansion in Latin America; Kapiszewski, Levitsky, and Yashar, The Inclusionary Turn in Latin American Democracies.

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period – with the Southern Cone and Mexico taking the lead.10 On the other hand, the degree to which states implemented NLR also varied – in terms of which sectors were targeted and how far the reforms actually went.11 Kurtz and Brooks,12 for example, examine the period 1975–2003 (covering the end of the developmental state and neoliberal reforms) and note that while most countries (save Chile) started off with quite closed economies, they varied significantly in terms of how statist they were in promoting industrial policy and advancing public ownership. Thus, the neoliberal reforms had a differential effect on those with more/less statist starting points. Regarding Central America and neoliberal reforms, it is important to acknowledge three different starting points than their Southern Cone counterparts. I discuss each – although in this section I focus at greatest length on the first point and only briefly on the second and third points, which are elaborated further in the following section. First, Central America’s Northern Triangle countries never experienced the same kind of activist state described by the political economy literature on Latin American development (a literature largely focused on the Southern Cone and Mexico). Guatemala, El Salvador, and Honduras neither pursued a significant ISI policy (Guatemala least so) nor developed a significant national state sector or social welfare regime; these Central American states were primarily focused on promoting agricultural export (and often heavily protected those markets) and had a relatively incipient industrial and labor sector (indeed, Guatemala had among the lowest unionization levels in the Americas); so too welfare policies were minimal in comparison to Costa Rica, Mexico, and South America. Indeed, between 1975 and 2003, Guatemala falls at the bottom of the statist score in the late 1970s and remains the second lowest in the following years; El Salvador is in the mid-range and falls during this period; and Honduras starts and remains just below the mid-range during these years.13 Thus, while NLR did lower the floor for citizens, it is important to recognize that most citizens of Guatemala had barely been covered by the preneoliberal state. This has continued for much of the third wave of democracy. By the 2010s, Guatemala had relatively stable growth but it remained highly uneven, with little progress in meeting the Millennium Development Goals; the IMF observed in 2015 that only a quarter of the population had met the Millennium Development Goals, while no goals had been met for the rural and indigenous population.14 The state seems to have assumed little commitment to

10 11 12 13 14

See Kurtz and Brooks, “Embedding Neoliberal Reform in Latin America”; Berrios, Marak, and Morgenstern, “Explaining Hydrocarbon Nationalization in Latin America.” See Corrales, “Market Reforms;” Kurtz and Brooks, “Embedding Neoliberal Reform in Latin America.” Kurtz and Brooks, “Embedding Neoliberal Reform in Latin America.” Kurtz and Brooks, 256–57. Taft-Morales, “Guatemala: Political and Socioeconomic Conditions,” 12.

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redress this – since “Guatemala has the lowest tax-to-GDP ratio in the region at 12.4%, compared to 22.8% for Latin America in 2015.”15 This said, there is yet another literature arguing that neoliberalism did impact Guatemala in significant ways. I suggest that this perspective often speaks to a different, and much more capacious, definition of the very term, neoliberalism. Neoliberalism in this case is taken to mean the prevalence of individualism, market-driven development, globalization (with significant export promotion, NTAX, in particular),16 and sometimes even multicultural governance and decentralization17 – advancing a set of ideas consistent with international development agencies and elite interests. I do not contest that these specific processes are in motion; indeed, they are. But I don’t see these patterns as derivative of “neoliberalism” per se. Rather, they constitute part of Guatemala’s long, highly unequal, and coercive form of capitalism (which predates neoliberalism); neoliberal ideas might have legitimated these patterns, but late twentieth century neoliberal reforms (political economy reforms that reversed and weakened state intervention in the market and social provision)

15 16

17

Taft-Morales, “Guatemala: Political and Socioeconomic Conditions,” 13. See Kurtz and Brooks, “Embedding Neoliberal Reform in Latin America,” 256–57. Robinson, “Maldevelopment in Central America,” passim, esp. page 480, 486; and Robinson, “Neoliberalism, the Global Elite, and the Guatemalan Transition” are among the most careful and informative of this scholarship. Robinson notes a change from the “developmentalist state” to the “neo-liberal state,” which he associated with a new transnational model. He argues, in particular, that globalization and transnationalization impacted Central America’s political economy at the end of the twentieth century. If traditional, agro-export (focused on coffee and bananas) were the defining features through the mid-twentieth century, in the 1980s we start to see, according to Robinson, a new stage of transnational capitalism – one marked in Guatemala by the rising prevalence of non-traditional agricultural exports, the maquiladora sector (transnational capital using cheap domestic labor – often drawing on young women – to assemble garments); a powerful financial sector; tourism (especially as civil wars started to unwind); and migration/remittances as a growing part of the economy. He emphasizes that this process coincided with the emergence of a new class of elite actors (often growing out of the old sector but also tied to an unfolding transnational project); these new actors have been supportive of the peace accords and emerging polyarchy as the political counterpart to this underlying effort to secure this new model of growth (although not fundamentally for restructuring power, as it ratified existing property relations). Robinson, in “Maldevelopment in Central America,” 480, also notes that Guatemala implemented some structural adjustment programs in 1997, during the PAN administration of Alvaro Arzú. By the 2000s (after Robinson published these pieces), mining had also become more important. For non-traditional agricultural exports (NTAX), also see Barham, Clark, Katz, and Schurman, “Nontraditional Agricultural Exports in Latin America;” Hamilton and Fischer, “Non-Traditional Agricultural Exports in Highland Guatemala;” and Carletto, Kirk, Winters, and Davis, “Globalization and Smallholders.” For maquilas, also see Traub-Werner and Cravey, “Spatiality, Sweatshops and Solidarity,” 389. Mining also increased, especially following liberalization of the mining law in 1997, which led to a rise in Canadian mining companies – generally without consulting local (often indigenous) communities; see Rasch, “Transformations in Citizenship.” See Charles Hale, “Does Multiculturalism Menace;” and Copeland, “Guatemala Will Never Change.”

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did not forge them in Guatemala. The Guatemalan state has nearly always advanced the interests of domestic and international capital in the countryside and sometimes in industry;18 maintained a small tax base; and a small social spending base. The state loomed largest when it came to coercion (more than development) – forging a culture of despair and disempowerment for some and a culture of revolution for others. Benedicte Bull, who has argued that neoliberal market reforms affected governance in Central America, has noted two important points that merit emphasizing.19 On the one hand, she observes that neoliberalim’s effect seemed least consequential in Guatemala, where reforms were often piecemeal, the nationalized bank sector was non-existent, tax-income levels were already the lowest in Latin America, social services were already very low (and remained low), and few spaces existed for new entrepreneurs (outside of already existing export agriculture, extractivism, as well as illicit sectors). On the other hand, she concludes that neoliberal reforms are at fault less for creating a crisis of governance and weak states (which she observes were not created by NLR) than in putting up roadblocks for strengthening the state itself.20 In short, this first point highlights that neoliberal reforms were consequential for Latin American states as a whole but not evenly so – particularly less so in Guatemala. The ideas associated with neoliberalism reinforced an already highly unequal society that already privileged agricultural export, markets, and elite interests over some shared collective understanding of development. Neoliberalism, as a global project, thus played a supporting ideational role more than a turning point for the Guatemalan state per se. Second, NLR reforms were not temporally isolated but unfolded at the same time that Central America was experiencing waning civil wars and negotiating peace accords in El Salvador, Guatemala, and Nicaragua. The civil wars and peace accords were arguably more impactful than NLR per se for the form these states took. The accords ostensibly were designed to restructure the state in radical ways (to end the war; deepen democratic reforms; address

18

19 20

The Guatemalan revolution (1944–1954), or ten years of spring, was an exception. See Jonas, Battle for Guatemala; Handy, Revolution in the Countryside; Gleijeses Shattered Hope; and Yashar, Demanding Democracy. Bull, “Governance in the Aftermath of Neoliberalism,” 96–101, 104–7. Bull, “Governance in the Aftermath of Neoliberalism.” Also see Benson, Fischer, and Thomas, “Resocializing Suffering,” for an argument that observes neoliberalism’s impact on the economy (focusing on market reforms such as the growth of the NTAX, the maquila sector, and IMF agreements) followed by popular protests, the rise of violence, and the turn to iron fist policies. Yet, while they note the impact of neoliberalism (and the misguided emphasis on gangs as the source of all problems), they conclude by emphasizing that contemporary violence cannot be explained absent an accounting of historical, societal, and structural factors that predate the neoliberal reforms outlined (esp. see page 40, 49, 50, in particular). In this regard, they too encourage us to look historically, which I do in the following section.

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indigenous  rights; outline ways of addressing socioeconomic and agrarian issues;21 among other issues); but this set of reforms was not about minimizing the role of the economic and social state institutions but of restructuring the coercive ones. Peace accords focused on restructuring the military and police, among other things – to get the military back in the barracks, to restructure the coercive institutions and personnel, and to prepare the country for a transition toward civilian-dominated politics. Third, while states were formally restructured to make them more democratic and accountable, coercive institutions were sticky and resistant to change. Human rights abuses declined, but these state institutions failed to protect citizens from the homicidal ecologies that took root. Complicity, corruption, and incapacity remained a core practice in these state institutions. The uneven outcome of peace accords (not just NLR) and the persistence of old institutions (and institutional practices) are key to understanding the contemporary states of the region. Without a radical break in personnel, institutional design, and norms, the reforms left in place institutions that enabled and abetted the growth of illicit economies and the associated development of homicidal ecologies in the region.22 part ii   guatemala and the

( un ) rule

of law

23

Given a history of military dictatorships, Guatemala’s state is often seen as synonymous with its coercive institutions. Indeed, during the prior authoritarian regime, the military penetrated many corners of the country, organized civil defense patrols (forcing the population to regulate itself), created model villages in the highlands where the insurgency was strongest, and unleashed widespread and unimaginable atrocities against its population.24 With a relatively underdeveloped set of economic and social institutions, the Guatemalan state was weighted toward the coercive. Contemporary democratization in Guatemala occurred in two rounds. The initial/formal transition to electoral democracy occurred in 1985–1986. Yet that transition to civilian rule was incomplete at best. The military did not readily cede power or follow/uphold the rule of law; widespread human 21

22

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For a discussion of the shortcomings and inequities of market-driven land reforms, which followed the 1996 Peace Accords in Guatemala, see Granovsky-Larsen, “Between the Bullet and the Bank” and “The Guatemalan Campesino Movement”; and Gauster and Isakson, “Eliminating Market Distortions.” See Yashar, Homicidal Ecologies, 52–4, for further discussion of why the literature on neoliberal reforms and violence is analytically suggestive (as it focuses on rising inequality, despair, a hollowed out state, and a turn to crime) but less compelling when it comes to explaining variation in homicidal violence in the Latin American region. See Méndez, O’Donnell and Pinheiro, The Unrule of Law. Many of these human rights abuses are documented in the digital archives of the Guatemalan National Police Historical Archive (https://ahpn.lib.utexas.edu/).

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rights abuses declined but did not disappear; and the regime did not uphold democratic rule of law projects. The subsequent 1996 peace accords, (often characterized as the more effective moment of democratization) ended the civil war but did not fundamentally remake the state. There was no radical break in institutions.25 Guatemala’s military maintained its reputation for human rights abuses, impunity, and corruption. Its courts have been severely hampered in their efforts to uphold the rule of law; and the same could be said for the prison system. The police are perhaps least understood in this process and yet formally tasked with monitoring domestic territorial space. I next discuss the police, military, and judicial system. The Police.26 The Guatemalan police have historically been an agent of violence, unpredictability, and corruption. During the authoritarian period, the police were subordinate to a military that engineered systematic human rights abuses. Military officers sometimes were directors and subdirectors of the police; sometimes officers were members of both the military and police; and the police had ties to paramilitary groups. With the transition to democracy in 1986, the military did not cede control over the police (although there were various unsuccessful efforts to do so).27 The police remained an unpredictable (and some would say disorganized) force to be feared rather than a force that offered protection. Moreover, human capital was low; while a 1977 law said that members of the police had to complete 6th grade and take a police training course, they rarely did even that.28 This history contrasts sharply with what we theoretically expect of the police, arguably the state agency most proximate to the people – street-level bureaucrats armed with guns who are supposed to know the law and track down those who break it.29

25

26

27 28 29

The historical institutionalism literature has argued that radical breaks are not the only way that changes comes about; reforms can also effect change over time (see Mahoney and Thelen, “A Theory of Gradual Institutional Change”). Notably, most of these discussions have focused on extant democratic regimes and have focused on the ability of civilian bureaucrats (and elected officials) to work within and around civilian institutions. Arguably (and worth further discussions) is the degree to which incremental reforms can culminate in meaningful changes within coercive institutions such as the police and military. Hunter, Eroding Military Influence in Brazil, suggests, based on her earlier work on the Brazilian military, that slow reforms can ultimately matter and endure. The Guatemalan police are unitary (with a single national police corps), a trait shared with police in Bolivia, Colombia, Cuba, Ecuador, El Salvador, Haiti, Nicaragua, Panama, Paraguay, Peru, the Dominican Republic, Uruguay and Venezuela (see Casas, González, and Mesias, Police Transformation in Latin America, 7, 9–10). Glebbeek, “Police Reform and the Peace Process,” 431–37. Glebbeek, 444. See Lipsky, Street-Level Bureaucracy, for a discussion of street-level bureaucrats. See Yanilda González’s 2014 dissertation, “State Building on the Ground,” for a discussion of the Latin American police as an example of street-level bureaucrats. Also see González, Authoritarian Police in Democracy.

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No clean institutional break occurred with the peace accords.30 This might seem a surprising claim since a new National Civilian Police (PNC – Policia Nacional Civil) was created with the 1996 peace accords, officially announcing various efforts to civilianize, professionalize, and increase police capacity. Even if the reforms removed the Guatemalan police from military control and enacted new educational requirements, in practice there was no major overhaul to replace underlying police institutions and personnel.31 “The Guatemalan government appears to have approached police reform more as a short-term political challenge rather than as a long term, institution-building effort crucial to the consolidation of democracy in Guatemala. Reform of the Guatemalan police forces was never easy because of their violent history, and the influence the army had in blocking important reforms. Although the Peace Accords provided an important framework and opportunity for actual reform, hardly any details were given as to how this reform should be implemented.”32

President Arzú, following the peace accords, chose to prioritize increasing the number of police officers, deployment throughout the country, and joint police-military patrols – all of which relied on extant resources and short-term fixes over deeper reforms to professionalize the military and engage in serious institution building.33 As such, the institutional and behavioral weight of the past remained: with a legacy of non-democratic institutions, lack of accountability to civilians, and 30

31

32 33

Police reform for the most extreme cases of police weakness, corruption, and complicity arguably requires clean breaks – with new institutions, a clear set of mandates (distinguishing between the police and military, as well as police and district attorney’s office), sanctioning mechanisms for rogue and corrupt agents, and arguably new personnel. Compromising on any of these listed changes increases the likelihood that old practices persist. It is not simply (or primarily) budgets or size that drive the outcome. Rather, it is a question of who is in office (new versus old personnel), sanctioning mechanisms, training, and mandates with defined role specification that clears the way for a force committed to policing. Otherwise, it is likely that past practices will persist. See Yashar, Homicidal Ecologies, Part III. Also see Jose Miguel Cruz, “Criminal Violence and Democratization in Central America,” which makes a parallel argument about the legacies of state formation (although he theorizes these reforms as part of democratization) and emphasizes that corruption remains endemic in these institutions in much of Central America. The persistence of institutional weakness and individual corruption (by petty and high-ranking officers) is rampant. See Ruhl, “The Guatemalan Military,” on the peace accords and their impact on the military. Also see Glebbeek, “Police Reform and the Peace Process in Guatemala.” Moran, “El Salvador and Guatemala,” and Stanley, The Protection Racket State, have argued that the strength of organizations coming into the peace accords affected the depth of the reform agenda – going further in El Salvador, which had strong political associations on the left and right, than in Guatemala, where the military predominated in the context of a weakened left/ URNG and a powerful economic elite (albeit one without a serious political party). Moran indicates that this affected the depth of the reforms and the weakness of what followed in Guatemala. Glebbeek, “Police Reform and the Peace Process,” 451. Glebbeek, “Police Reform and the Peace Process.”

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recycling of agents from one coercive branch to another. There was no effort to dismiss prior police officers (many of whom had been involved in the most atrocious human rights abuses during the military period). And the Spanish Civil Guard (based on an assistance program signed with the EU in 1996) assumed the role of training and advising the new force.34 By 1999, some 73% of the Guatemalan police were filled with members of the former national police.35 The peace accords did not fundamentally restructure the police, nor did it create a more capable police force. A government-UN-Danish study reported on several deficiencies in the police.36 The Guatemalan press summarized some of these issues as an inability to combat organized crime, low trust, and a precarious administration – featuring, in particular, the low capacity of the Investigation Department (Academia de Investigaciones) to fight organized crime and the ongoing connections between Civil Intelligence and the Old Military Intelligence.37 The press generally reported on the police’s low capacity – including insufficient police agents and resources to meet the demand;38 a lack of “special forces” police; insufficient technology; insufficient data; lack of inter and intra-departmental coordination; lack of helicopters in the Department of Antinarcotics Operations (DOAN); and lack of anti-riot technology.39 In 2000, Prensa Libre reported that the “PNC is impotent in fighting crime,” a statement supported by quotes from the PNC director, Rudio Lecsan. “We haven’t been able to consolidate a PNC capable of resolving security problems.”40 Academics also commented on this weak capacity, including an interview with security expert Gabriel Aguilera

34 35 36

37 38

39

40

Interview with an anonymous source from US Embassy (August 4, 2006; Guatemala City, Guatemala); Glebbeek, 438; Moran, “El Salvador and Guatemala,” 47. Moran, “El Salvador and Guatemala,” 49. The 1999 study was jointly conducted by Guatemala’s Ministry of the Interior (Ministerio de Gobernación), the UN Mission (Misión de Naciones Unidas para Guatemala/Minugua) and the Danish Center for Human Rights (Centro Danés para los Derechos Humanos). “PNC acepta debilidades,” Prensa Libre, March 20, 2000. In Escuintla, one article reports on the insufficient number of investigators to cover the rise in violence. See “Clima de inseguridad agobia a escuintlecos,” La Prensa Libre 2000.2.17. In San Marcos, the PNC also complained of insufficient agents per capita – “Disminuye seguridad,” La Prensa Libre 2000.12.14. The institutional weight of the past has arguably provided obstacles to achieving the police mandate. Birgit Gerstenberg, head of the Proyecto de la Academia de la Policía Nacional Civil, PNC, as part of the Misión de Naciones Unidas para Guatemala/Minugua noted that the peace accords required a “recycling” of security personnel, without which there would have been 12,000 unemployed police officers. Nonetheless, the old security forces that remained were not unencumbered but rather encumbered those who might have wanted to achieve reform. As Julio Arango Escobar (PDH) put it: “La intromisión de las fuerzas militares perdura, y por ello las autoridades deben ponerle fin al problema, pues nos hace retroceder en la justa aplicación de la justicia.” See “PNC se encuentra dividida,” La Prensa Libre 2000.4.6. “PNC Impotente en combate del crimen,” La Prensa Libre (7/11/00).

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Peralta, who noted a decade after the peace accords that the PNC had low capacity as indicated by low levels of entry, low academic training, and limited resources – alongside a state penetrated by organized crime.41 Indeed, the police have been far from a professional organization. Educational requirements for the Police Academy have been low (after the civilian police were formed, they were raised from 6th to 9th grade completion). Yet, it does not seem that the educational requirement was always met by incoming recruits or that those admitted had passed the entrance exams.42 In WOLA’s study of four Central American police forces (Guatemala, El Salvador, Honduras, and Nicaragua), Guatemala’s stood out as the only one without a formal police career law:43 “Corruption, political interference, and nepotism” has plagued the nominations and promotion process, there has been a shortage of mid- and high-career officers, and there has been a continual change in the high command, according to WOLA.44 Turnover rates have been a serious issue, moreover.45 In turn, the police have not delivered on their basic ability to pursue cases. Guatemala’s homicide clearance rate has been shockingly low (in a region whose homicide clearance rates are already among the lowest in the world).46 Actual conviction rates are presumably even lower;47 UNODC Crime Trends Survey reported the following convictions rates – a low in Guatemala (6% in 2009) and El Salvador (2% in 2006) in contrast to Costa Rica (46% in 2006)48 – calculated as a share of all cases brought before the court.49 Figure 5.2 reveals that conviction rates have improved slightly over time, but remain far behind the 41 42 43 44 45

46

47 48 49

Interview with Gabriel Aguilera Peralta, July 28, 2006. Glebbeek, “Police Reform and the Peace Process,” 444, 448. Washington Office Latin America (WOLA), Serve and Protect?, 17–8. WOLA, Serve and Protect?, 17–8. During the presidency of Alfonso Portillo (2000–2004), there were eight police directors and three interior ministers; during the presidency of Oscar Bérger (2004–2008), there were three police directors and three interior ministers; and during the presidency of Alvaro Colom (2008–2012), the pattern continued (WOLA, Serve and Protect?, 18). Homicide clearance rate is the percentage of recorded crimes for which a suspect is identified. Based on data for 11–14 countries in 2007–8 and 2011–2012 data, one can see striking regional disparities. Latin America has an estimated homicide clearance rate around 50% (conviction rate of 24 per 100 victims), compared to Europe’s homicide clearance rate of around 85% and an estimated global average homicide clearance rate of 60% (based on 41–60 countries, with a conviction rate of about 43 perpetrators per 100 victims) (UNODC, Global Study on Homicide 2013, 18, 92). In an early report, Guatemala came in at 7% compared to El Salvador’s 44%, Nicaragua’s 81% and Costa Rica’s 82% (United Nations Office on Drugs and Crime, Crime and Development in Central America, 31–31). Also see Brannum, “Guatemala 2018,” 267. United Nations Office on Drugs and Crime, Transnational Organized Crime in Central America and the Caribbean, 77. United Nations Office on Drugs and Crime, 77. Interview with anonymous source from US Embassy (August 4, 2006; Guatemala City, Guatemala). This source also estimated that the prosecution rate is less than 3% (i.e., that

Convition Rate (convictions/100,000 pop.)

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CONVICTION RATES BY COUNTRY FOR CITIZENS (ADULTS) IN CENTRAL AMERICA AND MEXICO, 2003–2016 (RATE PER 100,000 FOR ALL CRIMES) 350 300 250 200 150 100 50 0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: UNODC 2018

Costa Rica

El Salvador

Guatemala

Mexico

Nicaragua

Panama

Honduras

figure 5.2  Conviction rates by country for citizens (adults) in Central America and Mexico, 2003–2016 (rate per 100,000 for all crimes) Notes: “Persons Convicted” refers to “Persons found guilty by any legal body authorized to pronounce a conviction under national criminal law, whether or not the conviction was later upheld. Persons receiving a sentence after plea-bargaining, or in an abbreviated court procedure, should be counted as persons convicted. The total number of persons convicted should also include persons convicted of serious special law offences but exclude persons convicted of minor road traffic offences, misdemeanors and other petty offences.” (According to UNODC data accessed July 2020). https://dataunodc .un.org/data/crime/Persons%20convicted. Graph updated by Diana Sandoval Simán in July 2020. New graph based on the 2018 UNODC dataset entitled “Criminal Justice System Process: Persons convicted counts and rates per 100,000 population” available at https://dataunodc.un.org/data/crime/ Persons%20convicted. Accessed July 2020. Original graph created by Daniela Barba-Sánchez using Stata. Data available at: www .unodc.org/unodc/en/data-and-analysis/statistics/crime.html (accessed on September 17, 2014). According to data accessed in 2014, changes in definitions and/or counting rules are reported by Panama to indicate a break in the time series.

less than 3% of 225,000 cases reach the public prosecutor’s office/ministerio público); the source elaborated that less than 3% file formal complaints and of these less than 1% are prosecuted; it was estimated that homicides have a resolution rate of less than 5%. While these numbers are not corroborated, they feed into the generalized sense among experts working in this area that the homicide clearance rate, prosecution rate, and resolution are paltry.

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rest of the region. And, even while homicide rates have declined since 2009, arrest and conviction rates remain low:50 “CICIG reported in 2015 that the impunity rate for homicide was close to 95% (CICIG 2015).”51 Low homicide clearance rates and poor investigation have also been noted with respect to concerns of femicide.52 In turn, the press reported that the state seems to have little interest in resolving these crimes, in some cases blaming the victim and their families.53 Alongside professional incompetence, the police are often considered among the most corrupt sectors of society – including by United Nations Agencies and NGOs working in Latin America.54 In a comparative study of Central American police, WOLA55 found that Guatemala’s police force were severely lacking (as were the forces in El Salvador and Honduras) – penetrated by organized crime, lacking in internal discipline and accountability, among other indicators. While initially modeled after the Spanish Civil Guard model (from where most funding emanated), the police disciplinary model was reformed in 2003 (with help from MINUGUA, international aid agencies, and members of civil society). Yet even with these changes, WOLA found that the police were still penetrated (or influenced) by organized crime; riven by corruption; and engaging in serious human rights abuses. “The inability to monitor and control the police is due in large part to the weakness of internal control mechanisms and the lack of real support from police leadership.”56 Police records (which presumably underreport the level of the problem) indicate that in 2003, there were almost 1600 complaints of serious criminal activity and/or infractions by the police, ostensibly affecting some 12% of the Guatemalan police force; of these complaints, 33% were not investigated; 55% were investigated but found inconclusive; leaving just 12% remaining.57 In this context, around 60% of the population perceives the Guatemalan police as involved in crime – among the highest in the region (Figure 5.3). 50 51

52

53

54 55 56 57

Brannum, “Guatemala 2018,” 267. Brannum is citing: CICIG. Sistema de la mediación de la impunidad en Guatemala. Comisión Internacional Contra la Impunidad en Guatemala, 2015. Retrieved 14 August 2019 from https://cicig.org/uploads/documents/2015/Docto_SisMedImp_20160414.pdf. Also see Taft-Morales, “Guatemala: Political and Socioeconomic Conditions,” 7 for a discussion of how CICIG’s assistance to the Public Ministry coincide with increased conviction rates. As Figure 2 shows, however, the rates still remain strikingly low. UNODC reports on homicide by sex of victim in their online dataset – although it does collect data on femicide, in particular. See https://dataunodc.un.org/data/homicide/Homicide%20 rate%20by%20sex. “Suspenden licencias para armas ofensivas,” La Prensa Libre, 2005.2.17. “Ni protección ni justicia,” La Prensa Libre, 2005.6.10; and Azam Ahmed, “Women are ­Fleeing Death at Home. The U.S. Wants to Keep Them Out.” New York Times, Aug. 18, 2019. www.nytimes.com/2019/08/18/world/americas/guatemala-violence-women-asylum.html. See UNODC, Crime and Development in Central America, 30, citing Transparency International’s Global Corruption Barometer (2005) and WOLA, Serve and Protect?. WOLA, Serve and Protect?. WOLA, Serve and Protect?, 22. WOLA, Serve and Protect?, 22.

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figure 5.3  Belief that police are involved in crime (2004–2014). Source: LAPOP Data 2004–2014 Core Data. Specific country data for years 2010 and 2014. Research by Yanilda González and Daniela Barba-Sánchez. Graph prepared by Daniela Barba-Sánchez using Stata.58 NB: This question was posed in only three cases in the 2016/2017 LAPOP questionnaire. It was not asked in 2018.

Stepping back, these observations underscore the high levels of distrust, a lack of serious investigation, and a climate of perceived impunity. While the Office of Professional Responsibility saw its staff reduced by almost half between 2004 and 2006, there has been a practice of transferring police to other units rather than pursuing investigations of them; and when cases are sent to the Ministry of the Interior, the courts rarely prosecute them.59 58

Question AOJ18 in LAPOP 2004–2012 Codebook (Merged Datasets): “Some people say that the police in this community (town, village) protect people from criminals, while others say that the police are involved in the criminal activity. What do you think? (1) Police protect or (2) Police involved in crime (3) [Don’t Read] Doesn’t protect, but is not involved in crime or protects and is involved in crime (8) DK/DR.”   The data for 2014 comes from the specific country questionnaires for Argentina and El ­Salvador, and from the 2013 questionnaire for Colombia, given that the survey question was not included in the core questionnaire in 2014. The wording of the question was consistent across questionnaires. 59 WOLA, Serve and Protect?, 22–3.

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A high-profile incident in 2007 placed the police’s shoddy record in sharp relief. In that year, police officers were not only implicated in gunning down three Salvadoran politicians traveling by car on the Pan-Am Highway (these Salvadoran politicians were themselves suspected of involvement in the drug trade) but then these same police officers were also detained and gunned down a few days later in a Guatemalan, maximum security prison, where they were awaiting investigation.60 This scandal led to a round of resignations and police reforms. Some 3,000 officers were dismissed within the next year; efforts were made to improve discipline; but WOLA61 notes that officers have rarely been subject to criminal investigation – with dismissal serving as the more likely penalty. While dismissal can act as a deterrent for some, it is not a particularly harsh measure. Yet some concluded that this incident lay bare the evident ties between top state officials in the police and Interior Ministry (Ministerio de Gobernación), a pattern that was not new in the country.62 Overall, despite some institutional reforms, there is no doubt that throughout the 1990s and 2000s, police corruption, criminality, and complicity have been ongoing issues – including at the highest levels.63 Police brutality and criminality are also an issue. In the context of calls to purge the National Civil Police (PNC), the country’s Human Rights Prosecutor (Procurador de los Derechos Humanos/PDH) stated that “53.44% of the violations of fundamental rights were committed by actors (elementos) in the PNC in 1999.”64 Off-duty police officers are also reportedly engaging in violent crimes; a series of 2000 newspaper articles reported on police involvement in attacking armored trucks (Santa Rosa); hold ups (Petén), extortion (Petén), and carrying pistols off duty.65 Over the years, many articles have highlighted other cases of police complicity.66 Police crime and corruption, thus, are widespread and have sparked complaints lodged with the Human Rights Prosecutor (PDH) and occasional purges (a pattern also found in the military) for crimes that included corruption, extortion, kidnapping, assault, drug trafficking, homicides, and rape.67 Police involvement in crime, in fact, has been so pervasive that the National

60 61 62 63 64 65

66 67

This incident was reported in all the papers. For a succinct overview, see WOLA, Serve and Protect?, 23. WOLA, Serve and Protect?, 23. Ranum, Street Gangs in Guatemala, 76. WOLA, Serve and Protect?, 30. “Piden depuración de PNC,” Prensa Libre, 2000.3.23. “Policías de día, pillos de noche,” Prensa Libre, 2000.11.26. Also see the following Prensa Libre articles for reporting on similar sorts of incidents: “Depurarán la PNC,” 2000.1.26; “Piden depuración de PNC” 2000.3.23; “Siguen abusos de policías,” 2000.4.15; “Policías de día, pillos de noche,” 2000.11.26; “Sindican a PNC en hechos criminales,” 2000.9.9; “Policía descarta ‘limpieza social,’” 2000.5.18. See for example, www.prensalibre.com/pnc-esta-calada-por-criminalidad, August 17, 2015. See for example, “Destituyen a 542 policías,” La Prensa Libre, 2005.1.6; “Delinque el 20% de agentes de la PNC,” La Prensa Libre, 2005.8.12.

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Civil Police created a unit (La Unidad Multidisciplinaria) in 2005 to investigate these issues, with the director stating (aware of at least three “bandas” operating within the police): “It is not anything new, and we know that we have to combat it.”68 Acknowledging the depth of the problem, then Chief of Police Erwin Sperisen (the National Civil Police director) indicated that 20% of police officers were involved in crime, leading to the dismissal of 500 agents in that year alone (reported in August 2005).69 Disciplinary orders, problematic mindsets, and poor resources were also problems identified by the Police Chief.70 Sperisen starkly noted the overall inability of the police to do its job. Let me give you but one clear example: in the United States, bank security experts tell banks that if they come to assault you, don’t put up a fight, because there is a 98 percent chance that the criminal group will be caught. Here what they say is that you should not let them enter and that you should defend yourself in any way you can, because we are not going to catch them … why? Because we do not have the tools, we are a Police without resources. Tools don’t only include people but also technology, legislation, and investment.71

Chief of Police Sperisen’s comments are striking, given his own sordid trajectory. Appointed in 2004, Sperisen fled in 2007 to Switzerland, where he has dual citizenship. He in turn was arrested in Switzerland in 2012 for violent criminal acts, based on investigations by CICIG (Comisión Internacional Contra la Impunidad en Guatemala). He was charged with involvement in overseeing the 2006 extrajudicial killing of prisoners at El Pavón Prison by security forces – reportedly to take the prison back from the gangs. However, CICIG also suggests that he was part of a criminal organization, along with former Minister of the Interior, Carlos Vielman. Former prison system director Alejandro Giammattei was also implicated (although that did not stop him from running four times for president – a run that was successful on August 11, 2019).72 The accused “formed part of a criminal organisation based in the interior ministry and civil police that was dedicated to extrajudicial executions of people detained in

68

69 70 71 72

“Siguen abusos de PNC en la capital,” La Prensa Libre, 2005.7.11; “Investigan a policías por hechos delictivos” La Prensa Libre, 2005.7.26; “Capturan a banda de policías,” La Prensa Libre, 2005.7.24. “Delinque el 20% de agentes de la PNC,” La Prensa Libre, 2005.8.12. “Policía en democracia,” La Prensa Libre, 2005.7.16; Erwin Sperissen: “Una policía sin recursos,” La Prensa Libre, 2005.4.17. Erwin Sperissen: “Una policía sin recursos,” La Prensa Libre, 2005.4.17. BBC News, Latin America and Caribbean. “Switzerland arrests Guatemala ex-police chief Sperisen.” www.bbc.co.uk/news/world-latin-america-19445049 (accessed on August 18, 2013). Also see El Periódico, April 15, 2013 “Declaran testigos en caso contra Sperisen, V ­ ielmann y Figueroa” www.elperiodico.com.gt/es/20130415/investigacion/226941/ (accessed on August 18, 2013); and Prensa Libre June 12, 2011, “Cierran proceso contra el exministro Carlos Vielman” www.prensalibre.com/noticias/Cierran-proceso_0_604139597.html (accessed on August 18, 2013).

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­ risons,” CICIG [UN-backed international commission against impunity in Guatep mala] said in a statement. The group was also involved in other crimes including ‘murder, drug trafficking, money-laundering, kidnapping, extortion and the theft of drugs’, it further alleged. Among the accused are the former interior minister Carlos Vielman and former prison service director Alejandro Giammattei – a losing candidate in the 2007 presidential election. The international commission against impunity in Guatemala was set up by the UN in 2006 to help Guatemala reform its justice system and confront organised criminal gangs that have infiltrated the state.73

In 2014, Sperisen was sentenced in Switzerland to life in prison for the extrajudicial killing of seven prisoners at El Pavón, although the CICIG report suspected high-level criminal activities across the board.74 The Guatemalan state, in short, has a police force that has proven incapable of policing itself and the territory that it is supposed to protect. In this regard, it also has not achieved effective territorial reach.75 A senior Guatemalan official acknowledged its own problem with state weakness when the Ministry of the Interior (Gobernación) identified 58 municipalities as “ungovernable” or “without police presence.”76 In short, while Guatemala’s police force wields arms, it lacks the kind of organizational competence, territorial reach, professionalism, and integrity to maintain law and order across the country. While it polices in a post-military period, it has not developed the kind of democratic policing and capacity that one would have hoped with the transition to electoral rule and subsequent peace accords. As such, there has been latitude for illicit activity within its own ranks and among entrepreneurial actors eager to take advantage of illicit markets. So too, we have seen the rise in a wide range of alternative forms of security to fill the void – including private security firms for those who can afford to pay for them, community policing, and even vigilante groups.77

73 74 75

76 77

BBC News, Latin America and Caribbean. “Switzerland arrests Guatemala ex-police chief Sperisen.” www.bbc.co.uk/news/world-latin-america-19445049 (accessed on August 18, 2013). BBC News, “Guatemala ex-police chief jailed for life by Swiss court.” www.bbc.com/news/ world-europe-27740109 June 6, 2014 (accessed online on 2/19/2015). As Michael Mann (1984) theorized and many others have noted, the actual infrastructural power of the state varies considerably within their own territories – a point highlighted in O’Donnell’s 1993 discussion of brown areas in Latin America and further conceptualized and studied by a newer wave of important scholarship (Soifer and Vom Hau, “Unpacking the Strength of the State”; Soifer, State Building in Latin America; and Giraudy and Luna, “Unpacking the State’s Uneven Territorial Reach”, among others). While it is relatively easy to note where the police are not present, identifying its poor performance and/or complicity is much more difficult. United Nations Office on Drugs and Crime, Transnational Organized Crime in Central America and the Caribbean, 67 (quotes in UNODC text). See Arias and Ungar, “Community Policing and Policy Implementation”; Frühling, “A Realistic Look at Latin American Community Policing Programs”; Bateson, Security from Below; and González, State Building on the Ground.

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Military and Police: Unclear Boundaries. The police’s poor record has been troubled, moreover, by poor role specification78 vis-à-vis the military.79 Formally, since the peace accords, the military and police have been institutionally separate; military officers cannot command police units and the police are not subordinate to the military institutional structure.80 In practice, however, the boundaries between these institutions have not always been clear – not least since the military has ultimate authority to maintain Guatemala’s internal security, and military intelligence trains the police’s criminal investigation service.81 According to WOLA, the police/military divide is often merged; the military has been brought in to redress citizen security issues – generally seen as a domestic issue that forms part of the police mandate – particularly since the police have proven incompetent. Then President Portillo announced in March 2000, for example, that the army would join the National Civil Police (PNC) in public security “due to the PNC’s incapacity to confront organized crime and delinquency.”82 The incorporation of the military is fraught. The military entered the democratic period with a powerful, coercive branch with a long history of human rights abuses.83 Accordingly, the peace accords ostensibly sought to reform the 78 79

80 81 82

83

Withers, Santos, and Isaacson, Preach What You Practice; Casas, González, and Mesías, Police Transformation in Latin America, 10. Role specification requires that the police know its mandate and that the boundaries of the job are clearly defined. Unfortunately, police functions in Latin American countries have been neither clearly defined vis-à-vis the military (Withers, Santos, and Isaacson, Preach What You Practice) nor vis-à-vis the attorney general’s office (in terms of investigative responsibilities, for example). Withers, Santos, and Isaacson identify this poor role specification when they observe that a) governments (including United States aid programs) have not historically built up Latin American police forces, which have taken a back seat to the military as a coercive institution; b) that there is a not a bright line to demarcate military and police functions in all cases, save in Argentina, Chile and to a lesser degree in Uruguay; and that therefore the military has assumed (to varying degrees) many police functions in Mexico, Central America, the Andes, and Brazil. Ruhl, “The Guatemalan Military,” 74–5. Ruhl, 74–5. “Seguridad: Preocupa a diputados participación militar,” La Prensa Libre, 2000.5.27. Also see “Ejército dará seguridad ciudadana,” La Prensa Libre, 2000.5.25; and “Seguridad: Pobre inicio,” La Prensa Libre, 2000.6.18. The Guatemalan military governed (often very coercively) for most of the 1954–1985 period. It formally relinquished power in 1985 when President Vinicio Cerezo was elected. However, no one doubted that it maintained significant autonomy and authority over this very weak civilian president, as human rights abuses continued (as did the civil war). The 1996 Peace Accords provided another formal change that reduced and constrained the military’s power as it also ended the civil war that had raged for decades. Following the peace accords, institutional changes took place, although many former human rights abuses remained in office and/or maintained influence. Ruhl recounts that President Portillo (the second president following the peace accords) reportedly was counseled by former military officers who had been identified with past human rights abuses (at the time president of legislature, General Ríos Montt; and General Ortega Menaldo); and alleged collaboration with the Moreno gang’s criminal activities (General Ortega Menaldo; Colonel Jacobo Esdras Salán and Major Napoleón Rojas – all of whom had been dismissed by prior president for their alleged activities) (Ruhl, “The Guatemalan Military,” 68–9).

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military and police in line with the demands of a democratic society.84 Yet, both institutions have been roundly criticized. In the post-civil war period, human rights abuses have been an issue and impunity has largely reigned. Charges of corruption, complicity, and incompetence, moreover, have been pervasive. Yet the military (including both active duty and retired military personnel) have remained largely immune from prosecution and were not held accountable to the rule of law.85 Thus, while its brute force signaled strength, its conduct signified a riddled institution open to capture and profit-seeking. Reports and purges highlight the pervasiveness of the problem during this period (a possible legacy of the military period itself).86 Discipline, accountability, and honesty have been severely lacking in the military. The military has been subordinated to civilian rule and yet sustains significant autonomies and immunities – including limited civilian involvement in, or supervision of, military affairs and lack of fiscal clarity or accountability.87 The administration of President Oscar Berger, faced with this problem, forced early retirement on 500 military officers and significantly reduced its size to 15,500.88 Even so, the military’s integrity has consistently been called into question with charges of complicity and corruption. Given this checkered history, it is striking that presidents have continued to rely on the military for domestic “security.” It is not just that the military has consistently violated and stood above the rule of law, but that it is also not trained to address domestic policing. Accordingly, some military officers stated that the military was not prepared to fight organized crime or delinquency and

84

85 86

87 88

For example, President Arzú asserted civilian control over the military as he took office and during the peace accords (in part because of a discredited military and increasing elite autonomy from it). Of the reforms implemented, reductions in military size and budget decreased by an estimated one-third – with the Congress gaining control over defense spending (Ruhl, “The Guatemalan Military,” 60–1). Four military zones and 35 garrisons were closed (Ruhl, “The Guatemalan Military,” 61) – decreasing their bases in the countryside; and the president tried to decrease military jurisdiction by holding military men accountable in civilian courts, although the courts did not convict any military officers of serious crimes before Ruhl’s report was published (Ruhl, “The Guatemalan Military,” 61, citing Spence 1998). However, many other substantive reforms did not take place – with the military still playing a key role in gathering domestic intelligence (as opposed to developing the primacy of a civilian intelligence agency); and keeping some military institutions intact (i.e., EMP); no civilian was named as defense minister; and human rights impunity remained an issue (see Ruhl, “The Guatemalan Military,” 60–1, 79). Ruhl, “The Guatemalan Military,” 77–8. Some suggest that this pattern of corruption predates the democratic period (Peacock and Beltrán, Hidden Powers in Post-Conflict Guatemala; Moran “El Salvador and Guatemala,” 9). Moran argues: “During the period of internal conflict, the military regime in Guatemala relied more than the Salvadoran military on drugs and illicit activity to fund counterinsurgency activities.” Ruhl, “The Guatemalan Military,” 65, 79. Ruhl, 79–80.

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that they preferred to leave this responsibility to the police.89 Nonetheless, subsequent Guatemalan presidents have relied on the military to aid the police in the fight against organized crime and delinquency. Rather than restricting the military’s role, in some cases, presidents increased it. President Portillo, for example, expanded missions and increased the military budget beyond previously agreed upon limits.90 Thus, Guatemala’s military started to patrol civilian tasks – a job generally seen as the professional responsibility of the police. President Berger announced that the police patrols would be joined by an increased number of army personnel – with priority given to Guatemala City, Petén, Izabal, Zacapa, Santa Lucía Cotzumalguapa, San Marcos and the borders. To guard against abuses, he noted that the Human Rights Attorney General’s Office (Procuraduría de los Derechos Humanos, PDH) would accompany the patrols.91,92 This blurring of military-police lines also occurred in El Salvador as the government devised its strategy to deal with increased violence.93 The Judicial System. Weak police capacity also finds echo in a weak judicial system. While numbers increased for judges and courts (the number of judges doubled between 1994 and 1995 and over 100 new courts were created after the peace accords), institutional capacity remained compromised: insufficient budgets, low salaries, and incomplete training were all obstacles, as was minimal judicial independence and charges of complicity.94 Moreover, it is commonly recognized that the courts have historically been severely compromised by the inability of the state to protect judges, prosecutors, and witnesses (a point made by Ruhl specifically when noting how difficult it has been to prosecute military men charged with past human rights abuses).95 CICIG (The International Commission against Impunity in Guatemala – discussed further below) also documented the lack of state response to violent crimes: “Of some 50,000 crimes reported per month in 2010 only 429 were solved, resulting in an astonishing impunity rate of over 99 percent.”96 These data coincide with a widespread perception that impunity reigns high.97 The U.S. Assistant Secretary of State for the Western Hemisphere Affairs 89

90 91 92 93 94 95 96 97

Ruhl, “The Guatemalan Military,” 67, citing interviews with General Julio Balconi, former Minister of National Defense; General Marco Tulio Espinosa, former Minister of National Defense; and scholar Guillermo Pacheco. Also see Rachael Sieder et al., Who Governs, 41. Ruhl, “The Guatemalan Military,” 71–2. “Presentan nuevo plan de seguridad,” La Prensa Libre, 2005.7.26; “Elaboran plan para ­combatir el crimen,” La Prensa Libre, 2005.7.24. “Medidas contra la inseguridad,” La Prensa Libre, 2005.7.18. Yashar, Homicidal Ecologies, Chapter 6. Kitroeff, “Touching the ‘Untouchables’,” 53, drawing on Sieder. Ruhl, “The Guatemalan Military,” 78. Kitroeff, “Touching the ‘Untouchables’,” 7. There are innumerable examples of concerns about impunity. For example, see “Crímenes en la impunidad,” La Prensa Libre, 2005.1.6; and “Muertes, sin castigo,” La Prensa Libre, 2005.5.18.

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Ambassador Otto J. Reich testified before a congressional committee and indicated: there were increased signs of the participation of clandestine groups in illegal activities linked to employees of the Public Ministry, military intelligence, justice system, and police. These groups appear to act with relative autonomy, and while there was no evidence that they were part of government policy, they did operate with impunity.98

The courts generally also exhibited poor performance. One study found a 10% response rate (of any kind) to cases reported to the judicial system in 2002 and hearings occurred in only 1% of cases of “crimes against life” in 2005.99 Another estimate suggests that of 5,338 reported cases, only 115 successful murder prosecutions took place, which is just over 2% of cases; as they concluded: “In such a climate, the deterrent effect of the law is minimal.”100 Even with the creation of a prosecutor’s office for homicides (Fiscalía de Delitos contra la Vida) to address murders in the Department of Guatemala (not including Mixco, Villa Nueva, San Juan Sacatepéquez and Amatitlán), there remained a paltry record; by mid-2005, charges were made in less than 2% of the homicide cases in the Department of Guatemala (40 out of 2,397, since the creation of the office), according to newspaper reporting.101 With no capacity to protect witnesses, people would not testify, according to the prosecutor. “Let God be the one to judge, since I don’t want to lose more children,” said one victim’s mother.102 With such low performance rates, the courts and prosecutors were hardly serving justice or playing a deterrent role. Other state and professional agencies have also commented on the prevalence of impunity in the court system. The Human Rights Prosecutor (Procurador de los Derechos Humanos), Sergio Morales, stated that only one percent of crimes were resolved (of the 64,000 crimes that were committed each year).103 Of those crimes that were resolved, some complained that judges let the criminals go free.104 The International Commission of Jurists (Comisión Internacional de Juristas, CIJ) also reported that the justice system was riddled with problems, including the lack of investigation, process of appointing judges to cases, threats to judges, impunity, and near absence of sentencing 98 99

100 101 102 103

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Peacock and Beltrán, Hidden Powers in Post-Conflict Guatemala, 8. Levenson, Adiós Niño, 49, citing S. Ramírez and Claudia Paz, Diagnóstica de conflictividad local en la pos-guerra. Guatemala City: Instituto de Estudios Comparados en Ciencias Penales de Guatemala, 2002. United Nations Office on Drugs and Crime, Crime and Development in Central America, 31. “Muertes, sin castigo,” La Prensa Libre, 2005.5.18. “Muertes, sin castigo.” Also, see “Antejuicio por no investigar muertes,” La Prensa Libre, 2005.10.14, for a discussion of the lack of murder investigations. Sergio Morales: “Violencia es una amenaza,” La Prensa Libre, 2005.8.14. In this article, the reporter remarked, “Hay una percepción de la población de que la PDH defiende delincuentes,” and the Procurador replied that that is an understandable impression to have. “Preocupa libertad de delincuentes,” La Prensa Libre, 2005.2.15.

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(only 3% of complaints presented to the Ministerio Público were taken as far as sentencing).105 It is not just that there is intimidation of the members of the courts, it is that there is widespread corruption and impunity, as highlighted by both a UN Special Rapporteur and an InterAmerican Commission on Human Rights of the OAS.106 The scope of judicial incapacity is also highlighted by the difficulty of protecting judges and finding judges willing to serve in high-conflict areas. Judges are themselves victims of homicide, placing obvious challenges for those judges remaining on the bench or those asked to serve; not only have many judges feared for their lives but also those overseeing high-profile cases find it difficult to issue rulings and sentences.107 These have been issues particularly in places holding trials for drug trafficking.108 The President of the Tribunal de Alto Impacto, Carlos Guillermo Sosa, remarked: “We give thanks because they have not captured the leaders of the drug cartels, because I doubt that anyone could protect us.”109 Solving cases and issuing sentences is thus more than a procedural act of justice; sometimes, prosecutors and judges have themselves become victims in this process. Thus, the police’s low homicide clearance rate echoes the courts limited ability to judge.110 As Mayra Alarcón, from the renowned Myrna Mack Foundation, stated regarding the state in general, “there is no institutionalization…. No institutionality … the message is that there is a lack of certainty regarding the value of the rule of law. There is a subliminal message of total, extrajudicial insecurity.”111 In this context, we should perhaps not be surprised by Celvin Galindo’s declaration that “people in the Ministerio Público are afraid to talk.”112

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109 110

111 112

“Justicia está en crisis,” La Prensa Libre, 2005.8.6. This point was also cited in an interview with an anonymous source from US Embassy (August 4, 2006; Guatemala City, Guatemala). Peacock and Beltrán, Hidden Powers in Post-Conflict Guatemala, 43. See for example, La Prensa Libre articles in 2005 about murders in San Marcos and Chiquimula, respectively. “Jueces solicitan seguridad” (2005.4.27); “Temor a ser juez en Chiquimula” (2005.5.25). Also see “Jueces y fiscales ven mensaje en últimos atentados” (2005.5.19); and “Conocen amenazas de maras contra jueces” (2005.6.29). See, for example, “Temor a ser juez en Chiquimula” (La Prensa Libre 2005.5.25). In May 2005, the assassination of a high court judge in Chiquimula made it difficult to fill the post – with four lawyers declining the request to do so. The article highlighted how consequential and challenging this post was, in particular, given that it tried many high-profile cases (including drug trafficking charges) from the departments of Zacapa, Petén, and Izabal. These are also the departments that have had the highest death rates in the country – demonstrating both high demand but also potentially high risk. “Jueces y fiscales ven mensaje en últimos atentados” (2005.5.19). Interview with anonymous source from the US Embassy (August 4, 2006; Guatemala City, Guatemala) found similar patterns in the public prosecutor’s office (Ministerio Público), including a situation of overworked and under-resourced staff, incompetence and/or corruption. Interview with Mayra Alarcón, Myrna Mack Foundation, August 3, 2006. Interview with Celvin Galiindo, Fiscal Jefe de la Fiscalía, August 2006.

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Impunity … no longer refers to the lack of accountability for crimes committed during the civil war. The contemporary type of impunity has to be seen as a symptom of weak state structures because the judiciary, in the context of organized crime, is not capable of processing cases and prosecuting crimes (WOLA, 2007, pp. 7ff).113

Two developments, however, suggest some institutional progress in the 2000s: the formation and operation of CICIG (UN-established independent international body, forged in response to a government request for assistance, that investigated corruption and impunity in the state);114 and the appointment of renowned legal scholar and human rights activist, Claudia Paz y Paz, as Guatemala’s Attorney General (serving from 2010 to 2014). Both are impressive advances that are a sobering reminder of the structural obstacles to judicial reform. CICIG had been lauded for working to hold corruption to account (and served as an institutional model for Honduras). According to The International Crisis Group, CICIG helped train police officers and prosecutors; was involved in high-profile court cases; helped pilot reforms (including witness protection programs); helped establish high-risk crime courts and a special prosecutor’s office against impunity; and helped oust corrupt police officers, judges, among others. ICG argues that CICIG helped to reduce violence and increased homicide clearance rates during its mandate. As such, over time CICIG’s profile increased – although not without significant political opposition from the presidency.115 In this context, Claudia Paz y Paz initiated a widely celebrated, and yet short-lived, pursuit of justice. During her term, “the country witnessed record-breaking sentences that increased the country’s ability to reach justice in cases of violence and grave human rights violations. As the first Guatemala law enforcement office to pursue high-ranking combatants of the civil war for war crimes, she engaged in significant institution building (also creating stronger ties with CICIG). During this period, there was the successful conviction of high-ranking members of the military and of the former President Efraín Ríos Montt for crimes against humanity.”116 These were notable advances. However, these actions did not endure. Ten days later, the 113 114

115

116

Maihold, “Intervention by Invitation?,” 7. For a description of the agency (from the perspective of different moments in its institutional arc), see www.un.org/undpa/es/node/183334. Also see Isaacs, “Guatemala on the Brink”; Torres Rivas, “Guatemala: la corrupción como crisis de gobierno”; Maihold, “Intervention by Invitation,” and Brannum, “Guatemala 2018”. Also see International Crisis Group, Saving Guatemala’s Fight Against Crime and Impunity. See International Crisis Group, Saving Guatemala’s Fight, where they report that CICIG’s work corresponded with a decline in homicide rates, a significant rise in the resolution of homicide cases, and other institutional reforms to rout out corruption and crime. They arrived at this conclusion based on interviews and a synthetic control analysis. For a summary of these events, also see www.crisisgroup.org/latin-america-caribbean/central-america/guatemala/ curtain-falls-guatemalas-international-commission-against-impunity. See www.cejil.org/en/claudia-paz-y-paz-assumes-program-leadership-cejils-central-america-andmexico-office (accessed on August 18, 2019).

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Ríos Montt ruling was overturned by the Constitutional Court, and Paz y Paz was forced out of office within the year.117 Some have appropriately credited her (along with CICIG) with shining a stronger spotlight on government corruption, which subsequently and dramatically catalyzed “the avalanche of corruption scandals that shook the political foundations of her native Guatemala” and contributed to the groundswell that cut short the terms of then-President Otto Molina and his Vice President Roxanna Baldetti (both of whom ended up in prison).118 Yet, corruption still remains endemic in the country.119 The subsequent President, Jimmy Morales, was charged with corruption; he completed his term but not before forcing out CICIG (and its leader), responsible for levying the charge (see Brannum120 for an accounting of Morales support and the opposition to CICIG, especially once it started to investigate his family).121 Revisiting State Complicity and Corruption. In short, weak state capacity in law and order institutions is manifest in the police, military, courts, as well as other state institutions. This has created a propitious context for the growth of illicit actors and activity. This includes illicit activity within the state. We know that former and current military officials have themselves become involved in illicit activity. During the civil war, military officers among others not only became vested in the formal economy (the military had its own bank, which was subsequently absorbed by the Banco del Crédito Hipotecario Nacional in the early 2000s) but also started to engage in organized crime – including arms, drugs, money laundering, car theft, etc.122 While CICIG was momentarily able to play a critical role in holding some of these institutions and actors to account, its own success was apparently its undoing. In this context, state weakness and complicity have been endemic in Guatemala’s rule of law institutions – as well as among the highest elected offices – and have continued, even with the transition to electoral politics. As Karin Wagner from the research think tank, Asíes noted in 2006 when talking about law and order in Guatemala, “There is no respect for institutions.”123 Sadly, this statement still seems to ring true. ***

117

118 119 120 121 122 123

See www.cejil.org/en/claudia-paz-y-paz-assumes-program-leadership-cejils-central-america-andmexico-office (accessed on August 18, 2019). Also see www.insightcrime.org/news/analysis/ claudia-paz-y-paz-and-the-revolution-she-started-in-guatemala/ (accessed on August 18, 2019). See www.insightcrime.org/news/analysis/claudia-paz-y-paz-and-the-revolution-she-startedin-guatemala/ (accessed on August 18, 2019). See Torres Rivas, “Guatemala: la corrupción como crisis de gobierno”; Brannum, “Guatemala 2018.” Brannum, “Guatemala 2018.” See Freeman, “Ending Impunity,” for a comparative discussion of Guatemala and Peru’s efforts to end impunity and tackle grand corruption. Peacock and Beltrán, Hidden Powers in Post-Conflict Guatemala; Kitroeff, “Touching the ‘Untouchables’,” 49. Interview with researcher, Karin Wagner, Asíes, August 3, 2006.

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The comparative historical record leaves one with little optimism about the Guatemalan state and its ability to provide rule of law – even after the end of the civil war and implementation of the peace accords. In this context, the institutions have done little to govern effectively or to hold public officials to account. Politicians have occasionally responded with preventative declarations.124 More common, however, we have witnessed relative impunity coupled with hardline rhetoric, as with former President and former General Otto Pérez Molina. Yet Pérez Molina’s policy stance reveals Guatemala’s deep and underlying challenges. For while Pérez Molina first campaigned on hardline policies to crack down, he subsequently joined other Latin American leaders in the notable effort to spark discussions about decriminalization or legalization of parts of the drug trade. Pérez Molina’s ability to pursue such a track was undermined by his own corruption. In 2015, he submitted his resignation following rising protests and inquiries by the UN-backed International Commission Against Impunity in Guatemala (CICIG) into his leadership role in a multi-million-dollar, customs fraud scheme. While CICIG’s historic role is striking, so too is the corruption through the state. Pérez Molina’s now infamous downfall stands alongside former President Portillo who was extradited to the United States for his role in money laundering125 and President Jimmy Morales (who assumed office in an anticorruption move against Pérez Molina and left office having been investigated by CICIG, with Morales retaliating by ordering out the head of the unit). In the ultimate ironic tragedy, President Giammattei (elected in August 2019) was himself implicated in an earlier scandal investigated by CICIG. He expressed no intention of bringing back CICIG, whose term ended in September 2019.126 As this chapter closes, “rule-of-law backsliding” continues with news about nefarious and corrupt efforts to appoint judges, followed by dubious efforts to dismiss four Constitutional Court judges who have previously sided with anti-corruption efforts.127 With leaders like this, and law and order institutions with such a paltry record, it is evident why Guatemala does not seem safe to Guatemalan citizens. Indeed, state complicity, corruption, and weakness have allowed illicit 124

125 126 127

The press reports that previous Guatemalan presidents did occasionally also call for some degree of prevention. See “Ex pandilleros comparten su experiencia,” Prensa Libre, 2005.5.31; “Clamor por seguridad,” 2005.5.27; “Deporte en lugar de maras,” 2005.7.8; “Educación física y extraescolar para prevenir maras,” 2005.6.20; “Prevención del delito,” 2005.6.15; “Prevención y no mano dura,” 2005.6.23. See New York Times May 25, 2013 and May 28, 2013. Torres Rivas, “Guatemala”; TaftMorales, “Guatemala: Political and Socioeconomic Conditions.” See New York Times: www.nytimes.com/2019/08/11/world/americas/guatemala-election.html (accessed on August 16, 2019). See Will Freeman. “#CortesNoMafias: Guatemala’s Constitutional Court under attack.” July 6, 2020. Accessed on July 7, 2020: https://theglobalamericans.org/2020/07/cortesnomafias-guatemalasconstitutional-court-under-attack/

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economies to flourish – with a significant presence for DTOs and violent gangs. Where these organizational actors compete to control these illicit territorial spaces, violence and insecurity have become an everyday occurrence.128 It is this dynamic that has shaped a homicidal ecology, one that has helped to propel the homicidal violence patterns in Guatemala and elsewhere in the region; one that motives Guatemalan citizens to flee north, in hopes of finding safety and even protection; one that inspires activists to keep on fighting to hold state officials to account.

5.1  conclusion :

liberalism

–

neo and otherwise

Liberalism and Guatemala. The two terms have historically been in tension and remain so. The late nineteenth century Liberal period was led by a string of coercive dictators that relied on an unprofessional, if aggressive, military to advance agro-export interests and restrict the individual rights of citizens (especially indigenous peasants who were subject to debt peonage among other forms of subjugation). The mid-twentieth century was punctuated by a democratic decade (1944–1954) where liberal and collective rights were advanced; and the state was professionalized (including the military, although not the police). However, the “ten years of spring” were interrupted and followed by an increasingly repressive period – including civil war, extensive human rights abuses, and the return of military dictators. This is the state that Guatemalan possessed as it confronted the third wave of democracy. While the subsequent peace accords celebrated individual political rights and put the military officially back in the barracks, the underlying state was liberal in name only; the state remained coercive, corrupt, and saddled by a weak rule of law. And the political party system remained weak (with ephemeral and poorly organized political party organizations) and low societal trust in them.129 In other words, there has been no sustained partisan organization (with clear structures and programmatic positions) to mediate between states and citizen in the realm of formal politics It is in this context that regional neoliberal reforms were advanced. However, neoliberalism as a project did not fundamentally remake the Guatemalan state (as it did in so many other places) as much as become a new moniker to define the Guatemalan state’s already limited role in advancing industrial and social policies. At present, the Guatemalan state continues to support agro-export (now including non-traditional crops/NTAX) as well as other elite projects. It continues to rely on the combined actions of the police and military to address organized crime and gangs, and yet these same institutions are often complicit and/or incapable of addressing these challenges.

128 129

Yashar, Homicidal Ecologies. Isaacs, “Guatemala on the Brink.”

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The devastating irony is that Guatemala in the twenty-first century lacks a state that protects the most basic of rights (liberal or otherwise) – freedom from harm. Guatemalans might no longer harbor the same deep-seated fears that the state will repress them, as throughout much of the twentieth century; however, they continue to fear that the state will not protect them. It should then be no surprise that citizens of Guatemala (as well El Salvador and Honduras) have fled north – not only for economic reasons but also fundamentally to flee homicidal ecologies that define daily life; and to find a more secure life. According to the Pew Research Center, in 2017, the United States was home to some 1.4 million Guatemalans (including both immigrants and those of Guatemalan descent).130 The political farce is unfolding, and Guatemalans (as well as Salvadoran and Hondurans) are getting caught in an institutional matrix where the formal rules profess a commitment to liberalism, but they are belied by not only an illiberal practice but also a corrupt and violent one. “Guatemala cannot even provide protection to its own citizens,” said Eleanor Acer, the senior director for refugee protection at Human Rights First. “It’s ridiculous to suggest that Guatemala can also provide protection to large number of migrants from other countries.”131

As I finish this chapter, I continue to contemplate a series of stories about violence in Guatemala and the challenges of going north. One NYT story covers femicide in Guatemala (even worse in El Salvador and Honduras), the lack of justice for its victims and their family, and the challenges of going north. Fleeing perpetrators, one UN official states: “Despite the risk associated with migration, it is still lower than the risk of being killed at home,” said Angela Me, the chief of research and trend analysis at the “United Nations Office on Drugs and Crime.”132 Echoing those sentiments, Lubia Sasvin Pérez, a victim of domestic violence whose partner, in turn, murdered his mother, concluded: “Here in Guatemala,” she said, “justice only exists in the law. Not in reality.” This is the state of the state in Guatemala. Violence might take different forms. Homicide rates might fluctuate. The unrule of law, however, continues to characterize much of the Guatemalan state.

130

131

132

Luis Noe-Bustamante, Antonio Flores and Sono Shah. “Facts on Hispanics of Guatemalan origin in the United States, 2017.” www.pewresearch.org/hispanic/fact-sheet/u-s-hispanicsfacts-on-guatemalan-origin-latinos/. Michael D. Shear and Zolan Kanno-Youngs, “Trump Officials Argued Over Asylum Deal With Guatemala. Now Both Countries Must Make It Work.” New York Times, August 2, 2019. www.nytimes.com/2019/08/02/us/politics/safe-third-guatemala.html. Azam Ahmed. “Women Are Fleeing Death at Home. The U.S. Wants to Keep Them Out.” New York Times. August 18, 2019 www.nytimes.com/2019/08/18/world/americas/guatemalaviolence-women-asylum.html (accessed on August 20, 2019).

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Ranum, Elin Cecilie. “Street Gangs in Guatemala.” Edited by Thomas Bruneau eds., Lucía Dammert, and Elizabeth Skinner. Maras: Gang Violence and Security in Central America. University of Texas Press, 2011. Rasch, Elisabet Dueholm. “Transformations in Citizenship: Local Resistance against Mining Projects in Huehuetenango, Guatemala.” Journal of Developing Societies 28, no. 2 (2012): 159–84. https://doi.org/10.1177/0169796X12448756. Robinson, William I. “Maldevelopment in Central America: Globalization and Social Change.” Development and Change 29, 3 (1998): 467–97. Robinson, William I. “Neoliberalism, the Global Elite, and the Guatemalan Transition: A Critical Macrosocial Analysis.” Journal of Interamerican Studies and World Affairs 42, no. 4 (2000): 89–107. https://doi.org/10.2307/166343. Ruhl, Mark J. “The Guatemalan Military Since the Peace Accords: The Fate of Reform Under Arzú and Portillo.” Latin American Politics & Society 1, no. Spring (2005): 55–85. Schirmer, Jennifer. The Guatemalan Military Project: A Violence Called Democracy. Philadelphia: University of Pennsylvania Press, 1999. Sieder, Rachael. Who Governs? Guatemala Five Years After the Peace Accords. Cambridge: MA Hemispheres Initiative, 2002. Soifer, Hillel. State Building in Latin America. Cambridge: Cambridge University Press, 2015. Soifer, Hillel, and Matthias Vom Hau. “Unpacking the Strength of the State: The Utility of State Infrastructural Power.” Studies in Comparative International Development 43, no. 3 (2008): 219–30. Stanley, William Deane. The Protection Racket State: Elite Politics, Military Extortion, and Civil War in El Salvador. Philadelphia: Temple University Press, 1996. Taft-Morales, Maureen. “Guatemala: Political and Socioeconomic Conditions and U.S. Relations.” Congressional Research Service Report R42580, 2018. Tilly, Charles. Coercion, Capital, and European States, 990–1990. Oxford: Blackwell, 1990. Tilly, Charles. The Politics of Collective Violence. Cambridge: Cambridge University Press, 2003. Torres Rivas, Edelberto. “Guatemala: la corrupción como crisis de gobierno.” Nueva Sociedad 257, no. July-August (2015): 4–15. Traub-Werner, Mario, and Altha J. Cravey. “Spatiality, Sweatshops and Solidarity in Guatemala.” Social & Cultural Geography 3, no. 4 (2002): 383–401. https://doi .org/DOI: Uildriks, Niels, ed. Policing Insecurity: Police Reform, Security, and Human Rights in Latin America. Lanham, MD: Lexington Books, a division of Rowman Littlefield, 2009. Ungar, Mark. “Police Reform, Security, and Human Rights in Latin America: An Introduction.” In Policing Insecurity: Police Reform, Security, and Human Rights in Latin America, edited by Niels Uildriks. Lanham, MD: Lexington Books, a ­division of Rowman Littlefield, 2009. Ungar, Mark. Policing Democracy: Overcoming Obstacles to Citizen Security in Latin America. Baltimore: Johns Hopkins University Press, 2011. Ungar, Mark. “Prisons and Politics in Latin America.” Human Rights Quarterly 25, no. 4 (2003).

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United Nations Development Program (UNDP). Guatemala. Informe Nacional de Desarollo Humano, 2005. United Nations Development Program (UNDP). Informe estadístico de la violencia en Guatemala. Guatemala City: Magna Terra Editores, 2007. United Nations Office on Drugs and Crime (UNODC). Crime and Development in Central America: Caught in the Crossfire. New York, NY: United Nations Publication, 2007. United Nations Office on Drugs and Crime (UNODC). Global Study on Homicide: Executive Summary. Vienna: United Nations, 2019. United Nations Office on Drugs and Crime (UNODC). Global Study on Homicide 2013: Trends, Context, Data. New York: United Nations, 2014. United Nations Office on Drugs and Crime (UNODC). Global Study on Homicide: Homicide, Development and the Sustainable Development Goals. Vienna: United Nations, 2019. United Nations Office on Drugs and Crime (UNODC). Global Study on Homicide. Trends, Context, Data, 2011. United Nations Office on Drugs and Crime (UNODC). Statistics on Criminal Justice, 2014. “www.unodc.org/unodc/en/data-and-analysis/statistics/crime.html” www.unodc.org/unodc/en/data-and-analysis/statistics/crime.html. United Nations Office on Drugs and Crime (UNODC). Transnational Organized Crime in Central America and the Caribbean: A Threat Assessment. Vienna: UNODC, 2012. United Nations Office on Drugs and Crime (UNODC). World Drug Report 2014. New York: United Nations, 2014. Washington Office on Latin America (WOLA). Serve and Protect? The Status of Police Reform in Central America. Washington, D.C, Washington Office on Latin America, 2009. Washington Office on Latin America (WOLA). “Youth Gangs in Central America: Issues in Human Rights, Effective Policing, and Prevention.” A WOLA Special Report. Washington, DC: Washington Office on Latin America, 2006. Withers, George, Lucila Santos, and Adam Isaacson. Preach What You Practice: The Separation of Military and Police Roles in the Americas. Washington, DC: Washington Office on Latin America, 2010. Woodward, Ralph Lee. Central America, A Nation Divided. 3rd ed. New York & London: Oxford University Press, 1999. Woodward, Ralph Lee. “Guatemala: Year in Review.” In Encyclopedia Britanica, 2008. “www.britannica.com/EBchecked/topic/1493276/Guatemala-Year-In-Review-2008? anchor=ref1014352” www.britannica.com/EBchecked/topic/1493276/Guatemala-YearIn-Review-2008?anchor=ref1014352. World Bank. Crime and Violence in Central America. Vol. 1. Washington, D.C: World Bank Sustainable Development Department and Poverty Reduction and Economic Management Unit Latin America and the Caribbean Region, 2010. World Bank. Crime and Violence in Central America. Vol. 2. Washington, D.C: World Bank Sustainable Development Department and Poverty Reduction and Economic Management Unit Latin America and the Caribbean Region, 2010. World Health Organization, World Report on Violence and Health. Geneva: World Health, 2002.

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Yashar, Deborah J. Contesting Citizenship in Latin America: The Rise of Indigenous Movements and the Postliberal Challenge. Cambridge: Cambridge University Press, 2005. Yashar, Deborah J. Demanding Democracy: Reform and Reaction in Costa Rica and Guatemala, 1870s-1950s. Stanford, Calif: Stanford University Press, 1997. Yashar, Deborah J. Homicidal Ecologies: Illicit Economies and Complicit States in Latin America. Cambridge: Cambridge University Press, 2018. Yashar, Deborah J. “Institutions and Citizenship: Reflections on the Illicit.” In Shifting Frontiers of Citizenship: The Latin American Experience, edited by Mario Sznajder, Luis Roniger, and Carlos A. Forment. Leiden and Boston: Brill, 2013. Yashar, Deborah J. “The Left and Citizenship in Latin America.” In Latin America’s Left Turn: Political Diversity and the Search for Alternatives, edited by Kenneth Roberts Eds. and Steven Levitsky. Baltimore: Johns Hopkins University Press, 2011. Youngers, Coletta A., and Eileen Rosin, eds. Drugs and Democracy in Latin America: The Impact of U.S. Policy. Boulder, Colo: Lynne Rienner Publishers, 2005. Ziegler, Melissa, and Rachel Nield. “From Peace to Governance: Police Reform and the International Community.” Washington, D.C: Washington Office on Latin America (WOLA), 2002.

Part III

INFRASTRUCTURAL POWER: REFORM STRATEGIES

6 Two Roads of Neoliberal Reform in Higher Education Past Policy Decisions Establishing Today’s Type of Reforms in Peru and Chile Eduardo Dargent Bocanegra and Gabriela Camacho Garland

6.1  introduction Among the countries that adopted neoliberal reforms in the 1980s and 1990s, Chile and Peru stand out as cases in which deep reforms drastically changed the institutional landscape and society. Their reforms share many similarities. Indeed, Chilean reforms of the 1980s were frequently used as a blueprint by Peruvian reformers of the 1990s – their purported success was cited to justify the need for similar measures in Peru.1 The university system was no exception. Both countries underwent higher education reforms inspired by neoliberal principles, Chile in 1981 and Peru in 1996. These neoliberal reforms promoted the creation of private universities on the understanding that competition for resources and students would ameliorate the academic quality of the system as a whole and respond more aptly to society’s demand for professionals.2,3 In Chile, the role of the public system as a service provider shrunk in percentage terms, and in Peru, liberalization was seen as a part of the “growth solves everything” neoliberal creed. Beyond the similarities, the two reform projects also had differences: the motives, policy design, and forms of implementation were distinct. In Chile, the military government aimed to weaken the public universities, perceived as hotbeds of socialism. To this end, the junta stressed the reform of the public system based on neoliberal principles, stimulating participation in a free market. Over time, the state promoted access to private universities through state-sponsored loans and credit amid a more comprehensive process of policy implementation. In Peru, the reform was guided by fiscal concerns and the bankrupt state’s need to attract investment. It left the public system untouched, 1 2 3

Weyland, Bounded Rationality. Colclough, “Education and the Market.” Cuenca and Reátegui, “La (incumplida) promesa universitaria.”

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allowing private for-profit universities to live side by side with their public and private non-profit counterparts. These policies did nothing to create state-sponsored incentives for student recruitment to private higher education. State capacity also played a role in the two divergent reform trajectories, although not in the crucial way that would be expected by the academic literature. In Peru – a country ranked low for state capacity in comparative regional studies – the reform failed to develop a proper institutional regulatory framework, leading to very low levels of quality in private higher education. And in Chile, higher levels of state capacity did not exempt it from its own serious problems of quality and inadequate regulation – albeit to a lesser degree. Several Chilean private universities found ways to profit even though this was explicitly outlawed. These outcomes show that the effective regulation of strong private actors providing public services is a challenge even for developing states with higher levels of state capacity. These differences were what led to distinct outcomes and grievances in each country and partly explain the different counter-reforms witnessed in recent times. The Chilean experience was characterized by bottom-up protests for higher education reform that aimed to guarantee more equality in the public system, better quality and cost-free access to higher education, and greater control of private actors. Current and former students from within the higher education system, indebted and dissatisfied, became crucial actors in the broader social movement demanding the reform of neoliberal policies in Chile.4 In Peru, the counter-reform was essentially top-down, focusing on the creation and strengthening of regulatory institutions to ameliorate quality in public and private universities with little involvement of former or current students. In both cases, despite the differences, neoliberal policy feedback processes help explain why the outcomes remain very much part of the neoliberal framework. The article proceeds as follows. First, in a brief theoretical section, we present neoliberal policy feedback, a brief summary of higher education neoliberal reform in both countries, and the relevance of state capacity for the outcomes under consideration. Then, to understand how the neoliberal state worked in higher education, we describe said systems before the neoliberal reforms, the motives behind the reforms implemented in both countries, as well as the similarities and particularities. In the third section, we show how feedback effects transformed higher education in particular ways: new state institutions, private providers, and interest groups emerged; old and new actors gained or lost strength, sometimes in unexpected and different ways than originally designed. Finally, in the last section, we show how these dynamics help to explain the counter-reform efforts in both countries and their limits. To do this, we rely on qualitative interviews conducted in both countries, as well as relevant legislation. We conclude with some general lessons about neoliberal policy effects and some practical lessons for policy reformers. 4

Disi, “Sentenced to Debt.”

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By discussing the determinants, trajectories, and failed promises of neoliberal higher education reform, in this article, we touch on critical issues related to the impact of neoliberal reforms on the state and society in Latin America. The effects of these reforms drastically changed power constellations in both countries, showing that private actors in higher education prove difficult to regulate even in developing states with higher levels of state capacity like Chile. But when coupled with low levels of state capacity, as in Peru, such weak or inexistent regulation can lead to very low-quality levels. Furthermore, these outcomes constitute a new landscape for policy reformers interested in achieving better outcomes in higher education. The shortcomings of higher education before neoliberalism were many, and neoliberal reformers were right in pointing out several of their inefficiencies. Nonetheless, the neoliberal reforms failed to live up to their supposed benefits, showing that private actors have limitations in their provision of certain public goods and that they can bring new problems to the table. In turn, this shows the importance of states being capable of regulating private parties before completely liberalizing their systems.

6.2  neoliberal

policy feedback and state capacity

A growing literature on comparative politics highlights how policy feedback effects help to explain the resilience of neoliberal reforms in Latin America.5 A policy feedback approach points to how the selection and design of certain policies have effects on subsequent political processes; or, to put it more simply, on how “policies make politics”.6 This policy feedback perspective emphasizes the role played by rules and policies adopted during a certain period as generators of permissive or restrictive conditions for future political developments, including, in some cases, reproduction mechanisms that precipitate difficult-to-break trajectories.7 In the words of Pierson,8 “policies provide incentives that encourage individuals to act in ways that lock in a particular path of policy development … [leading to] elaborate social and economic networks, greatly increasing the cost of adopting once-possible alternatives and inhibit exit from a current policy path.” Policies make politics through different mechanisms. First, they provide resources and incentives for the emergence, strengthening, or weakening of interest groups that become defenders or opponents of the policy, pushing for its dismantling or its continuation.9 Second, they produce administrative

5

6 7 8 9

Arce, “The Politics of Pension Reform in Peru”; Ewig and Kay, “Postretrenchment Politics”; Madariaga, “Mechanisms of Neoliberal Resilience”; Bril-Mascarenhas and Maillet, “How to Build and Wield Business Power”; Maillet, “Variedades de Neoliberalismo.” Pierson, “When Effect Becomes Cause,” 596–97; Pierson, Dismantling the Welfare State. Weir, “When Does Politics Create Policy?” 172; Pierson, Dismantling the Welfare State. Pierson, “When Effect Becomes Cause,” 606, 608. Pierson, “When Effect Becomes Cause,” 599–603; Skocpol Protecting Soldiers and Mothers, 59.

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reforms within the state structure, as specialized personnel and resources are required for policy implementation, conditioning the capacity of these areas to promote the new policies10 and prompting the emergence of bureaucratic lobbies that aim to expand them.11 Third, policies have informational effects on elites. When the policies fail, these elites opt for new alternatives. When they are successful, the elites will aim to replicate them (a process called policy learning).12 Fourth, policies have an impact on political participation, as policy beneficiaries, or those affected by these policies, develop a civic identity and collective interests that other groups do not possess.13 The “first wave” of policy feedback literature focuses on how welfare reforms created or benefited organizations and interest groups that in the 1980s were key to resisting neoliberal efforts to retrench the state.14 The “second wave” of the literature centers on neoliberal or retrenchment policy feedback in terms of how similar feedback mechanisms account for the resilience of neoliberal policies. Specifically, in this second wave, more prominence is given to the role played by private providers of public services as stakeholders interested in policy continuity or even in deepening their original benefits.15 As a result of the reforms, business actors increase their structural and instrumental power and thus strengthen their position to influence and affect public policy.16 In our two cases, reformers believed that competition and private providers would be a salutary addition to the higher education system. From their perspective, competition and the market would promote a virtuous circle of quality enhancement and more flexible adaptation to society’s professional demands. According to Cuenca and Reátegui,17 Peruvian neoliberal reformers believed that the reforms would have the following positive impacts: expansion of the educational offer and thus coverage; democratization of university access; and effective regulation by the market. The same applies to Chile. Although the Chilean reform stemmed from three different groups inside the authoritarian regime – interventionists, reformers, and neoliberals18 – all of them expected that competition would improve the quality of university education by creating markets of professors and students.19 10 11 12

13 14 15 16 17 18 19

Skocpol, Protecting Soldiers and Mothers, 58–9. Béland, “Reconsidering Policy Feedback,” 4. Hall, “Policy Paradigms, Social Learning, and the State”; Ewig and Kay “Postretrenchment Politics”; Dargent, Technocracy and Democracy in Latin America; Schmidt and Thatcher, “Theorizing Ideational Continuity,” 35; Beach, Schäfer & Smeets, “The Past in the Present.” Campbell, How Policies Make Citizens; Campbell, “Policy Makes Mass Politics”; Schmidt and Thatcher, “Theorizing Ideational Continuity,” 34–6. Pierson, “When Effect Becomes Cause.” Ewig & Kay, “Postretrenchment Politics,” 71–2; Arce, “The Politics of Pension Reform in Peru.” Fairfield, Private Wealth and Public Revenue in Latin America; Culpepper, Quiet Politics and Business Power. Cuenca and Reátegui “La (incumplida) promesa universitaria en el Perú,” 7. Orellana and Miranda, “La mercantilización de la educación en Chile,” 104–6. Brunner, “Educación superior en Chile,” 2, 14.

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Going against the optimistic view of the neoliberal reformers, research on the topic shows that private actors can also bring about severe deficiencies in the services they target and create new problems. According to this literature, and with particular reference to the topic under study, private actors who benefit from the reforms can take advantage of weak states or permissive regulations. These actors can alter policies to their advantage or capture state actors to align a policy more closely to their interests – usually associated with profitmaking, at the expense of the public good or the original content of the policies.20 By looking at two key moments in the history of higher education in two countries in the region – a first neoliberal transformation and a subsequent reform – we want to highlight how the policy decisions that led to the first transformation created a policy feedback process that limited the subsequent ability of both Chile and Peru to reform their higher education systems. Previous research on various countries has highlighted the negative effects of market mechanisms on Latin American higher education systems or, at least, significant divergences from the reformers’ original goals. The new private institutions created by the reforms frequently provided low-quality education and taught degree programs that maximized their gains while acting in complicity with states to enhance their profits, sometimes in corrupt ways.21 Martins22 and Rodríguez Ponce23 show how private actors grew in importance in Brazil and Chile, respectively, and how they shaped policies to their advantage and in ways that did not conform to the original goals of the reform. Although it is not our intention to provide an assessment of the shortcomings of neoliberal higher education, it is clear that many of the proposed solutions failed, that the reform brought new problems, and that Latin American higher education systems have been profoundly changed by the emergence of forprofit private universities. As mentioned, in both Chile and Peru, new and influential private actors in higher education emerged to entrench the reforms, influence state actors, and oppose regulation. Furthermore, the institutions that conducted these reforms became quite instrumental in all subsequent attempts at modification. But the processes reveal quite distinct trajectories. As noted, these differences are explained by the motives behind the reforms, as well as their design and their implementation. In Chile, the policies were more comprehensive and were implemented according to their initial design to foster private universities and make all universities, including public ones, compete under market conditions. This

20 21

22 23

Arce, “The Politics of Pension Reform in Peru.” Disi “Sentenced to Debt”; Disi, “Policies, Politics, and Protests”; Benavides, León, Haag & Cueva, “Expansión y diversificación de la educación superior,” 13–5; Martins, “Reconfiguring Higher Education in Brazil”; Mönckeberg, El negocio de las universidades en Chile; Rodríguez Ponce, “La educación superior en Chile y el rol del mercado.” Martins, “Reconfiguring Higher Education in Brazil.” Rodríguez Ponce, “La educación superior en Chile.”

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included, over time, state-sponsored loans for students attending university, creating a strong interest group that later supported protests against the system. These policies triggered a political problem since some private universities were considered to be second-class in comparison with other institutions, leading to dissatisfied graduates whose degrees did little to help them pay back their loans.24 While most of the literature on neoliberal policy feedback has focused on how these feedback effects support the continuity of neoliberal reforms by strengthening private actors, the Chilean case shows how these effects also contribute to creating interest groups that push for reforms of neoliberal policies. In Peru, the neoliberal reforms were less comprehensive and did not touch the public system, allowing it to live side by side with for-profit private universities. Since no comprehensive policies to enhance private provision were implemented, current and former students lacked an issue around which to coalesce. These policy effects also depend on another important variable that contributes to shaping the distinct social and political outcomes of new rules and policies: state capacity. States with greater capacity can be expected to be more successful in implementing policies and correcting unexpected policy outcomes. Much of the time, policy regulations in developing countries are not implemented properly. This “implementation gap”25 tends to be particularly wide in developing states with low levels of capacity, where policies are frequently designed without due evaluation of the real possibilities of state implementation. Our cases show the relevance of state capacity to understanding these divergent outcomes, as well as some commonalities that call into question the extent to which private actors are regulated. While Chile tends to be ranked among the strongest states in Latin America, Peru is often placed near the bottom.26 The Peruvian reform and its outcomes show a clear “worst-case scenario” of neoliberal feedback with little or no control over private actors. In Peru, state weakness caused many things to go wrong with the reform, most notably the growth of myriad low-quality universities focused on profit rather than the high-quality provision of public goods, and these problems were not corrected during implementation.27 This case shows how weak states that are bad providers are also very likely to be bad regulators, letting the activity of private actors with considerable resources go uncontrolled. Nonetheless, Chile’s higher state capacity did not prevent strong private actors in that country from escaping state regulation and exercising influence over state actors. Although profit-making was explicitly forbidden in the Chilean 24 25 26 27

Disi, “Sentenced to Debt”; Disi, “Policies, Politics, and Protests”; Rodríguez Ponce, “La educación superior en Chile.” Grindle, “Governance Reform.” Kurtz, Latin American State Building in Comparative Perspective. Cuenca and Reategui “La (incumplida) promesa universitaria en el Perú”; Benavides et al., “Expansión y diversificación de la educación.”

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system, universities exploited different schemes to do just that while charging indebted students,28 and many of the newest among them were lacking in quality. State capacity may allow for better implementation and prevent extremely low levels of quality, but strong private actors were relevant in both countries to explaining the failed implementation and shortcomings of the reforms. In the rest of this article, we will discuss, in greater detail and with reference to the aforementioned two moments, how neoliberal higher education reforms in Chile and Peru produced feedback effects but with different consequences. To this end, we interviewed key public officers involved in higher education and reviewed public reports and legislation.

6.3  neoliberal reform in chile and peru : pre - and post - washington consensus In this section, we present the content of neoliberal reforms in Chile and Peru and the new institutional designs that these reforms created. In each case, we describe the higher education system before the reforms and show how the political context in which they were adopted – authoritarian and anti-communist Chile and economically bankrupt Peru – contribute to understanding the content of these reforms. 6.3.1 Chile Before the reforms introduced by Pinochet’s government in 1981, Chile’s University system was made up of what are still known as the CRUCH universities (Consejo de Rectores de Universidades Chilenas – Council of Presidents of the Chilean Universities). Today, the body unites twenty-nine of the country’s “traditional” universities, but to begin with, it was made up of eight core universities and their offshoots. CRUCH kept its status following the reforms, and only universities derived from those that predated 1981 could join and enjoy the same benefits. This special consideration versus other universities is reflected by the fact that to this day, only CRUCH institutions can receive direct public funding. Until 1981, CRUCH was at the heart of the higher education system in Chile; before the reforms of that year, the bulk of the budgets of these universities was covered by the state, and university education was largely free of charge.29 However, this did not mean that university education was universal, and universities were still very elitist.30 In general, universities had considerable autonomy, with little or any state direction or regulation. The Chilean university system underwent profound reform in 28 29 30

Mönckeberg, El negocio de las universidades en Chile. Brunner, “Educación superior en Chile,” 11. Orellana & Miranda, “La mercantilización de la educación en Chile,” 97; Sanhueza & Carvallo, “Conflictos y transformaciones en la educación superior,” 211.

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1967. University coverage expanded and the teaching faculties were subjected to a professionalization process. The reform movements called attention to the elitist foundations of university education and attempted to open the system up to the popular classes.31 During this period, between 1967 and 1973, higher education enrollment grew substantially. Universities remained autonomous, and the state’s role was restricted to authorizing the creation of new institutions.32 The relationship between the Chilean state and the university system changed drastically following the 1973 coup, as the new authoritarian government (1973–1990) saw universities as a hotbed of subversive Marxist activity. Universities were put under surveillance, public expenditure on university education dropped drastically, and educational institutions were called upon to self-fund, forcing universities, even the public ones, to start raising their own tuition fees.33 As part of these measures, a student loan system known as Crédito Fiscal Universitario was created, but the structure and the system remained untouched.34 In 1981, the authoritarian regime reformed the university system by changing its inherent logic and opening it up to the market. Many of these changes would be crystallized further through the Constitutional Organic Law on Education (LOCE) enacted days before Pinochet left office in 1990. But in 1981, the Interior Ministry had already issued the comprehensive framework needed to govern Chilean higher education.35 The authoritarian regime’s assessment of the university system concluded that the CRUCH apparatus had created a discriminatory situation whereby eight universities and their branches received public funds and prevented others from entering. According to the authoritarian regime, this constrained the freedom of teaching and amounted to the monopolization of the university system, preventing any competition among the existing universities; the result was that the state came under more pressure to generate more public resources instead of the universities competing with one another and thus improving their service. The reorganization of university education had to address two government concerns. First, the authoritarian government wanted to ensure that the university system operated according to its demands. Second, the government wanted to guarantee that universities operated according to the demands of a society that was beginning to function under market logic.36 In response to these perceived problems, the 1981 legislation37 declared universities to be non-profit,

31 32 33 34 35 36 37

Sanhueza & Carvallo, “Conflictos y transformaciones en la educación superior,” 215. Brunner, “Educación superior en Chile:,” 11. Bernasconi & Rojas, Informe sobre la educación superior en Chile, 16; Sanhueza & Carvallo, “Conflictos y transformaciones en la educación superior chilena,” 219. Brunner, “Educación superior en Chile,” 13. Ministerio del Interior, Declaración del Ministerio del Interior. Brunner, “Educación superior en Chile,” 16. Ministerio de Educación Pública de Chile, Decree- Law N 3.541.

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made it easier to create new ones, and explicitly forbade students and administrative employees from having the right to vote for the administrative bodies. The creation of a new university required the authorization of the ministries of the Interior and Education, as well as the supervision of a traditional, older university during its initial years of operation. This atomized the public system, splitting the public universities from their offshoots.38 The guiding principle of this reform was the liberalization of markets and the provision of incentives to private universities to participate in these markets.39 But market liberalization remained incomplete, and although creating a new university was rather straightforward, new universities still required the explicit permission of the Interior Ministry to do so. This, as noted, was because the dictatorship was deeply worried about the political activity it suspected was taking place inside universities.40 The two most important changes introduced by the reforms were the provisions made for new universities and the alterations to the university funding system. The direct funding universities received from the state was slowly transformed into indirect contributions, tied to attracting the best 20,000 students in Chile. Any university created after 1981 would only receive this indirect contribution and no other public funding. Competing for students thus became a central function for universities. At the same time, the government started cutting public funding for existing universities (the CRUCH universities). The reform stipulated that universities charge students tuition fees, to be set by the institutions themselves. It also explicitly eliminated free-of-charge university education, labeled a “demagogic costume”41 that concealed the fact that the whole community ended up paying for it. These changes redrew the entire higher education system and planted the seeds of a neoliberal system, with minimal state involvement in service provision and a free market to stimulate competition. The government created “fiscal university loans” and incentives to stimulate demand for higher education.42 Afterward, students were compelled to repay these loans. Those who could not obtain loans through their universities but who fulfilled the requirements for doing so received guarantees from the state so that they could obtain loans from the banking and financial system. These loans, despite being reformed over time to further enhance demand, remained a central plank of the Chilean university system and were at the core of the students’ disillusionment that led to the demonstrations of the 2000s.43 38 39 40 41 42 43

Sanhueza & Carvallo, “Conflictos y transformaciones en la educación superior chilena,” 218. Brunner, “Educación superior en Chile,” 14. Interview with Chilean Education expert 2019. Ministerio del Interior, Declaración del Ministerio del Interior, 46. Rodríguez Ponce, “Pensadores y forjadores de la universidad en el Perú,” 128–9. Disi, “Sentenced to Debt”; Disi, “Policies, Politics, and Protests.”

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As has been well documented, the so-called Chicago Boys44 played a crucial role during the dictatorship, extending a highly unregulated market logic into all aspects of society. The two coexisting trends – interventionist and neoliberal – produced a system in which the free market would regulate higher education. However, it was not until 1990, when the authoritarian regime ended, that a completely liberal system took hold in higher education. Of the thirty-six universities founded between 1981 and 2007, twenty-one were created after the “No” vote had won the referendum in 1988 – the defeat of the authoritarian regime that ushered in the democratic transition. Over the years, once the authoritarian regime fell and thus the government’s interest in controlling educational content dwindled, the role of the Chilean state was restricted to the provision of student loans to boost competition. In Peru, a concern with market competition was also present but, as we shall see next, the path of policy design led to different outcomes. 6.3.2 Peru In the years before the reform, the public university system in Peru was in chaos. The degradation of academic quality started in the 1960s. At that point, similarly to Chile, the university system was small and elitist, so it would be unfair to contrast its quality with the system that subsequently ensued with all its challenges. Mass enrollment coupled with low budgets were central to the severe decline in academic quality. Moreover, during the 1970s and 1980s, radical Marxist and Maoist groups gained a foothold in the universities, leading to a decline in pluralism.45 The patrimonial and frequently corrupt management of universities exacerbated the problems,46 as did the hyperinflation crisis that hit Peru in the late 1980s. On top of that, public universities were among the main theaters of political violence in the 1980s and 1990s, marked by Shining Path47 infiltration as well as state repression and intervention.48 Even with all these problems, public universities had considerable autonomy, which frequently translated into disregard for criticism and a lack of responsiveness. The university system, which included private non-profit universities and public institutions, was supposed to self-regulate through a governing body, the National Assembly of Presidents (Asamblea Nacional de Rectores, ANR), a public–private association composed of all university presidents in 44 45 46 47

48

Silva, “Technocrats and Politics in Chile.” Lynch, Los jóvenes rojos de San Marcos. Lynch, Los jóvenes rojos de San Marcos; Degregori & Sandoval, Antropología y antropólogos en el Perú, 38–41. The Shining Path was a terrorist organization of Maoist ideology that sought to overthrow the Peruvian state and replace it with a revolutionary regime. Its actions, those of the MRTA guerrilla movement, and the state’s response led to a period of armed internal conflict in Peru, which lasted from 1980 to 2000. Dargent & Chávez, “Impacts and Legacies of Political Violence.”

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the country. This self-regulation was limited at best but mostly inexistent, as the ANR was primarily a champion of a rather expansive view of autonomy in higher education in which academic freedom was frequently associated with a lack of transparency. The executive’s institutional tools for influencing the public system were very limited, mainly through budgets funneled via a small office in charge of public universities within the Ministry of Education. But for the most part, the state decided to ignore the public universities, leaving them underfunded and largely controlled by mediocre and corrupt authorities. This decline in the quality of public universities coincided with a national increase in the completion of secondary education, leading to a growing demand for private higher education. Up to the 1980s, private non-profit universities (known in both the Chilean and Peruvian systems as universidades asociativas) were formally non-profit and some were quite prestigious. As a result of this growing demand, during the 1980s, the private universities increased both in number and in enrollment figures. Entry exams to these universities became easier in comparison to the more prestigious public and non-profit private universities, facilitating access to higher education.49 Although these universities were formally non-profit, many of them found ways to become quite lucrative businesses. Thus, some of the problems of quality that are usually attributed to the 1996 privatization reform were already mounting in the previous years. This was the overall institutional landscape of Peruvian higher education before the 1996 reform. One may conclude that, given the previous neoliberal reforms adopted in Peru in the early 1990s, this was just another step along the reformers’ route to providing market solutions to public problems. It seems no coincidence that a World Bank report published in 1994, just two years before the reform, stated that allowing profit in higher education was an appropriate means of responding to the limitations of higher education in developing countries. It is clear that some policy diffusion took place: World Bank formulas for enhancing private actors in the education system were known and promoted by key figures in the Ministry of Economics and Finance (MEF), the main technocratic body behind the neoliberal reforms in Peru. According to the Ministry of Education officials who planned the reform, the idea of promoting higher private education (and education in general) came from the MEF.50 Moreover, officials from private universities who embraced market reforms demanded and promoted more-flexible laws to allow profitmaking in the education sector as a salutary solution for the system.51 Thus, neoliberal ideas were certainly a driving force in the 1996 reform.

49 50

51

Sota, El sentido de la II reforma universitaria en el Perú; Interview with expert in education and former adviser in the Ministry of Education, Lima, 2019. Interviews with the Former Vice Minister of Education and former adviser in the Ministry of Education during the higher education reform, Lima 2019 and with Former Adviser in the Ministry of Education during the higher education reform, Lima 2019. Interview with Former Chancellor of Universidad Peruana de Ciencias Aplicadas and member of FREDEMO, Lima 2019.

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Nonetheless, the story behind Decree Law 882 is more complex than this neat narrative of neoliberal reformers and diffusion suggests. The Decree authorized profitmaking in education and provided some tax benefits for newly opened institutions. The idea behind the tax benefits was that the state had to provide some incentives in exchange for the purported public benefits that these universities provided. According to our interviewees from the Ministry of Education reform team that designed the policy, the need to revive the economy and enhance investment in different social areas was what eased the privatization reform in education. These officials say that the presidency, the MEF, and the Minister of Education of the time issued an order to design a reform that could help meet an urgent need to enhance investment in the country. A similar demand was made of all ministries as part of the legislative delegation that Congress issued to the executive. These measures were portrayed as a way of boosting ongoing economic recovery after the economic crisis.52 Perhaps this urgency, paired with the ideological preferences in MEF, explains the limited focus on regulation present in the law. This preoccupation differs from what guided the Chilean reform, which was more focused on the need to end what was seen as a monopoly, and helps explain the different paths the systems took after the reforms. What is particularly interesting about Peru’s neoliberal reform, in comparison to those of other countries in the region, is that it did not encompass the public system. Indeed, Degregori and Sandoval53 conclude that the Peruvian neoliberal reform of public education promoted private profitmaking universities but left aside the public system. The government’s agenda for higher public education was somewhat limited and focused more on curbing Shining Path’s influence and on limiting political criticism in universities than on reforming them.54 But for the most part, the state did little to reform the public system. Budgetary allocations remained low and the aforementioned institutional design remained almost unchanged. There is another aspect that is relevant to understanding the particularities of the policy feedback process in Peru that we discuss in the next section. Just a year before the reform, in November 1995, Congress created the National Council for the Authorization and Operation of Universities (Consejo Nacional para la Autorización y Funcionamiento de las Universidades, CONAFU).55 The idea was to create an autonomous office within the ANR to approve the creation of new private universities and to divest Congress of this responsibility. In the case of public universities, the passage of a law by Congress and 52

53 54 55

Interviews with the former vice minister of education and former adviser to the Ministry of Education during the higher education reform, Lima, 2019; and with a former adviser to the Ministry of Education during the higher education reform, Lima, 2019. Degregori & Sandoval, Antropología y antropólogos en el Perú. Sandoval, Modernización, democracia y violencia política. Decree Law 26439, 1995.

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MEF authorization were also required. The good intention behind this law was to reduce the politicization of what was regarded as a technical decision. But the unintended consequence was that the institution in charge of controlling and governing public and private universities was also now responsible for granting entry to new private universities to the market.56 As we discuss later, the gradual assumption of control over the ANR by low-quality private and public universities led to the introduction of rather flexible regulations for the approval of new private universities. As we have seen, the new changes did not include the development of an autonomous regulatory body. During our interviews, the officials in charge of the reform said that they proposed a second stage of reforms that included independent regulation of private education, but these were never pursued. The marriage between neoliberal ideology and economic interests limited the institutional focus on regulation. In the next section, we show how the policy feedback process was somewhat vigorous in creating new private actors and increasing their power without proper regulation.

6.4  feedback

effects and the new

landscapes of higher education

The reforms had a considerable impact on the university systems of both countries. As expected by policy feedback literature, policy made politics: in both countries, private universities grew in number and gained power, increasing their influence over political and bureaucratic actors. In Chile, though, state-sponsored student loans also created a new interest group that in the future would become part of the coalition in favor of revoking neoliberal reforms: unsatisfied students and former students indebted to the financial system. In this section, we show these developments and their particularities in each country, which will allow us to discuss the different types of backlash against neoliberal higher education reform witnessed in both countries in recent years. 6.4.1 Chile Chile’s 1981 reform allowed private universities to multiply and steadily increase their share of enrollment, while public expenditure on public institutions continued to decrease.57 By 2007, there were sixty-one universities in Chile58: sixteen public ones (all of them charging students), nine traditional asociativo universities, and thirty-six new private institutions postdating the 56 57 58

Casas, “Reformismo sin reforma.” Atria & Sanhueza, “Propuesta de gratuidad para la educación superior chilena,” 2. The total number is lower than Peru’s, but Chile also has less population (around 19 million in 2019 versus 32 million in Peru).

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1981 reform.59 But the changes ran deeper than just numbers. The public role of universities changed as they became “professional factories” whose main function was “to produce a good for private appropriation (a professional qualification) that is justified because it will prove lucrative for whoever receives it.”60 These changes were also motivated by profit. As we have noted, profitmaking was not legally permitted but there were various ways in which university ownership could be made a lucrative business. Chilean universities developed different schemes to this end, turning in particular to the renting and leasing of real estate to assure its “owners” of profits. Through complex transactions between university owners and the financial system, and in many cases through the creation of new entities, the owners were able to recirculate the proceeds from higher education into their pockets.61 This switch, to promoting demand for higher education while unofficially allowing profit, gave rise to institutions centered on devising and teaching “easy” degrees.62 Good-quality university education remained elitist and only truly accessible to the higher classes, who were better placed to afford not only the more expensive universities but also the exclusive private schools that effectively assured entry. The 1981 reform changed the face of universities in Chile and led to the emergence of three phenomena in undergraduate education: 1) the market expanded through the creation of new programs and new branches; 2) market stratification occurred based on academic testing (in which higher-income students did considerably better) and social selectivity; and 3) students were distributed among the respective university types according to socioeconomic background, leading to a differentiation in the value that the market placed on the credentials generated by the different universities.63 Private providers came to dominate the university system, cementing its status as one of the most highly privatized by international standards (measured in terms of the proportion of total higher education expenditure that comes from private sources).64 Right before the return to democracy, the Constitutional Organic Law on Education (LOCE) was enacted, crystallizing the market-centrism of the university system as well as the 1981 reform. Continuity was thus ensured and a competitive market remained a central tenet of the Chilean university system, which became increasingly private-oriented, while public expenditure decreased as a share of the whole.65 The return to democracy did not challenge the neoliberal principles that had driven the reforms of the authoritarian

59 60 61 62 63 64 65

Mönckeberg, El negocio de las universidades en Chile, 9. Atria & Sanhueza, “Propuesta de gratuidad para la educación superior chilena,” 6. Mönckeberg, El negocio de las universidades en Chile. Rodríguez Ponce, “La educación superior en Chile y el rol del mercado,” 128. Atria & Sanhueza, “Propuesta de gratuidad para la educación superior chilena,” 21. Brunner, “Educación superior en Chile,” 20. Disi, “Policies, Politics and Protests,” 132.

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regime; on the contrary, the democratic transition completed its implementation. The democratic governments after the transition accepted the neoliberal diagnosis, conceiving the state’s role in the university system as a subsidiary66 and favoring the continuation of tuition fees, while their criticism was confined to the limitations of the dictatorship.67 Technocrats of a neoliberal persuasion were integral to the governments of those years and the state relinquished its role as an educator to instead become an evaluator: an actor that finances, regulates, certifies, and steers the actions of private entities.68 The return to democracy also signaled the emergence of a new “middle class”, for which higher education was crucial as a means of consolidating this new social position.69 The Chilean middle and lower classes saw higher education as a route to social mobility, and so the proliferation of private universities was not aimed primarily at the elite but at other classes that could secure education through loans. This drove up demand for higher education, which universities met through greater enrollment. These institutions thus became a form of capitalist venture: lucrative and mass-oriented.70 This new venture was partially financed through credits, both completely private and part-backed by the state, first the Crédito Fiscal Universitario (which only covered CRUCH universities), and eventually the Crédito con Aval del Estado (CAE), which came not only about as a response to some student mobilizations in the 2000s but also sowed the seeds of the subsequent student debt crisis. Students who could not afford tuition fees took out different types of loans in the hope of being able to repay them through higher future salaries. Since educational quality at the universities varied greatly, this proved a risky bet for many. When in 2010 many of the students who had accessed CAE started graduating, they discovered that their expectations did not meet the realities of the labor market and had to set aside a third or even half of their salary to repay their loans.71 Silently but steadily, grievances about the inequality of the status quo began to grow. Chile put in place a university system that was hard to undo. The country’s neoliberal transformation was on the more radical end of the scale.72 Furthermore, La Concertación – the coalition that led the first few governments following the transition to democracy – had individuals in its camp who were convinced of some of the benefits of neoliberalism, and so the political elite was afraid that too much meddling with the neoliberal tenets might trouble the country’s conservative forces and disrupt the nascent democracy. This

66 67 68 69 70 71 72

Sanhueza & Carvallo, “Conflictos y transformaciones en la educación superior chilena,” 224. Orellana & Miranda “La mercantilización de la educación en Chile,” 109. Sanhueza & Carvallo, “Conflictos y transformaciones en la educación superior chilena,” 231. Orellana & Miranda “La mercantilización de la educación en Chile,” 117. Orellana & Miranda “La mercantilización de la educación en Chile,” 118. Interview with congressional representative from UDI, Santiago, 2019. Interview with education expert, Santiago, 2019.

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served to consolidate the neoliberal model that the authoritarian regime had put in place and to strengthen the position of private actors as well as neoliberal politicians and policy-makers (particularly technocrats), making it hard to upset the whole system even when it started to fail. This new higher education system created an emerging group of beneficiaries in the middle class who, as noted, wanted to access university as not only a means of social mobility but also a technocracy that remained convinced that a competitive market was the best solution long after the authoritarian regime was gone. Both groups were key for the policy feedback of the return of democracy but would ultimately end up in opposing camps during the backlash years. 6.4.2 Peru In Peru, as with Chile, the reform promoted the swift creation of private universities. Graph 1 shows that of all Peru’s private universities in existence today, around 70% were created after 1995. Among them were some private for-profit universities that started to compete with prestigious associative nonprofit universities for students, leading to a measure of healthy competition in the system. The neoliberal reform decisively increased the numbers, power, and status of private universities in the higher education system. But in general, the type of private university that proliferated was not that which the reformers expected; rather, the reform paved the way for an explosion of low-quality private universities in Peru. These low-cost universities democratized access to higher education but did so partly by reducing the educational level required for acceptance into their degree programs. The reform also opened the door for changes within the ANR that led to further deterioration of university quality. As mentioned earlier, since 1995 CONAFU, an organization within the ANR, had been in charge of approving the creation of new universities. The ANR’s rules of governance gave considerable power to its General Assembly, made up of university presidents. As the number of private universities increased, the assembly members gave power to what might be termed a “low quality” coalition, which made the creation of universities easier. An informal fast-track model of authorization emerged whereby CONAFU gave universities preliminary authorization, which later made it almost impossible to close universities already in operation.73 During these same years, the democratic governments of Alejandro Toledo (2001–2006) and Alan García (2006–2011) promoted – and achieved – the creation of public universities in a largely irresponsible manner. Campaign promises to set up a university often came in response to local demand for one, even if there had been no proper studies into the likely viability of doing so. As a result, the number of public universities increased to fifty-one after years of remaining stable at thirty-five. Many of these new universities lacked 73

Interview with former adviser of the Education Commission in Congress, Lima 2019.

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140 133

120

120

101

100

96 90 82

80

79 76

72 65

60

59

58 55

52

51

49

40

38

37

33

32

29 23

20

15 12 5 1

1

3

25

28

34

35 37

38

29

20 10

7

Public Universities Private Universities Total

1551 1824 1917 1959 1961 1963 1965 1968 1970 1977 1983 1985 1989 1991 1995 1997 1999 2001 2003 2005 2007 2009 2011

0

40

graph 1  Number of Public and Private Universities in Peru (1551–2011) Source: ANR – Datos estadísticos universitarios 2012. Anexo 1. Cuadro N° A-01 Source: ANR 2012, 19 (Cuadro Nº A-01).

the most basic resources required to operate or were located in regions that already had a public university. Moreover, many of the new university presidents were supportive of deregulation. Eventually, presidents favoring deregulation were able to win control of the ANR and CONAFU. With CONAFU now in the hand of this “low quality” coalition, it became quite straightforward to create universities through processes often denounced as corrupt and informal.74 CONAFU authorized some of these universities to open branches in the regions, leading to the 74

Interview with former adviser of the Education Commission in Congress, Lima 2019.

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proliferation of small, underequipped branches. From then onward, it was common to find “universities”, especially branches, sharing buildings with casinos and restaurants. In contrast to Chile, Peru had no public funding for student credits. The only public policies aimed at these institutions were the aforementioned tax cuts. Nonetheless, low-quality private universities became quite popular, for obvious reasons: they gave students with lower academic grades access to higher education and reduced the difficulty of attaining a degree. A report about higher education based on information from the ANR and Peru’s National Institute of Statistics and Informatics (Instituto Nacional de Estadistica e Informatica, INEI) noted the following: “while in 1990 41% of candidates to private universities were accepted, after the deregulation of the system, this percentage increased up to 74% in 2014. In contrast, the percentage of candidates that is accepted in public universities has remained relatively constant at around 20%.”75 Although research shows that graduates from these universities face severe limitations in finding jobs, still the system allows them to obtain a degree.76 Consequently, after graduating, these groups lose interest in the university system because, unlike many of Chilean graduates, they are not indebted. According to Disi,77 this lack of linkage between students and the university system explains why Peru witnessed none of the protests, by students or former students in favor of reform, that Chile did. It also explains why the key demand for reform in Chile was the introduction of free-of-charge university education. The system led to the proliferation of institutions with no established quality standards, a low-cost offering, and an overriding focus on maximizing profits. Although this consequence of the neoliberal reform of higher education is a widespread problem throughout Latin America, in Peru, the situation was aggravated by state capacity. As various reports have found, this process shows all the evils of leaving a sector as crucial as education unregulated: students who lacked basic skills were nonetheless able to access low-quality higher education and, most importantly, obtain degrees.78 These universities tended to devise low-cost, mass-appeal degree programs for which technical equipment was not necessary. Rather than responding to growing social demand for certain occupations from sectors of the Peruvian economy that have boomed in recent decades (mining, agri-industry), these universities focused on degrees they could deliver at a low cost. Instead of promoting research, they operated primarily as centers of traditional teaching – with little in the way of inquiry of natural sciences, humanities, or social sciences. 75 76 77 78

British Council, La reforma del sistema universitario peruano, 30. Yamada, Lavado & Martínez, “¿Una promesa incumplida?”; Cuenca, “Democratización del acceso y la precarización del servicio.” Disi, “Sentenced to Debt”; Disi, “Policies, Politics, and Protests.” Yamada et al., “¿Una promesa incumplida?”; Benavides et al., “Expansión y diversificación de la educación superior universitaria”; British Council, La reforma del sistema universitario peruano, 29–35.

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The power of these private actors increased and they gained political relevance. Some private universities started to use their influence to provide inducements to politicians in Congress, leading to corruption scandals. More commonly still, some university owners were able to carve out political careers for themselves by using their institutions as a source of patronage.79 In this context, private universities gained financial and political power throughout the 2000s. Peru’s low state capacity was partly responsible for this outcome. With no interest in the public system, and lacking the capacity to match the resources and influence of the growing private actors, the state stood by while low-quality private universities proliferated. The Ministry of Education took little involvement in this growing problem. The ministry’s institutional structure remained largely as it had long been, with a small office in charge of higher education and technical institutes.80 Meanwhile, the MEF focused only on exercising some control over public universities’ budgets and generally limited the use of funds that a new law had assigned to public universities in mineral extracting regions.81 Exceptions to this permissive attitude occurred when two of Toledo’s education ministers, Nicolás Lynch (2001–2002) and Javier Sota Nadal (2004– 2006), each created commissions to assess the problem and propose higher education reforms.82 But these efforts, although constructive, remained isolated and lacked the political muscle to break down the resistance of the private actors who would be affected by the reform. Thus, changes to the system would not be seen until the next decade.

6.5  counter - reform :

changing neoliberalism

During the 2010s, both countries saw reactions against their higher education systems, leading to far-reaching reforms that were resisted by private actors and their political allies. However, these processes were quite different from each other. While Chile’s backlash was bottom-up with massive demonstrations and a focus on equality and to a lesser degree quality, Peru’s was a somewhat unforeseen top-down phenomenon focused more on achieving regulation to enhance quality in the system. The saliency of these different demands, as well as the involvement of the citizenry in these processes, is also part of the trajectories under analysis. In both cases, though, the system still conforms to the market characteristics promoted by neoliberal reforms, showing the importance of feedback effects for the entrenchment of these reforms. 79 80 81 82

Barrenechea, Becas, bases y votos. Interview with Former Director of the Higher Education Office, Ministry of Education, Lima, 2019. Dargent & Chávez, “Impacts and Legacies of Political Violence in Peru’s Public Universities.” Ministerio de Educación del Perú (MINEDU), Informe sobre la Universidad en el Perú.

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6.5.1 Chile Between 2011 and 2013, massive student protests took to the streets of Chile. These protests were the heir to the school-student protests that began in 2006 – las marchas pingüínas – to demand a fair basic education system and radical changes to the Constitutional Organic Law on Education (LOCE). Although the LOCE was eventually replaced by a General Law of Education in 2009, this new law did not drastically change the system, which remained marketoriented. As a result of these protests, demands for making university education free-of-charge began to gain traction. Protests to this end grew larger and more vociferous during Sebastian Piñera’s first government (2012–2016) – Chile’s first right-wing administration since the transition to democracy – showing that other issues were also at stake. The protests marked an important milestone for Chile, as they were the first large mobilizations since the return to democracy and were led by young people who did not have a clear recollection of the Pinochet era but experienced its many legacies. Over the years, protests against the pension system, gender violence, and other issues ensued as Chile’s unrest grew. The defiance against the neoliberal order inherited from the authoritarian regime continued to gain critical mass and contributed to the mass protests of 2019, which questioned the societal order and its foundation on the 1980 Constitution, enacted under authoritarianism. The demands for a complete overhaul of the Chilean university system were thus a reflection of deeper discontent with the neoliberal economy, and the effect it had on social inequalities. Access to state-sponsored loans may have not only increased Chile’s student enrollment rates over the years but also left students highly indebted in a system where even public universities charged tuition fees.83 Interestingly, in contrast to other policy feedback processes in which beneficiaries become a source of support for policy continuation, in the case of Chile, the policy led to the emergence of a group of students pitted against it. The lower and middle classes who had first seen higher education as an opportunity for social mobility and higher income were rapidly disabused of this dream, as their degrees did not give them access to better-paid employment opportunities. This loan policy and the quality of university education created a divide between providers on the one hand and current and former students on the other. By the end of Piñera’s time in office, a reinvigorated state-funded system was widely perceived as the only possible solution. This quickly became one of Michelle Bachelet’s main campaign promises. Bachelet’s Concertación Democrática, a left-leaning alliance, won the 2013 elections, but smaller parties further to the left succeeded in securing the election to Congress of several of the student demonstration leaders. The discussion regarding the university reform was intricate. The Constitutional Court struck down the first draft of the 83

Disi, “Sentenced to Debt”; Disi, “Policies, Politics, and Protests.”

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proposed legislation because it proposed that CRUCH universities be allowed to enter the free-of-charge scheme merely by being CRUCH universities, whereas other institutions needed to comply with other requirements – which the court deemed discriminatory. This ruling resonates with the logic of the 1980s in which the university system was opened up so that other universities could enter and compete with CRUCH institutions, and stands in stark contrast with the role the Constitutional Court played in the Peruvian case. It also shows how neoliberalism and the competition principle had taken hold and shaped what is deemed acceptable even years after the first reform. Finally, the government in Chile had to reach an agreement with the right to pass the legislation.84 After several months of debate and negotiations, with private universities resisting the changes through lobbying and public declarations, Congress approved a reform that included free-of-charge higher education. The new private actors created by the 1981 reform – non-CRUCH universities – became vital players, with the ability to press the government to defend their interests. The law stipulates that both CRUCH universities and those that wish to join voluntarily must receive non-fee-paying students.85 Although the reform did achieve its goal of securing free-of-charge university education for some, it does so not through more direct funding but by expanding indirect contributions. Each university in the scheme receives the tuition fee on behalf of the students who are eligible for free-of-charge education. The system does not return to the pre-Pinochet public funding schemes but instead is built on top of the neoliberal system that was put in place then. The Ministry of Finance played an important role in the negotiations, even inside the government. More than one person involved said that the discussion went well beyond fiscal issues and that the Ministry of Finance had opinions regarding the reform that was stronger than anything they had seen before.86 The finance minister was not only concerned with the cost of the reform but also understood that there was no way to roll it back. He found a solution to these fiscal concerns by including a clause by which the expansion of free-ofcharge tuition would be gradual and contingent upon tax collection.87 As we can see, this solution does not change the basic market orientation of the system, whereby universities still need to compete to attract more students and thus secure funding. It remains a paid service; payment is based on individual demand rather than blanket funding for all higher education.88 These 84 85

86 87 88

Interview with former finance minister, Santiago, 2019. There are currently 35 universities that receive nonpaying students from the 60% lowestincome population. As of January 2020, there were 376,433 non-fee-paying students enrolled in a bachelor or technical degree, of a total of 1,280,181 enrolled students – around 30% of the students. Interviews with former minister of education, Santiago, 2019; and with former manager of higher education at the Ministry of Education in Chile, Zoom interview, Berlin–Santiago, 2020. Interview with former Finance Minister, Santiago, 2019. Interview with education expert, Santiago, 2019.

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outcomes show the influence of private actors in defending the main tenets of the model. As a public official closely involved in the process observed, the final design of the university reform was heavily influenced by the fact that in Chile the state engages with private actors as if they were also part of the state.89 The resistance to a more progressive solution is exemplified by the comments made by technocrats inside Bachelet’s government. A former finance minister put it as follows: “a lot could have been done differently: it would have been much more expensive, it would have been more distorted, and it would have made the left happy.”90 A member of the right-wing opposition, which was against the reform, said he got along rather well with Rodrigo Valdes (former minister of finance) and Nicolás Eyzaguirre (former minister of education, of the secretary-general of the presidency, and of finance), as they were the most neoliberal officials in their sector at the time.91 These ministers played key roles in the design of the counter-reforms. In the end, the reform remained deeply embedded in the established neoliberal model. The influence of private actors that emerged and drew strength from the reform was crucial to this outcome. The question of equality in the system is certainly back on the agenda, and Chilean universities are more public-oriented than they were in the recent past. Nonetheless, as the protests of 2019 showed, the basis of the neoliberal system remains secure despite the reforms. 6.5.2 Peru In Peru, counter-reform was quick and unexpected, as the criticisms of higher education remained largely confined to specialist circles and did not lead to protests or politicization. The criticisms and proposals that came during Javier Sota Nadal’s spell as Education Minister (2004–2006) helped to create a loose coalition of academics and civil society actors interested in the issue, but publicly the issue was still afforded little attention.92 To understand the Peruvian process, one has to look at the series of events that allowed a small coalition first to operate within the Education Commission of Congress and later to gain prominence and support within a larger coalition for reform that used dramatic examples of poor quality to get the public onside. The process began with a ruling of the Constitutional Tribunal in 2008. A group of citizens questioned, by way of a constitutional complaint, the ability of universities to open branches across the country in an unregulated manner. In response, the tribunal delivered a ruling in which it strongly criticized the lack of state regulation of private universities.93 Given the abuses committed 89 90 91 92 93

Interview with former assistant to the former minister of education, Santiago, 2020. Interview with former finance minister, Santiago, 2019. Interview with congressional representative from UDI, Santiago, 2019. Interview with former adviser of the Education Commission in Congress, Lima 2019. Tribunal Constitucional del Perú Case Number N° 0017-2008-PI/TC, 2010.

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by these institutions, the Tribunal ordered the executive and Congress to “immediately adopt the necessary institutional steps to reform the university education system in the country.”94 While the ruling was quite clearly in favor of promoting broader reform, in practice, such rulings frequently end up being little more than declaratory. And for the most part, this was also true in this case, as the government of Alan García (2006–2011) paid little attention to the university system. His government’s only significant action in this regard is the establishment of an accreditation institution – the National System for Evaluation, Accreditation, and Certification of Education Quality (Sistema Nacional de Evaluación, Acreditación y Certificación de la Calidad Educativa, SINEACE) – that issued certificates of quality,95 predated the ruling. In any case, this process was voluntary and quite formalistic and had little impact on the system as a whole. It was the succeeding government of Ollanta Humala (2011–2016) that expressed significant interest in stopping the proliferation of poor-quality public and private universities. With the decisive support of Daniel Mora, a congressman from a different political grouping who prioritized higher education reform, in December 2012, the government passed a law placing a five-year moratorium on the creation of new universities.96 This law, and the debate around it, used the Constitutional Tribunal’s ruling to show the need for a complete reform of the system. When, in 2012, Mora became president of the Education Committee in Congress, he opened the debate for a new higher education law. In the beginning, the process seemed doomed to fail, as the pro-reform coalition was small and had few resources. In opposition were the ANR, the public, and private universities that rejected regulation, and politicians who supported the status quo.97 Furthermore, the Ministry of Education, already engaged in a comprehensive reform of the primary and secondary education system, had little interest in adding higher education reform to this already daunting task. However, as Chaccha98 has argued, Mora and his coalition used the Education Committee as a forum to raise awareness about the limitations and terrible conditions of the university system. Fueled by civil society groups and some student organizations, the press and social media were soon awash with information attesting to the comparatively poor quality of the Peruvian system, the inadequate conditions in which universities operated, the lack of professional credentials (or even the dubious credentials) of university authorities, and the conflicts of interest in which their political allies were caught up. Eventually, these scandalous revelations became part of the public debate, 94 95 96 97 98

Tribunal Constitucional del Perú Case Number N° 0017-2008-PI/TC, 2010. Congreso del Perú, Decree-Law 2870, published May 23, 2006. Congreso del Perú, Law 2997, published December 22, 2012. Hilda Chaccha, “El poder de las coaliciones en la arena de las políticas públicas.” Chaccha, “El poder de las coaliciones en la arena de las políticas públicas.”

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dragging the Ministry of Education into the process. Although the anti-reform coalition featured powerful actors with abundant resources – including congressmen with links to private and public universities – these scandals made it more difficult to resist calls for reform. After a somewhat conflictive process, a new higher education law was finally approved.99 The law provided for the creation of a new regulatory Institution, SUNEDU, to replace the ANR, and guaranteed that public and private universities adhere to the content of the law and provide a service under basic conditions of quality in terms of teaching and research. Although private universities have more flexibility with regard to their activities, the law still required new, higher standards in teaching, faculty composition, and research. From the outset, SUNEDU exercised its mandate to guarantee that all universities in the country meet these basic conditions of quality. During the few years since its creation, with ups and downs, the institution gained in standing and closed more than two dozen universities that did not meet the required standards. Just as important, it has sanctioned universities operating outside the law. As a result of this oversight, it is possible to detect an improvement in certain indicators of higher education in Peru, such as the volume of research, the number of full-time professors, and publication output.100 Moreover, the Ministry of Education responded to the law by reinforcing its areas in charge of higher education, and in 2015, set up a National Directorate of Higher Education – a special office that exercises more control over public and private universities in terms of service provision, as well as giving administrative support to public universities. The momentum has continued, and a draft law for the creation of a Vice-Ministry of Higher Education was recently submitted to Congress. Resistance to these changes has remained strong, however. The abovementioned law was challenged by a group of congressmen who filed a constitutional complaint with the Constitutional Tribunal, but this body found that the need to exercise adequate regulation of the system was consistent with university autonomy. Private and public universities continue to exert pressure on Congress and the executive in an attempt to secure reform of the law or to reverse SUNEDU’s regulatory decisions. Nonetheless, the reform continues, and little by little SUNEDU is gaining legitimacy and strengthening its control over private and public universities. Although the University Law has brought about important changes, the partially reformed system remains within the neoliberal paradigm. SUNEDU was designed similarly to other regulatory bodies and is highly skewed toward favoring the technical credentials of its members. Private universities still have considerable flexibility in exercising their activities, and their profitmaking status remains untouched, despite greater scrutiny. Nonetheless, the resulting system is one in which the public goods of higher education are at least taken 99 100

Congreso del Perú, Ley Universitaria, Law 30220, published July 03, 2014. SUNEDU, II Informe bienal de la realidad universitaria.

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into account, university autonomy is used less as an excuse for unregulated activities, and cases of universities falling far short of quality standards are no longer tolerated.

6.6  conclusion The two cases show how despite a family resemblance, neoliberal policies, and their effects can be quite different across countries. We propose that the different neoliberal paths depend on the distinct motives behind such reforms, the designs adopted, and the state capacity levels. Backlashes against the reforms are also better understood by taking into account these trajectories. Accordingly, our two cases, especially the Peruvian one, show how weak states are more vulnerable to the risk of neoliberal reforms, creating private actors that can quickly manipulate rules to their advantage. Following on from previous research on the effects of market reforms, we show how private actors can exercise pressure to deepen the reforms in ways that benefit them, to the point of adversely affecting the provision of public goods expected by the reformers. Under these conditions, an informal and even illegal market can emerge and states lack the capacity to properly control them. Although the Peruvian case represents an extreme case of a weak state allowing private actors to gain power without regulation, the experience of Chile, with its more capable state, was similar. A final point regarding state capacity. It would be a mistake to equate strong states and effective implementation with “good” policy outcomes. Indeed, strong states may be more successful in policy implementation, but at the same time deliver inadequate outcomes that are then difficult to reverse. In some respects, this was witnessed in Chile, where policies were successful not only in achieving the goal of opening up the education system to market competition and promoting students’ recruitment in private institutions, but also – partly due to this success – in changing other positive characteristics of the pre-existing university system, resulting in a more unequal structure of higher education provision that was hard to reverse even in the face of mass mobilization. The cases also show some particularities of neoliberal higher education policy feedback that would be worth exploring in other policy areas. Unlike social democratic policy feedback, which tends to build coalitions between state providers and beneficiaries for the continuation of policies, this form of policy feedback created a divide between universities and students that became highly politicized in the Chilean case. By applying the two moments from the policy feedback literature to this case, it is evident that neoliberal policy feedback can also create groups that oppose the results. Similar dynamics are seen with other neoliberal policies, such as the divide between private pension providers and their affiliated members.101 This seems a more general consequence of 101

Silva, Challenging Neoliberalism in Latin America.

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neoliberal policy feedback: benefits for providers can be perceived as disadvantages to users when these services do not meet expectations, causing a divide that can lead to counter-reform. But perhaps the most important lesson of these cases concerns the original promises of the neoliberal reformists. In both countries, neoliberal reforms of higher education were framed as salutary options to reduce the many evils of public higher education. The competition was expected to force universities to improve their quality and become more receptive to societal demands. This did not happen. Although there are many criticisms to be made of public higher education systems, especially the one in place in Peru before the reforms, the cases show that without a proper public system, it is difficult to launch the virtuous feedback circle expected by reformers. On the contrary, profitmaking – whether officially allowed (as in Peru) or unofficially tolerated (as in Chile) – and insufficient regulation of private institutions creates conditions that exacerbate many problems: declining quality standards, lack of attention to research and innovation, mass-marketing of low-cost degree programs to the neglect of costly but socially valuable careers, and others. The challenge for reformers in years to come is to find ways to ameliorate public higher education while maintaining high standards in private education – a relationship that, rather than being virtuous, can be quite complex and sometimes negative.

6.7  interviews Arias, Hugo (2020). Assistant to Nicolas Eyzaguirre, former Minister of Education of Chile. Santiago, January 20th. Atria, Fernando (2019). Education expert and profesosr, Universidad de Chile. Santiago, March 29th. Bellollio, Jaime (2019). Congressman, UDI. Santiago, April 12th. Bustamente, Luis (2019). Former President of the Universidad Peruana de Ciencias Aplicadas and member of FREDEMO. Lima, April 3rd. Contreras, Alejandra (2020). Former manager of higher education at the Ministry of Education of Chile. Zoom, July 31st. Delpiano, Adriana (2019). Former minister of education of Chile. Santiago, April 16th. Figallo, Flavio (2019). Former vice minister of education and former adviser to the Ministry of Education of Peru on higher education reform. Lima, April 4th. Guadalupe, César (2019). Expert in education and former adviser to the Ministry of Educacion of Peru. Lima, January 15th. Jorquera, Pablo (2020). Former adviser to the Ministry of Education and to the Secretary of the Presidency. Santiago, January 10th. Mori, Jorge (2019). Former adviser to the Education Commission in Congress. Lima, June 3rd. Muñoz, Gonzalo (2019). Education expert and former adviser to the Ministry of Education of Chile. Santiago, April 1st. Prochzaska, Enrique. Former adviser to the Ministry of Education of Peru during higher education reform. Lima, April 4th.

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Rivera, Mario (2019). Education expert and former adviser to the Ministry of Education of Peru. Lima, April 15th. Saavedra, Jaime. Former Minister of Educacion of Peru. Washington D.C., May 30th. Valdes, Rodrigo (2019). Former finance minister of Chile. Santiago, March 27th. Zapata, Verónica (2019). Former director of the Higher Education Office, Ministry of Education of Peru. Lima, June 6th.

6.8  legislation Congreso del Perú Decree- Law 26439, passed January 20, 1995. Congreso del Perú, Decree-Law 2870, published May 23, 2006. Congreso del Perú, Law 2997, published December 22, 2012. Congreso del Perú, Law on University Reform and the creation of the National Superintendence of Higher University Education, SUNEDU, Law 30220, published July 03, 2014. Ministerio del Interior, Declaración del Ministerio del Interior sobre Nueva Legislación Universitaria Chilena, 1981. www.memoriachilena.gob.cl/archivos2/ pdfs/MC0015045.pdf Ministerio de Educación Pública de Chile Decree- Law N 3.541, passed December 30, 1980, published January 03, 1981. Tribunal Constitucional del Perú, Case Number N° 0017-2008-PI/TC, 2010. bibliography

ANR – Asamblea Nacional de Rectores (2012). “Datos Estadísticos Universitarios.” Dirección de Estadística de la ANR. http://censos.inei.gob.pe/cenaun/redatam_inei/ doc/ESTADISTICA_UNIVERSITARIAS.pdf Arce, Moises. “The Politics of Pension Reform in Peru.” Studies in Comparative International Development 36, No. 3 (2001): 88–113. Atria, Fernando & Claudia Sanhueza. “Propuesta de gratuidad para la educación superior chilena.” Clave de Políticas Públicas, No. 17 (November 2013). Barrenechea, Rodrigo. Becas, bases y votos: Alianza para el Progreso y la política subnacional en el Perú. Lima: IEP, 2014. Beach, Derek, David Schäfer & Sandrino Smeets, “The Past in the Present – The Role of Analogical Reasoning in Epistemic Learning About How to Tackle Complex Policy Problems.” Policy Studies Journal 0, No. 0 (2019): 1–27. Béland, Daniel. “Reconsidering Policy Feedback: How Policies Affect Politics.” Administration & Society 42, no. 5 (September 2010): 568–90. Benavides, Martín, Juan León, Frida Haag & Selene Cueva, “Expansión y diversificación de la educación superior universitaria, y su relación con la desigualdad y la segregación,” Documento de Investigación No. 78. Lima: GRADE, 2015. Bernasconi, Andrés & Fernando Rojas, Informe sobre la educación superior en Chile: 1980–2003 (Caracas: UNESCO International Institute for Higher Education in Latin America and the Caribbean), https://unesdoc.unesco.org/ark:/48223/ pf0000140395 Bril-Mascarenhas, Tomás and Antoine Maillet, “How to Build and Wield Business Power: The Political Economy of Pension Regulation in Chile, 1990–2018,” Latin American Politics and Society 61, no. 1 (2019): 101–25.

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British Council, La reforma del sistema universitario peruano: Internacionalización, avance, retos y oportunidades. Lima. Octubre 2016. Brunner, José J. “Educación superior en Chile: Instituciones, mercados y políticas gubernamentales 1967–2007.” PhD diss. University of Leiden, 2008), http://200.6.99.248/~bru487cl/files/jjbrunner_final.pdf Campbell, Andrea. How Policies Make Citizens: Senior Political Activism and the American Welfare State. Princeton; Oxford: Princeton University Press, 2003. Campbell, Andrea, “Policy Makes Mass Politics.” Annual Review of Political Science, 15 (June 2012): 333–51. Casas, Frank. “Reformismo sin reforma. El papel del Estado en el proceso de transformación de las políticas de creación de universidades desde el Conafu, entre 1995–2010.” Master’s thesis, PUCP, 2012. http://tesis.pucp.edu.pe/repositorio/ handle/20.500.12404/4973 Chaccha, Hilda “El poder de las coaliciones en la arena de las políticas públicas: Caso ley universitaria.” Master’s thesis, PUCP, 2019. http://hdl.handle .net/20.500.12404/14322 Colclough, Chris “Education and the Market: Which Parts of the Neoliberal Solution are Correct?,” World Development 24, no. 4 (1996): 589–610. Cuenca, Ricardo. “Democratización del acceso y la precarización del servicio. La masificación universitaria en el Perú, una introducción.” In La educación universitaria en el Perú: Democracia, expansión y desigualdades, edited by Ricardo Cuenca, 9–18. Lima: IEP, 2015. Cuenca, Ricardo and Luciana Reátegui, “La (incumplida) promesa universitaria en el Perú,” Documento de Trabajo N 230. Serie Educación, 11 (Lima: IEP, 2016) Culpepper, Pepper D. Quiet Politics and Business Power: Corporate Control in Europe and Japan. Cambridge Studies in Comparative Politics. Cambridge: Cambridge University Press, 2010. Dargent, Eduardo. Technocracy and Democracy in Latin America: The Experts Running Government. Cambridge: Cambridge University Press, 2015. Dargent, Eduardo & Noelia Chávez, “Impacts and Legacies of Political Violence in Peru’s Public Universities.” In Politics After Violence: Legacies of the Shining Path Conflict in Peru, edited by Hillel D. Soifer & Alberto Vergara, 132–56. Austin: University of Texas Press, 2019. Degregori, Carlos I. and Pablo Sandoval, Antropología y antropólogos en el Perú: La comunidad académica de Ciencias Sociales bajo la modernización neoliberal. Lima & Buenos Aires: IEP/Clacso, 2009. Disi, Rodolfo “Policies, Politics, and Protests: Explaining Student Mobilization in Latin America.” PhD diss., University of Texas at Austin, 2017. https://repositories .lib.utexas.edu/handle/2152/60377 Disi, Rodolfo “Sentenced to Debt: Explaining Student Mobilization in Chile,” Latin American Research Review 53,No. 3 (2018):448–65. Ewig, Christina and Stephen Kay, “Postretrenchment Politics: Policy Feedback in Chile’s Health and Pension Reforms,” Latin American Politics and Society 53, No. 4 (2011): 67–99. Fairfield, Tasha. Private Wealth and Public Revenue in Latin America: Business Power and Tax Politics. Cambridge: Cambridge University Press, 2015.

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Grindle, Merilee S., “Governance Reform: The New Analytics of Next Steps.” Governance: An International Journal of Policy, Administration, and Institutions, 24, no. 3 (July 2011), pp. 415–18. Hall, Peter. “Policy Paradigms, Social Learning, and the State: The Case of Economic Policymaking in Britain.” Comparative Politics 25, No. 3 (April 1993): 275–96. Kurtz, Marcus, Latin American State Building in Comparative Perspective: Social Foundations of Instiutional Order. New York: Cambridge University Press, 2013. Lynch, Nicolás, Los jóvenes rojos de San Marcos: Radicalismo Universitario de los años 70. Lima: El Zorro de Abajo Ediciones, 1990. Madariaga, Aldo “Mechanisms of Neoliberal Resilience: Comparing Exchange Rates and Industrial Policy in Chile and Estonia.” Socio-Economic Review 15, No. 3 (2017): 637–60. Maillet, Antoine. “Variedades de Neoliberalismo: Innovación conceptual para el análisis del rol del Estado en los mercados.” Revista de Estudios Políticos 169, (2015): 109–36. Martins, Carlos B. “Reconfiguring Higher Education in Brazil: The Participation of Private Institutions,” Análise Social 208, xlviii (3º), (2013): 622–58. Ministerio de Educación del Perú (MINEDU), Informe sobre la Universidad en el Perú (Lima: Oficina de Coordinación Universitaria, MINEDU, 2005). Mönckeberg, María O. El negocio de las universidades en Chile. Santiago: Penguin Random House, 2014. Orellana, Víctor and Camila Miranda, “La mercantilización de la educación en Chile.” In Entre el mercado gratuito y la educación pública: Dilemas de la educación chilena actual, edited by Víctor Orellana, 95–156. Santiago: LOM Ediciones, 2018. Pierson, Paul. Dismantling the Welfare State: Reagan, Thatcher, and the Politics of Retrenchment. New York: Cambridge University Press, 1994. Pierson, Paul “When Effect Becomes Cause: Policy Feedback and Political Change.” World Politics 45, no. 4 (1993): 595–628. Rodríguez Ponce, Emilio “La educación superior en Chile y el rol del mercado: ¿Culpable o inocente?” in Ingeniare 20, No 1, 2012: 126–35. Sandoval, Pablo. Modernización, democracia y violencia política en las universidades peruanas (1950–1995). Buenos Aires: Consejo Latinoamericano de Ciencias Sociales, 2002. Sanhueza, José M. and Fernando Carvallo, “Conflictos y transformaciones en la educación superior chilena.” In Entre el mercado gratuito y la educación pública: Dilemas de la educación chilena actual, edited Víctor Orellana, 209–58. Santiago: LOM Ediciones, 2018. Schmidt, Vivien A., and Mark Thatcher. “Theorizing Ideational Continuity: The Resilience of Neo-Liberal Ideas in Europe.” Chapter. In Resilient Liberalism in Europe’s Political Economy, edited by Vivien A. Schmidt and Mark Thatcher, 1–50. Contemporary European Politics. Cambridge: Cambridge University Press, 2013. Silva, Eduardo. Challenging Neoliberalism in Latin America. Cambridge Studies in Contentious Politics. Cambridge: Cambridge University Press, 2009. Silva, Patricio. “Technocrats and Politics in Chile: From the Chicago Boys to the CIEPLAN Monks.” Journal of Latin American Studies 23, no. 2 (1991): 385–410.

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Skocpol, Theda. Protecting Soldiers and Mothers. Cambridge, Massachusetts; London, England: Harvard University Press, 1992. Sota, Javier. El sentido de la II reforma universitaria en el Perú: Las reformas en la educación superior en América Latina y El Caribe. Lima: Asamblea Nacional de Rectores, 2004. SUNEDU, II Informe bienal de la realidad universitaria. Lima: SUNEDU, 2020. Weir, Margaret. “When Does Politics Create Policy? The Organizational Politics of Change,” in Rethinking Political Institutions: The Art of the State, eds. Ian Shapiro, Stephen Skowronek and Daniel Galvin, 171–86. New York: NYU Press, 2006. Weyland, Kurt. Bounded Rationality and Policy Difussion: Social Sector Reform in Latin America (Princeton, NJ: Princeton University Press, 2006). Yamada, Gustavo Pablo Lavado & Joan Martínez. “¿Una promesa incumplida?: La calidad de la educación superior universitaria y el subempleo profesional en el Perú,” Documento de Discusión, DD/05/14. Lima: Centro de Investigación de la Universidad del Pacífico, 2014. https://repositorio.up.edu.pe/handle/11354/1102.

7 Reinvented Governments in Latin America Reform Waves and Diverging Outcomes Luis L. Schenoni

7.1  introduction The debate about the state in Latin America has been increasingly influenced by comparative historical analysis and historical institutionalism.1 These approaches see institutions – in this case, state institutions – developing along rigid, long-term trajectories, affected from time to time by relatively short critical junctures characterized by contingency.2 This analytical framework has proven especially useful to understand the deep historical roots of differences in dimensions of state capacity such as tax collection, the monopoly of violence, and territorial reach and control.3 Yet, it is seldom, if ever, applied in the field of public administration or to study the recent evolution of civil services in the region. Scholars of public administration in Latin America, on the other hand, tend to interpret civil service reforms in ways that fit the historical-institutionalist approach considerably well. The idea that in Latin America the bureaucracy is the “administrative widow of successive governments and political regimes” and should thus be seen as a succession of “geological layers,” suggests that countries made fateful decisions at specific points in time, which set them into distinct trajectories.4 The picture of Latin American bureaucracies evolving through forking paths, with every turn introducing inescapable rigidities, is so

1 2 3 4

Mahoney and Rueschemeyer, Comparative Historical Analysis in the Social Sciences; Mahoney and Thelen, Explaining Institutional Change. Mann, The Sources of Social Power. Kurtz, Latin American State Building in Comparative Perspective; Saylor, State Building in Boom Times; Soifer, State Building in Latin America; Schenoni, “Bringing War Back In.” Oszlak, “¿Escasez de recursos o escasez de innovación?” 28; Chudnovsky, “Public Administration in Latin America.”

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keen to the comparative historical approach that it cries for its exploration by public administration scholars. This chapter provides an exercise of that sort, applied to the analysis of civil service reform in late twentieth-century Latin America. My argument brings together at least three intuitions already present in studies about those reforms, which also suggest the need to adopt a comparative historical framework: that institutional continuities, critical junctures, and sequencing, might have determined their divergent outcomes. Let us consider these three ideas separately, albeit briefly. First, public administration reform in the 1990s took place on top of institutionalized practices which differed starkly from country to country. The idiosyncratic nature of Latin American civil services has consistently undermined large-n comparisons in previous research. Rules of promotion provide a clear example: incentive structures can value training and performance differently, and reward them via salaries, bonuses, or myriad other benefits, making it almost impossible to compare meritocracy across borders. Since indicators of bureaucratic quality are often very contextual, scholars have concluded that case-oriented research and awareness of strong path dependence within cases are necessary.5 The comparative historical framework makes it easy to incorporate these ideas by drawing on the comparison of a few relevant cases, which pay attention to singularities and continuities. Second, new agendas were pushed in particular critical junctures during the 1990s, which opened a window of opportunity for reform. Changes are therefore as important as continuities. Put otherwise, factors that loosen institutional constraints and rigidities merit as much attention. Although reformists existed before and after, very little would have been done in the 1990s if it were not for the concurrency of an international context that put these apparent solutions at the top of the policy agenda.6 In most Latin American countries, the nadir of economic crises coincided with the sudden advancement of economic, state, and administrative reform – all at the same time. This, in turn, suggests that civil service reform can only be analyzed within a framework that thinks in terms of many factors and how they align – sometimes contingently – in critical moments7 (Goertz 2017). Third, these reforms came in waves and followed specific sequences. Most scholars and practitioners agree, for example, in dividing late twentieth-century reforms into so-called “first generation” and “second generation” reforms – a distinction I explain later on. Importantly, sequencing mattered a great deal in determining the real impact of these reforms. Because career stability is a virtual prerequisite for bureaucratic autonomy and good performance, countries that adopted a piecemeal approach to downsizing in the first wave fared better 5 6 7

March and Olson, “Organizing Political Life.” Kingdon, Agendas, Alternatives and Public Policies. Goertz, Multimethod Research, Causal Mechanisms, and Case Studies.

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in modernizing public management and reorientating the civil service toward the citizenry in the second wave.8 A close look at path dependence, critical junctures, and sequences, serves to highlight the importance of one recurrent factor: the autonomy of the civil service. Although Latin American civil servants are in general constrained by a civil law tradition that establishes clear boundaries to their competencies, in some countries those who live “from politics” have been able to develop a greater esprit de corps and resilience vis-à-vis the whims of public opinion and the interests of those who live “for politics.”9 This phenomenon hints at the importance of sociology and politics beyond and above the technicalities of administrative reform. When proactive bureaucrats with shared beliefs organized in influential and cohesive advocacy coalitions and preserved their reputation as uniquely qualified providers of key public services, they were better able to preserve their autonomy, and “own” the reforms.10 Finally, evaluating the success of these reforms requires some ideal goal which I relate to both the professionalism and legitimacy of the civil service. Professionalism is partly evidenced not only in the existence of competitive salaries, and meritocratic recruitment and promotion – i.e., initial incentives or inputs – but also in the technical competency and respect to legality showed by administrators – i.e., behavioral outcomes. The latter, in turn, strongly determines the (rational) legitimacy of bureaucracies. Looking at these parameters it is reasonable to expect that economic crises and international pressures (creating critical junctures) as well as the bureaucratic institutions previously in place in each country (creating path dependence) would have influenced the capacity for civil service autonomy and resilience. Yet these structural factors bare no deterministic relation to the outcomes of reforms. Much of what happened within those critical junctures was highly contingent, from the timing and sequence of exogenous shocks, to the decisions of key agents and the results of their strategic interactions. To develop my argument, I focus on four cases: Argentina, Brazil, Chile, and Peru. This small-n comparative strategy is in line with recent applications of the comparative historical approach, where case selection intends to provide a rudimentary control for possible confounding characteristics. Argentina and Brazil had a relatively large public workforce by the end of the 1980s and faced the challenge of decentralization to subnational units due to their federal structure. Chile and Peru, on the other hand, were centralized polities with relatively small bureaucracy. In the end, however, only Argentina and Peru implemented 8

Rauch and Evans, “Bureaucratic Structure and Bureaucratic Performance,” 53; Barzelay, “Designing the Process of Public Management Policy Change”; Echebarría and Cortázar, “Public Administration and Public Employment Reform.” 9 Spink, “Possibilidades técnicas e imperativos políticos”; Weber, Politics as a Vocation. 10 Jenkins-Smith and Sabatier, “Evaluating the Advocacy Coalition Framework”; Carpenter, The Forging of Bureaucratic Autonomy.

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profound first-generation reforms drastically reducing their payrolls in the early 1990s. Conversely, Brazilian and Chilean bureaucracies were able to resist those pressures. Having undergone a deep restructuration of their civil service under first-generation reforms, Argentina and Peru were severely hampered in their capacity to properly implement more focused, second-generation ones. Conversely, the Brazilian and Chilean bureaucracies became paradigms of secondgeneration reforms aimed at enhancing meritocracy and efficiency.11 Brazilian and Chilean bureaucracies had been historically more professionalized – this was their most salient similarity even before the 1990s. Yet, as we shall see, this did not automatically secure their autonomy. Because bureaucratic autonomy necessitates not only a solid reputation but also a political coalition to back it up, Argentine public servants were arguably in a much better position to weather the reforms and preserve their autonomy through a traditional alliance of trade unions and the Peronist Party in government.12 The case of Argentina comes to illustrate that a great deal of uncertainty and contingency that takes place during critical junctures leading to the (unintended) results of institutional reforms. I present this argument in three sections. The first one looks at the evolution of public sector reforms in Latin America throughout history and paints a picture of the regional context when our critical junctures hit. The second section turns to first-generation civil service reforms of the early 1990s, looking at the political dynamics and specific outcomes of each case. Finally, a third section focuses on second-generation reforms that took place in the late 1990s and assess the situation of civil services by the end of the decade. Some conclusions close.

7.2  public

sector reforms until the

1990 s

Although it is tempting to trace back the history of Latin American public administrations to those who recreated a bureaucratic apparatus from the ashes of the Independence Wars, the Bourbonic and Pombaline reforms in the colonial era remind us that the issue of administrative reform reaches back beyond modern national states, and already in the form of concurrent, cross-regional critical junctures. In this seemingly endless regression, extant institutions conditioned and shaped subsequent ones, but innovation and contingency also led individual countries into specific institutional paths, a process that continued to take place throughout the nineteenth century. The interaction of Latin American states with each other, foreign powers, and the global economic context played a constant role in this process. This explains a considerable amount of institutional isomorphism, which should also not be overlooked. European and United States bureaucratic missionaries scattered across the region played a key role in the modernization of state 11 12

Iacoviello and Strazza, “Diagnostic of the Civil Service in Latin America.” Carpenter, The Forging of Bureaucratic Autonomy, 5.

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agencies during the late nineteenth century, an era characterized by the rapid emulation of successful models.13 Some local bureaucracies, however, were relatively more able to run quiet revolutions of their own, entering self-reinforcing processes of modernization fueled from within, and indeed, bureaucracies that were already more autonomous and efficient by the early twentieth century, tend to be so nowadays.14 Yet, region-wide attempts to modernize the state bureaucracy are not easy to find until the twentieth century. Scholars have identified a first instance of this kind with the Kemmerer missions that the United States dispatched to Colombia (1923), Chile (1925), Ecuador (1926), Bolivia (1927), and Peru (1931), in order to update accounting techniques for budgetary and financial management. Prompted by the public administration career reform in the United States, also Brazil (1934), Argentina (1937), and many others followed in establishing meritocratic standards in these areas (Spink 1998). Not surprisingly, this reform wave took place during the critical juncture opened by the inter-war period and a transition away from a laissez-faire era. Although these total wars did not affect the region in important ways, the widening gap between European and American bureaucracies, as well as state expansion due to the depression, opened up a new critical juncture.15 In the early post-war era, although many states decided to follow the French paradigm of the École National d’Administration,16 European models lost their former prominence and attempts to modernize bureaucracies across Latin America were heralded mostly by the United States Agency for International Development (USAID) and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). This consolidated a shift from an era where bureaucracies tried to modernize from the inside-out, seeking a variety of outside models, to a new era where powerful international agents pushed for reform, promoting uniform institutional blueprints. Some eclecticism, however, was inevitable. Specific characteristics of the Latin American developmental state – for example, the embeddedness of corporative interests and patrimonialism – undermined the straightforward implementation of outside models. In time, new actors like the World Bank (WB) and the InterAmerican Development Bank (IADB) joined the discussion, and native initiatives like the Centro Latinoamericano de Administración para el Desarrollo (CLAD) joined in to provide more grounded approaches.

13 14 15 16

Resende-Santos, Neorealism, States, and the Modern Mass Army. Paredes, Shaping State Capacity. Centeno, Blood and Debt; Olavarria, “Recent and Past Governance Reforms in Latin America.” Some examples are the Escola Brasileira de Administração Pública in Brazil (1952), the Instituto Nacional de Administración Pública in Mexico (1955), the Instituto Superior de Administración Pública in Argentina (1958), the Escuela Superior de Administración Pública in Colombia (1958). Many of these institutions (or their successors) continue to carry central importance in the training of Latin American bureaucracies.

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Interestingly, countries like Argentina and Chile remained relatively more shielded from external influences during this period, letting their bureaucracies set the pace and adapt with a higher degree of autonomy. Peter Spink concludes about this era that “…in all cases this adaptive process generated results. In countries where there have been major attempts at generating major and planned reform the reverse is the case.”17 It was therefore known by the 1990s that broad reforms and imported blueprints could be problematic, and countries that preserved the prestige and know-how of their bureaucracies had fared better in both autonomy and efficiency. However, when the neoliberal ideal of state reform kicked in, ushered by the Latin American debt crisis, considerations of this kind were sidelined. Nuances regarding the respective role that local and international actors should play had no place in a context that required drastic cuts in bureaucratic spending. The focus of the debate drifted toward the fiscal difficulties of an oversized state. The problem was seldom framed as one of enhancing taxation, formalizing the economy, or producing gains in efficiency – all of which would have required a stronger bureaucracy – and so a perfect political storm began to form threatening bureaucrats throughout the region.

7.3  first - generation

reforms

First-generation reforms promoted by multilateral institutions in the early 1990s concentrated mostly on decentralization, privatization, deregulation, outsourcing, and reducing the size of the public administrative apparatus. Although other elements like streamlining hierarchies and increasing managerial salaries were sometimes part of the package, administrative reform was conceived as part of an overarching state and economic reform. The emphasis was on the ways in which reforms could help reduce fiscal deficits by downsizing national-level bureaucracies and reducing their cost. Heralded by multilateral financial institutions like the IADB, the WB, and the International Monetary Fund (IMF), these reforms were often attached to conditionality-based lending in a context when several countries had defaulted and were restructuring their debts. The very political careers of top executive officials – often not only presidents themselves but also technocrats in charge of navigating the economic crises – hinged on the success of reforms, which created incentives for a strong centralization of decision-making. First-generation reforms seldom involved broad consensus. Not even at the implementation stage were agencies granted much control. Pressure from both international and domestic (executive) actors compounded and ensured that reform was imposed upon bureaucrats in a top-down manner and from the outside-in. It should not be surprising that this resulted in much intra- and interbureaucratic unrest. In most cases, political debates pitched the Ministry of 17

Spink, “Possibilidades técnicas e imperativos políticos,” 15.

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Economy – in charge of reducing the fiscal deficit – against other agencies. But struggles also divided trade unions and generated a cleavage between reformists and obstructionists inside government, parties, and bureaucracies. Obstructionists had a strong case for resistance that reached beyond their corporate interests. They knew that drastic reductions in personnel would hurt important isles of efficiency and importing blueprints could result in increased inefficiency where new and old rules misaligned.18 In every case, these obstructionists put up a fight, for it was the resolution of these debates and political struggles that would decide the extent and nature of the reforms. 7.3.1 Argentina The overwhelming victory of first-generation reformists in Argentina can be captured in a few jaw-dropping statistics. In 1989, before the reforms, the national state employed 874,182 civil servants. By the end of the 1990s, when first-generation reforms had officially ended, the number had come down to 270,000.19 The major shift was decentralization from national to provincial level bureaucracies, which by the end of the decade employed two-thirds of the public servants and executed in practice half of the budget.20 Yet, the size of Argentina’s bureaucracy was still cut by around one-third considering both levels.21 Employment in state-owned enterprises, which declined from some 347,000 in 1989 to 66,000 already in 1991, massively transferred skilled personnel to the private sector. Few states in the region underwent such a formidable reduction of public employment at the national level. The context of hyperinflation in which President Carlos S. Menem arrived at Casa Rosada in July 1989 is key to understand these numbers. The economic reforms enacted were so rapid and profound that by October 1990 Argentina had already sold state-owned monopolies in five sectors – trains, telephones, commercial aviation, highways, and oil – and had pre-scheduled the privatization of water and electricity by 1993.22 “Argentina suffered one of the most comprehensive market reforms among developing countries,” which extended to state reform as well, meaning that “in less than five years the country witnessed a fundamental restructuring of its state–society relations.”23 Focused mostly on reducing the fiscal deficit, the administrative reform was led by the Ministry of Economy and coordinated by the Comité Ejecutivo para la Coordinación de la Reforma Administrativa (CECRA), which handled negotiations with trade unions, coordinated task forces in different ministries, 18 19 20 21 22 23

Brinks et al. The Politics of Institutional Weakness in Latin America. Chudnovsky and Doussett, “Cuando la falla en la implementación,” 325. Cao and Laguado, “La renovación en las ideas,” 143. Oszlak, “From Smaller to Better Government,” 416. Palermo and Novaro, Política y poder en el gobierno de Menem, 171. Etchemendy, “Construir coaliciones reformistas,” 675.

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and dealt with technical experts from the WB and the IADB. CECRA’s suggestions were analyzed and eventually approved by the President via decrees which bypassed the legislative, a procedure that was facilitated by a situation of economic emergency.24 The reforms aimed to reduce the salaries and benefits of public employees, while promoting their voluntary and compulsory retirement as well. The focus on downsizing was clear from the start. To push the reforms, CECRA pursued a divide-and-conquer strategy pitching the main unions of the public sector against each other. Naturally, unions progressively lost power during the reforms, losing affiliates, sits in congress, and part of their historic leverage within the Peronist party. But this would probably not have happened if union leaders had remained true to their allegiances. The Unión del Personal Civil de la Nación (UPCN), for example, compromised on the reform and was benefited from access to newly privatized pension funds and managerial control in sectors like health and tourism. Meanwhile, those who confronted, like the Asociación de Trabajadores del Estado (ATE), lost such benefits. In this way, the relatively reputed Argentine bureaucracy saw its autonomy corroded by a cunning executive who drew a wedge into its political coalition. The decision to confront or bandwagon had important ramifications in the long term. UPCN, for example, was entrusted with the virtual monopoly of labor representation in the Sistema Nacional de la Profesión Administrativa (SINAPA). SINAPA was instituted in 1991 with the purported intention of consolidating promotion by performance and training but it quickly became a Trojan horse for radical reformists. By changing the rules of the game, SINAPA was also instrumental in undermining bureaucratic autonomy, replacing hierarchical personnel and serving as an excuse for leaving positions vacant, while informal, precarious employment contracts outside the system became common.25 Another interesting characteristic of the early Menem reforms was the increase in the absolute number of public servants in political jurisdictions – e.g., secretaries and sub-secretaries of state – despite an initial rule that limited them to three units per level. The fact that those positions were allowed to grow in a context of unfathomable downsizing also underscores the politicization in the reform and the need to compensate entrenched bureaucrats and union leaders willing to change sides.26 24 25 26

Ghio and Echemendy, “Fugindo do perigo.” Orlanksy, “Reforma del Estado”; Chudnovsky and Dussett, “Cuando la falla en la implementación,” 326. The leader of the union of gastronomic workers, for example, was offered a position at the Superintedencia de Servicios de Salud, which supervised the assignment of 4 billion dollars among a union-run branch of the Argentine health system. In another case, the leader of the railway union was offered a top position in the new privatized company in exchange for the dismissal of 80,000 employees. These are only two salient examples of a widespread practice at the time (Volosin, La máquina de la corrupción).

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The informality of it all resulted in sprouting corruption scandals. Responding to pressure from the WB and domestic public opinion, mechanisms of budgetary control were introduced by law in 1992. Two relevant institutions were created: the Sindicatura General de la Nación (SIGEN) and the Auditoría General de la Nación (AGN), for internal and external monitoring of budgetary spending, respectively. Although these agencies served to legitimize previous reforms – and the argument for constitutional reform – they were still plagued by informality and lack of autonomy.27 Overall, first-generation civil service reforms in Argentina are harshly criticized by public administrators. According to Oscar Oszlak, this dismantling had five serious consequences: poor planning led to state deformity; wholesale privatization compromised state regulatory capacities; abrupt decentralization of functions left subnational units incapable to deal with the burden; demobilization and systematic sidelining of critical actors undermined citizens-as-users, and inflexibility of the reforms created a type of inertia that would seriously undermine second generation reforms.28 7.3.2 Brazil Brazil differs markedly from Argentina in the breadth and intensity of its first-generation reforms. Although Brazil underwent two cycles of reform as well, the first of these cycles encountered serious political difficulties which delayed and softened its implementation considerably.29 A first attempt at downsizing was heralded by President Fernando Collor de Mello (1990–1992), who tried some Argentine-style radical reforms during his administration. But both market and state reforms in the early 1990s were unsuccessful, not least because Collor faced the compounded opposition of a strong coalition of local businessmen, the developmentalist bureaucracy, the military, and several other actors bent upon slowing the pace and reducing the aims of the reform.30 Finally, the impeachment of Collor meant that actual first-generation reforms would arrive to Brazil relatively late, with the administration of President Fernando Henrique Cardoso, starting in 1995. The initiatives put forward by Cardoso also envisioned civil service reform as part of a broader package directed to reduce the scope of the state, and under the auspices of the IMF and the WB. The offensive was initially no less ambitious than others in the region, but Cardoso created the Ministry for Federal Administration and Reform of the State (MARE) and appointed a notable bureaucratic entrepreneur at the top: Luiz Carlos Bresser Pereira. 27 28 29 30

Orlansky, “Política y Burocracia.” Oszlak, “From Smaller to Better Government,” 418. Barzelay, “Designing the Process.” Fausto and Devoto, Brasil e Argentina, 488; Di Tella, “El sistema político brasileño en perspectiva argentina,” 158; Pang, The International Political Economy of Transformation, 133–37.

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Bresser introduced a big difference from the outset. He was a public administration professor and an active reformist with broad international networks. After becoming part of the cabinet, he was also named president of the Centro Latinoamericano de Administración para el Desarrollo (CLAD), the Latin America think tank that set the agenda of administrative reform. This put Brazil at the vanguard of the reformist movement but also meant that the person in charge of the process would have autonomy. Bresser’s legitimacy as a notable academic also gave him political leverage even vis-à-vis Cardoso. His vision of the reform, it would be revealed, was not as crude as others, and he had already incorporated the kind of nuance and sophistication that would become the hallmark of second-generation reforms. It is interesting to note that the fame and respect for Bresser were partly due to the reputation of the Brazilian public administration per se. Only a cadre recognized notable socio-economic status – comparable to the diplomacy or business associations – could have produced a leader of such authority. The most outstanding particularity of the Brazilian process, however, was that the reformist impetus faced coordinated and strong opposition from both within and outside the bureaucracy. This would become evident right after the approval of the Plano Diretor da Reforma do Aparelho do Estado in 1995, which laid out the policy of fiscal adjustment, amalgamating this opposing coalition. Counting with the support of the key ministries – like Casa Civil, Planejamento, and Fazenda – the Plano Diretor da Reforma divided the public sector into a strategic nucleus, exclusive activities, and non-exclusive activities, envisioning much more flexible contracts and the possibility of outsourcing for the latter. Yet, the stability of public employees soon became a highly politicized issue. Although some voluntary retirement took place, most civil servants resisted. Little support was gathered for institutional changes, even within the ministries that led the reform. While the top echelons approved budgetary cuts, the personnel able to produce real productivity gains within the bureaucracy was reluctant to cooperate.31 Obstructionists were backed by strong unions which formed broad coalitions in the public sector – like the Confederação dos Trabalhadores no Serviço Público Federal (CONDSEF), created in 1990 – and were ultimately able to close ranks with the Central Única dos Trabalhadores (CUT), the main union federation in Brazil. Eventually, obstructionists mobilized through unions and political influences and gathered enough power to block the reform at the level of Congress. MARE had prepared an amendment to the 1988 Constitution which Cardoso sent to the legislature on August 1995, but its treatment was delayed for years. Aware of the opposition, MARE moderated and started to push for more circumscribed and selective reforms.32 Discourse changed radically as well. 31 32

Rezende, “Por Que Reformas Administrativas Falham?” Lima, “As reformas administrativas no Brasil.”

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In the words of Bresser, the stated goal of these reforms became not only to eliminate personnel redundancies but also to increase the accountability and efficiency of the civil service by offering more stability to competent professionals.33 Despite all these attempts at renegotiating some reform, the political resistance marshaled by unions representing the interests of middle- and lowrank public employees was fierce and effectively blocked it. In retrospect, this was fortunate. Studies have demonstrated that the greatest problem Brazil was facing at the time was not the size of its bureaucracy per se, but the high cost of salaries, pensions, and bonuses, which were up to fifty percent higher than in the private sector. In any case, the element of fiscal adjustment – the core of first-generation reform – had to be postponed and dealt with more cautiously and gradually in the future. 7.3.3 Chile Unlike our first two cases, Chile was not a main target of WB or IMF conditionalitybased lending in the early 1990s and could, mainly because of this, avoid reforms of the great spectrum.34 Moreover, administrative reforms under the Pinochet regime – which included a unified salary scale, a statue for public employees, administrative decentralization of the state into regions, and a 30 percent reduction in the size of public employment – already profiled Chile as an “entrepreneurial market state” on the eyes of multilateral institutions. The power of the neoliberal wing during the dictatorship, as well as the political institutions they left behind, had constrained expansions in the public sector and left Chile in better fiscal standing. Therefore, administrative reform was less of a concern. President Patricio Aylwin (1990–1994), for example, kept state reform low in the agenda and showed important continuities with what was done under Pinochet. Although Aylwin’s concern with the topic is evident in the creation of the Ministerio de Planificación y Cooperación (MINDEPLAN) at the beginning of his term, overly confronting unionized civil servants would have undermined a still young and fragile democratic alliance visà-vis the military and right-wing parties. Aylwin promoted cooperation instead, starting with unionized workers of the National Association of Fiscal Employees who participated actively in the elaboration of an accord expanding performed-based remuneration.35 The broad recognition of civil servants as those distinctively capable of enhancing the efficiency of the public sector encouraged some entrepreneurs within the bureaucracy – a group that became known as “the archangels” – to 33 34 35

Bresser, “New Public Management Reform,” 14. Lardone, “The appropriation of the World Bank policies?” Marcel and Toha, “Reforma del Estado y de la gestión pública.”

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take reform into their hands and began a bottom-up transformation of areas like taxation, health, education, and prevision.36 As it would happen later on in Brazil, advocacy coalitions rising from within the bureaucracy responded to stability and meritocratic incentives by pushing a process of increasing sophistication, for example, in the measurement of performance indicators for budget elaboration and planning. The initial steps of the reform were piecemeal, however, and based on trial and error. A Plan Piloto de Modernización de Gestión en Servicios Públicos (1993), for example, was implemented to test a method of results-based evaluations on five to seven agencies before the system was extended beyond. The experiment took three years to produce some initial results which were thoroughly evaluated by the next administration before any large-scale implementation took place. Some of these projects were co-financed by the WB and the IDB, but always with strong participation of Chilean counterparts and imposing very little threat, if any, to the stability of public officials.37 When President Eduardo Frei arrived to power in 1994, he gave more impulse to the process, starting with a focused effort to reform justice. The agenda was pushed by a broad coalition including Agustín Edwards, president of Fundación Paz Ciudadana, and a few top political figures, but was mostly handled by the judiciary. Edwards, just like Bresser in Brazil, was the kind of public intellectual and reform entrepreneur that could remain autonomous visà-vis the executive and give the reform legitimacy needed in Congress and in the streets. Early in 1994, the Inter-ministerial Committee for Public Modernization was created, demonstrating that administrative reform beyond justice was still on the agenda. Progress, however, continued to be very slow. Laws had to be passed in 1995 and 1996 to start the process of reform in areas like budgetary planning, tax collection, and customs. The methodology of pilot projects that took many years to evaluate also delayed implementation. But reforms advanced slowly and steadily, which eventually resulted in a much better coupling with second-generation reforms. 7.3.4 Peru The contrast between Chile and Peru with regard to state reforms in the 1990s could not be starker (see Camacho and Dargent in this volume). When it comes to first-generation civil service reforms, the cases are polar examples. The context in Peru was even more severe than in Argentina or Brazil, given the concurrency of economic and political crises affecting the party and regime institutions, which meant that the critical juncture was carved deeper than elsewhere into existing administrative institutions. 36 37

Waissbluth, La reforma del Estado en Chile; Navarrete, “La modernización del Estado.” Filgueiras, “Los casos de los Ministerios de Hacienda y de Salud en Chile.”

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The destruction of bureaucratic capacity in Peru during the 1990s took place in a broader context of a party system collapse. This meant that the advocacy coalition led by political outsider Alberto Fujimori could exclude the bureaucracy affiliated with traditional parties – a strong force for stability in other cases – while still including powerful actors like international financial organizations, local and foreign businessmen, and a new technocracy concentrated in the high echelons of the executive.38 While these bureaucrats were somehow shielded by the Partido Aprista during the Alan García, and by Congress during the first months of the Fujimori administration, the attack on partisan and republican institutions soon became fierce, and civil servants became were openly targeted. Fujimori called them “parasitizing” and “idle” in public speeches, identifying “bureaucratization” as one of the biggest problems he was determined to resolve.39 In January 1991, an offensive plan to downsize the bureaucracy was enacted. The process was handled in a top-down, centralized fashion, by the Ministry of Economy – the agency that, as in other cases, most openly embraced fiscal reform. The plan consisted of two reinforcing measures. A first resolution promoted resignations across the board by offering compensation to civil servants who adhered to the plan within a specific time frame. The second measure consisted in allowing the dismissal of non-essential personnel with meager compensations starting in April. This threat led more than 30,000 public officials to resign voluntarily in a matter of months. By late 1991, this initial attempt at wholesale reform was slowed down due to continuing economic hardships, some reorganization of unions, and the growing confrontation between Fujimori and Congress. The Instituto Nacional de Administración Pública (INAP) started to gain some promising control over the reform, and some hoped it could stop, and even revert some measures. But Fujimori’s self-coup of April 1992 led to strong re-centralization of state reform. That same month regional governments were suppressed and replaced by provisional councils depending directly on the central government. Subsequent debates about constitutional reform sent the topic to the bottom of the agenda, but the reform continued steadily underway in a rather authoritarian fashion. Subsequent administrative reforms reflected the increasing verticalization of authority in Peru. They were handled directly by the Ministerio de la Presidencia (MIPRE), infamous for its authoritarian role, without much consultation with other organs. Subsequently, the 1993 Peruvian Constitution itself contemplated the centralization of the executive bureaucracy in the presidency, allowing MIPRE authorities to first absorb and then shut down the INAP in 1995. Overall, Peru underwent a cut in public employment from roughly 600,000 to 300,000 civil servants in this first wave of reform.40 38 39 40

Tanaka, “¿Crónica de una muerte anunciada?” Cortázar, Oportunidades y limitaciones, 43. Webb and Fernández Baca, Perú en números 1994.

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Although Peru is perhaps the clearest case of bureaucratic destruction during first-generation reforms, the literature does recognize some specific examples where bureaucratic know-how and prestige were preserved. These cases are the exceptions that prove the rule applied to all other areas of public administration was seriously wrongheaded. One such case is that of the Superintendencia Nacional de Administración Tributaria (SUNAT). Prompted by the urgent need to enhance tax collection Fujimori preserved the autonomy of this agency and devised a plan to reform it “from within.”41 The reform, therefore, came to include the training of new agents in the also newly created Instituto para la Administración Tributaria (IAT), and although several hundred of employees voluntarily resigned in 1991, the number of SUNAT agents was up again to its original 3,000 by 1993, with a ten-fold salary increase and the social prestige derived from Fujimori’s public support. This newly created elite corps simplified the tax system – from sixty to just nine tax categories – and tax collection increased considerably as a result.42 In this way, SUNAT became an example of how reforms could be done right although, as we shall see, the damage caused to the civil service was already great enough to undermine second-generation reforms.

7.4  second - generation

reforms

Second-generation reforms find their root in the New Public Management (NPM) school, a view of the civil service that took hold in OCDE countries during the 1980s. These ideas were famously summarized in a volume by David Osborne and Ted Gaebler (1992) which arguably set the stage for a change in the ideology of multilateral institutions by the mid- 1990s.43 According to this new mindset, “reinventing governments” required not a drastic downsizing and reduction in scope, but a more result- and citizen-oriented type of management that, by copying practices in the private sector, would bring critical gains in efficiency. These ideas disembarked in Latin American policy circles through a 1997 report by the WB noting that first-generation reforms had gone too far in the direction of reducing the scope of the state and had done too little to strengthen it.44 The new recipe was marked by what became known as the “four Es”: efficacy of public sector intervention, economic efficiency, equity in the distribution of expenditures, and generating a proper environment for the private sector. Poverty reduction, infrastructural investment, and good state regulation became at least as important as reducing the fiscal deficit. Administrative reform, in a way, started to decouple from economic policy. A concrete focus 41 42 43 44

Cortázar, Oportunidades y limitaciones, 50. Nickson, “Transferencia de políticas.” Osborne and Gaebler, Reinventing Government. Fukuyama, “The Imperative of State-Building.”

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on the civil service was promoted instead. This involved redesigning the functions of the staff, getting rid of overlapping hierarchies, streamlining organizational charts, and de-bureaucratizing. The view of the public servant also changed radically, with a new emphasis on meritocratic rules for recruitment and career advancement, competitive salaries, continuous training of personnel, and enhancing the technological infrastructure in the public sector to facilitate the management and flow of information. The second wave was different not only in the way multilateral institutions pictured the reforms but also in the way they approached actual countries. Although NPM became a necessary buzzword for getting funding from the WB, IMF, and IADB, the emphasis shifted from conditionality-based lending and forcing reforms upon states in need to the negotiation of legally binding agreements with specific bureaucracies, the use of ideological persuasion, and a particular emphasis in having civil servants “own” the reform.45 Bureaucratic autonomy, erstwhile the last line of defense against downsizing, now became a prerequisite for successful implementation. Because of the more active role that bureaucracies played during secondgeneration reforms, it would be unfair to continue dividing the two main coalitions of this era between reformists and obstructionists. These antagonistic camps did not polarize after fiscal adjustment policies were loosened and the discussion became more technical. During second generationreforms, we should talk instead of political reformers, on the one hand, and embedded or autonomous bureaucratic reformers, on the other. Collaboration between these two camps was frequent in order to surpass the hurdles old administrative traditions and patrimonialism supposed for NPM reforms.46 7.4.1 Argentina By the mid-1990s, the WB became increasingly concerned about the situation of the Argentine state, which was now smaller in size but remained highly inefficient. Reports issued in 1996 and 2000 highlighted that great “institutional weaknesses” remained, mainly regarding the capacity of the federal government to sustain in time the initial boost in efficiency that was achieved via downsizing.47 Embarked upon a set of economic policies that necessitated a continuous flow of foreign credit and investment, the response of the second Menem administration was swift. A Second State Reform has launched already in February 1996. The legal framework included a new focus on rationalization, particularly trying to eliminate remaining areas of overlap between national, provincial, 45 46 47

Riggirozzi, “The World Bank as conveyor.” Pollitt and Bouckaert, Public Management Reform. Lardone, “The appropriation of the World Bank policies?”

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and decentralized agencies. But key aspects of first-generation reform remained, such as high levels of informality, and a notable concentration of authority in the executive. The president created the Unidad de Reforma y Modernización del Estado by Decree and under the Jefe de Gabinete (Chief of Staff). Created by the 1994 Constitution, the Chief of Staff was a powerful executive official, now invested with notable authority to approve or reject so-called “modernization plans” and “strategic plans” that would be developed by different bureaucracies. The Chief of Staff was also a political appointee with no legitimacy within the bureaucracy. This often led to conflict with the ministries which slowed down and at times paralyzed the reform. The politicization and informality of the reform were a residue of firstgeneration reforms that Argentina could never get fully rid of and which purported serious problems. The timeline for bureaucracies to present their plans was too short, and delays related to inter-bureaucratic bargains undermined a few attempts at rationalization. Similarly, while some agencies were reorganized and integrated under bigger structures, the critical problem of overlap and duplication of activities was almost never taken care of due to intra-bureaucratic political struggles.48 Finally, while the formal public servant career – now regulated by SINAPA – seemed to be in line with fiscal goals, a whole parallel structure of informal and precarious state employment exploded when the climate of second-generation reforms allowed some expansion. From 1997 to 1999, short-term contracts and outsourcing to self-employed workers increased by 300 percent.49 The Second Reform also included some important initiatives that were not clearly related to bettering efficiency, monitoring, and planning. For example, a fund was created to assist those public workers who remained unemployed, as a sort of palliative for the unintended consequences of previous reform, and a bargaining chip with ATE, still a powerful union. Although the fund was never implemented, this is another example of how Argentina missed the chance to implement important second-generation reforms, diverting its attention to fix the problems created by first-generation ones. Most importantly, first-generation reforms had eroded the basic structures needed to build upon. The precarity of labor and growth of the informal sector, which resulted from wholesale privatization and downsizing, led to an inefficient growth of the state – many times tinged by clientelism – in areas beyond the scope of capable bureaucratic structures. Similarly, the concentration of power in the executive, which was essential to the success of the first-generation reforms, consolidated after the 1994 Constitutional Reform, making it ever more difficult to preserve bureaucratic autonomy. The failure of NPM in Argentina is captured in several studies. One contemporary study, for example, concluded that “…dysfunctional features which 48 49

Orlanksy, “Política y Burocracia.” Chudnovsky and Doussett, “Cuando la falla en la implementación de las reglas,” 326.

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existed prior to the reform continue to appear in more than 80 percent of the issues.”50 More recently, this assessment has not changed.51 7.4.2 Brazil As previously discussed, the 1995 plan for public administration reform became virtually stalled when Cardoso sent a project to Congress to amend the 1988 Constitution, generating much criticism and politicizing of the issue. This setback, however, led to a shift in focus at MARE, whose main goal drifted toward a more piecemeal implementation of concrete initiatives.52 Even before the 1997 WB report, MARE had been successful in implementing some gradual changes. For example, Bresser coordinated with the Escola Nacional de Administração Pública (ENAP) – the school of public officials – the training of public managers and budgeting and planning analysts, two new career paths in the public sector that remained absent in most Latin American bureaucracies.53 From 1995 to 1998, MARE also won, one by one, more than a hundred legal battles to derogate administrative rules in the areas of human resources, state purchases, and organization. These slow but consistent reforms set the stage for a second cycle of Brazilian reform started when Congress finally passed a law in 1997 regulating “social organizations” – new entities that would be functional to the decentralization of state activities. Even more importantly, the constitutional amendments proposed by MARE were also approved in 1998. Still, Cardoso had learned from his early experience that politicization could spoil all this progress. He was committed to lower the tone of the discussion, keeping second-generation reforms under a low profile, shielded under the umbrella of bureaucratic autonomy. The best way to do this was to shut down MARE, giving a political victory and some closure to the losers of the reform process. Bresser (2001) himself agreed that MARE was closed, and its responsibilities were transferred to the Ministry of Planning.54 Discretion was probably the best way to ensure the continuity of the process. Unlike most first-generation reformers in Latin America, Bresser was persuaded by the NPM framework from the beginning and perhaps more concerned with the citizen-user framework than he was with downsizing and fiscal adjustment, which were chiefly associated with MARE. Therefore, by changing discourse, Brazilian reformists were able to soothe concerns related to personnel dismissals and heavy policy transfers from outside. Instead, bureaucratic entrepreneurs were empowered 50 51 52 53 54

Bozzo et al., Cuaderno CEPAS No. 5. Oszlak, “From Smaller to Better Government.” Nickson, “Transferencia de políticas.” Barzelay, “Designing the Process,” 12. Bresser, “New Public Management Reform.”

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inside each of their autonomous units, which allowed for a more decentralized, piecemeal management of the reforms.55 Progress in this second phase remained slow but steady. In 2000, for example, Cardoso implemented a national survey to evaluate user satisfaction with public services and created – by decree – a system to evaluate user satisfaction in the future, including quality standards to be attained across the federal bureaucracy.56 The new focus on public service accountability was also accompanied by a very strong pro-democratic discourse which emphasized the necessity to open erstwhile authoritarian bureaucracies to the citizenship as a necessary step toward a full-fledged consolidated Brazilian democracy. The narrative was very successful in legitimizing second-generation reforms. The public debate shifted from the stability of public employees toward the existence of authoritarian enclaves within the bureaucracy, which even generated incentives for insiders to reform in order to preserve their social prestige. This discursive shift toward the necessity of democratizing the bureaucracy was a distinctive feature of the Brazilian administrative reform process when compared to its neighbors. Contrary to the expectations of many bureaucrats, it also reinforced bureaucratic autonomy by enhancing their reputation and expanding their political coalitions. 7.4.3 Chile Almost in parallel to the WB report issued in February 1997, Frei launched the Plan Estratégico para la Modernización de la Gestión Pública, which contained in it many of the reforms the archangels had been pushing for years.57 As with previous experiences, the process started with pilot projects which only after careful evaluation evolved into more institutionalized Planes de Mejoramiento de Gestión. Unlike the programs of the early 1990s, second-generation reforms in Chile were owned by the state to a much greater degree. For example, a Programa de Coordinanción de Proyectos de Gestión (1997), a Programa de Evaluación de Proyectos Gubernamentales (1997), and a Programa de Mejoramiento de Gestión (1998) were financed in their entirety by the Chilean state, ensuring almost complete autonomy from WB pressures and institutional blueprints. These programs provided general frameworks but the details about performance indicators and modernization projects were subscribed by the agencies to be reformed. Results, therefore, grew out of much intra-bureaucratic, inter-bureaucratic, and even executive-legislative cooperation. Given the gradual nature of administrative reform in Chile during the early 1990s, the continuity between first-generation and second-generation reforms 55 56 57

Barzelay, “Designing the Process,” 13. Nassuno, “A administração com RSP foco no usuário-cidadão.” Waissbluth, La reforma del Estado en Chile.

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was notable. Yet, this new wave helped embolden the Chilean reform process, in particular by legitimizing a more technocratic approach the country had already taken. The 1997 plan introduced by Frei, therefore, presented Chile already as a paradigm of the NPM school; a country that foresaw the conclusions that CLAD and multilateral institutions were discovering only by then.58 In important respects, Chile was truly at the vanguard of NPM in Latin America. Budgetary planning is perhaps the clearest example. In 1998, the Dirección de Presupuestos developed a program for strategic planning which included multi-year budgetary forecasts and commitments, something rather unseen in the rest of Latin America.59 A clear downside of the Chilean reform, however, was the democratic deficit that any highly technocratic reform entails. In this regard, a democratic narrative might have played a positive role, just as it did in Brazil. On the one hand, it generated incentives for bureaucrats to demonstrate efficiency and transparency to the private sector and civil society. On the other hand, being led by the left-wing coalition, the reforms were seen as an opportunity to increase accountability and thus viewed positively by the public. Also due to the graduality and long-term nature of the reform calendar, many of these reforms continued to take place under President Ricardo Lagos (2000–2006). The main drivers of reform under Lagos were not his own agenda, nor the top-down pressure of multilateral institutions, but a consistent request for transparency and accountability from the citizenry after a corruption scandal in the Ministry of Public Works. This case serves as a reminder that even corruption scandals and politicization can have a relatively positive impact on reforms, albeit under very particular conditions. All in all, after first- and second-generation reforms, Chile not only avoided drastic downsizing; it had registered a 20 percent enlargement of its public payroll amidst increased efficiency. Brazil is the only other Latin American country that registers such an enlargement, while the rest of the region underwent reductions from 5 to 40 percent throughout the 1990s – Argentina and Peru, as we have seen, are among the most radical examples.60 7.4.4 Peru The second phase of reform in Peru coincides with the second term of Fujimori, who was reelected in 1995. By that time, it was clear to officials and public opinion that autonomous entities within the public administration who skipped first-generation reform blow, like SUNAT, had become the only “isles of modernity” left and awaiting to be mimicked.61 58 59 60 61

Marcel and Toha, “Reforma del Estado y de la gestión pública.” Filgueiras, “Los casos de los Ministerios de Hacienda y de Salud en Chile.” Oszlak, “El servicio civil en América Latina y el Caribe,” 8. Ordoñez, “La reforma Administrativa en el Perú.”

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These few so-called “enclave reforms” contrasted with attempts at wholesale reform and downsizing which were seriously questioned, even by the President himself. By 1995, Fujimori found those measures had created serious bottlenecks and began to hire new personnel under a different type of contract to bypass self-imposed limits.62 Through these means, the public administration had started to grow again to the extent that pre-reform levels of public employment would be achieved before the end of the decade.63 The new focus, thus, tuned to modernization, while fiscal concerns were relegated. In terms of decision-making, the Ministry of Economy was sidelined, and more control was granted to the Presidencia de Consejo de Ministros (PCM) and decentralized to the ministries and entities to be reformed. Fujimori counted now with a sound majority in Congress, so a law was passed in late 1995 which delegated legislative functions on the executive to modernize all ministries, which would expire in December 1996. From the beginning, however, the program was marred with ambiguities. While on the one hand, there was an emphasis on the autonomy of bureaucratic enclaves and incentives for self-reform, the PCM team hired consulting experts paid by development cooperation funds and coming from the private sector. In a blatant attack against bureaucratic autonomy, private and foreign reformists tried to impose indicators of performance promoted by multilateral agencies, which were seen by civil servants as yet another way for the Presidency to exert control over them.64 International pressure and competition between the Ministry of Economy and other ministries eventually led to politicization. The Peruvian press suggested that the new reform could entail a new wave of voluntary retirements – this time of up to 200,000 civil servants. Amidst a heated debate, public opinion soon turned against second-generation reforms. In the end, Congress, the President, and the ministries ended up abandoning the reform plan, aligning with public opinion and activists from the bureaucracies directly affected by the plan – some thirty entities which would have disappeared as a consequence of rationalization and streamlining. The issue had become so sensible that Congress had to reject an already approved loan by the IDB, which the executive had previously negotiated with much effort. The contradictions that marred second-generation reforms in Peru point to the importance of sequencing. It was arguably the reminiscence of the first reforms that scared public opinion and made the second wave politically untenable. Finally, the reform process was not sufficiently institutionalized and decentralized to be sustained in time by bottom-up forces from within the bureaucracy. The reform was conceived as an executive project centralized in the 62 63 64

Cortázar, Oportunidades y limitaciones, 65. Echebarría and Cortázar, “Public Administration and Public Employment Reform,” 137. Cortázar, Oportunidades y limitaciones, 72.

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upper echelons of the administration. Therefore, with Fujimori swayed away from this policy goal, and the expiration of the legislative delegation by the end of 1996, reform attempts found a sudden end.65

7.5  conclusions This study of civil service reforms in Latin America during the 1990s illustrates, first and foremost, many possible forms of collaboration between comparative historical analysis and public administration, which could be further explored. These areas of overlap are both methodological and theoretical. Methodologically, it is worth pointing to insights about critical junctures, path dependence, and sequencing, which undergird all four narratives across this chapter. First of all, critical junctures mattered. In all our cases like-minded reforms concurred in moments of regional crisis. In Argentina, a case of serious economic crisis, and in Peru, a case of overlapping economic and institutional crisis, international pressure more easily pushed wholesale first-generation reforms. Dodging both economic and political storms, Chile more easily avoided a rupture with the past. Yet, Brazil could have ended down the former path be it for the severity of its economic and political crisis, and yet did not, pointing to the importance of other factors as well. Secondly, previous trajectories mattered as well. Chile and Brazil, our two cases of success, already had relatively professionalized bureaucracies before the 1990s. This reputation arguably gave them an edge over others. With the exception of a few small enclaves, the Peruvian bureaucracy did not count with a similar reputation. But again, this relationship is not deterministic. Argentina counted on a relatively strong bureaucracy both respected and initially backed by a political coalition, and yet failed to reform successfully as well. This points to the importance of contingency. Whether bureaucracies could preserve their autonomy did not depend exclusively on previous institutional legacies or the nature of structural shocks, but rather on fortuitous strategic interactions during the juncture. The cohesiveness of the Brazilian autonomist coalition, and the breakup of the Argentine one, were unforeseeable. Thirdly, sequencing also mattered. The relative resilience of Brazilian and Chilean bureaucracies vis-à-vis first-generation reforms determined, in turn, the feasibility of further reforms. Conversely, in Argentina and Peru, where first-generation reforms hit hard, second-generation ones became politically and practically impossible to implement. The importance of this sequence becomes evident when we try to flip the order of events by virtue of a thought experiment or speculate about a counterfactual where first-generation reforms never have happened. Theoretically, all the previous insights point to the autonomy of the civil service – given its reputation and capacity to build political coalitions – as a key factor, 65

Barzelay, “Designing the Process.”

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at the center of this story.66 The issue of state autonomy has also been of key importance in the comparative historical tradition, but attention to it has ebbed and flowed, and the idea is rarely applied in the field of public administration.67 In our story, bureaucratic autonomy is key because it explains both the preservation of prestigious, meritocratic bureaucracies from first-generation reforms and the successful implementation of second-generation reforms from within. Conversely, the vulnerability of civil servants to the pressure exerted by chief executives and multilateral financial institutions led to less auspicious outcomes. This lends credence to the idea that positive feedbacks are possible when strong bureaucracies are able to build fiscal, human, and organizational capacity, while shielded from “powering reforms” (see Bersch in this volume). The latter is likely to create policy volatility and produce negative policy cycles, also reproducing in the long term.68 Conversely, as it turns out, gradualism, stability, and consistency, seem to be important predictors of success. Katherine Bersch aptly captures these ideas by referring to the fable of the tortoise and the hare. The tortoise, self-aware of its (cognitive) limitations, used gradualism and consistency, the weapons of the slow, to get to the goal.69 This chapter contributes with a complementary insight: just as tortoises can be slow and survive because of their shell, so is bureaucratic autonomy necessary to underpin processes of slow reform. Other basic comparisons between these same four cases question the validity of alternative interpretations. For example, the influence of the military during the Fujimori administrations in Peru contrasts with their radical exclusion from politics in Argentina, suggesting that the armed forces did not play a stabilizing role in the context of administrative reforms – as one might be led to think when analyzing only Brazil and Chile, two countries where the military remained relatively strong. Similarly, the concurrency of administrative and economic reform in Brazil contrasts with their clearer separation in the case of Chile and shows that the urgency of state reform due to a critical economic context did not necessarily doom public servants – as one might be led to think if looking only at Argentina and Peru. Yet, the conclusions drawn from these four cases do not automatically generalize to the rest of Latin America. Future research should explore this possibility. That abrupt downsizing was a mistake seems to be corroborated by looking at countries like Costa Rica and Uruguay, for example, where reforms had only marginal effects on public employment. Both these have retained a relatively large payroll – as a percentage of their population – and focused instead on enhancing meritocratic rules of recruitment and promotion. 66 67 68 69

Carpenter, The Forging of Bureaucratic Autonomy. Evans et al., Bringing the State Back In. Chudnovsky et al., “Construcción de capacidades estatales.” Bersch, When Democracies Deliver, 6.

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8 The Devil Hides in the Details Variations of Conditional Cash Transfers Programs in Latin America* Luciana de Souza Leão

In the 1990s, Brazil and Mexico initiated what some have called a “development revolution from the Global South” with the implementation of Conditional Cash Transfer programs (CCTs). The turn to CCTs was considered a revolution because it diverged from the historical emphasis that Latin American countries had placed on universal benefits, which were shown to be ineffective in reaching the most vulnerable populations, and shifted priority to distributing money and resources exclusively to families classified as poor.1 Over the years, Brazil’s Bolsa Família and Mexico’s Progresa-Oportunidades have garnered the attention of scholars and policymakers worldwide,2 and they have been credited with ushering in a “new generation” of “pro-poor” poverty policies by World Bank economists and critical development anthropologists alike.3 In this chapter, I take the case of CCTs as an invitation to examine a tradeoff faced by many Latin American neoliberal states – their promise of making states both more efficient and more inclusive. More specifically, I use the case of CCTs to explore variations in how the Brazilian and Mexican states understood and acted on the promise of increasing inclusivity in official safety nets by making poverty management more efficient. I show that while Brazil and Mexico equally chose CCTs as their main strategy to reinvent social policy provision for poor families in a neoliberal era, they did so for different reasons, which resulted in the implementation of programs that followed distinct *

1 2 3

The author would like to thank Elisa Vasconcellos and Sara Gleason for their meticulous work in this project. Fieldwork for this research was supported by an IDRF fellowship from the Social Sciences Research Council. Hulme, Hanlon, and Barrientos, Just Give Money to the Poor. De La O, Crafting Policies to End Poverty in Latin America. Rawlings, “A new approach to social assistance”; Ferguson, Give a Man a Fish.

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operational logics. In Mexico, the state invested in a very rigid and precise regime to select and monitor poor families, while Brazil adopted a more loose and dynamic strategy. I show that these differences depended on the strategies of political legitimation of each CCT and were influenced by the distinct approaches to neoliberalism adopted by each country. My findings are based on the analysis of a rich set of empirical data, including approximately 10,000 pages of official documents and 100 in-depth interviews with Brazilian and Mexican political and bureaucratic elites conducted in Brasília, Rio de Janeiro, São Paulo, and Mexico City, between 2014 and 2017. The chapter is organized as follows. I start by introducing the innovations in the approach to poverty reduction represented by CCTs, focusing on how these programs can be used to investigate variations in approaches to neoliberalism in Latin America. The second section presents the operational differences between Brazil’s Bolsa Família and Mexico’s Progresa-Oportunidades, highlighting their distinct targeting and monitoring mechanisms. In the third section, I explain how these operational differences relate to the distinct challenges that Brazil and Mexico faced to legitimate their programs. In the final section, I summarize my findings and how they contribute to a better understanding of neoliberal states in Latin America.

8.1  conditional

cash transfer programs :

a neoliberal way to fight poverty ?

For most of the twentieth century, Latin American states played a highly interventionist role in the region’s socioeconomic modernization process.4 During this period, many countries in the region implemented a diverse set of welfare institutions, which intended to provide social benefits and rights to a large portion of the population. Yet, in most cases, the social and labor legislation only guaranteed benefits to workers whose occupation was formally recognized by law, effectively excluding millions of individuals working in informal, rural, and domestic labor from its provisions.5 By the late 1970s, it was clear that the largest part of society had not benefited from this developmental model, and that there was a need to change the corporatist and clientelistic models of access to social welfare systems.6 The severe debt crisis of the 1980s and the beginning of the re-democratization process pushed many countries in the region to redefine their development strategy. At that time, neoliberalism was in vogue and influenced most state reforms in Latin America. This fact combined with persistent criticism of state inefficiency and rent-seeking bureaucracies made the shrinking of Latin 4 5 6

Ferraro and Centeno, eds., The Rise and Fall of the Developmental State. Schmitter, Interest Conflict and Political Change in Brazil; Haggard and Kaufman, Development, Democracy, and Welfare States. De Souza Leão, “A Double-Edged Sword.”

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American states seem to be a good option. As Reis put it, “less state and more society became the prevailing ideology.”7 Moreover, the modernization discourse had moved to elevate the value of markets, free enterprise, and internationalism, while disparaging state interventionism as outdated and ineffective.8 Specifically, the so-called Washington Consensus called for governments to scale back their social policy ambitions and focus instead on the neediest sectors of society.9 In Latin America, this push to reinvent social policy provision was coupled with experimentation with targeted anti-poverty programs, such as Conditional Cash Transfer programs (CCTs). Contrary to the historical focus on the universal provision of goods and services, the idea in CCTs was that the state would combat poverty by transferring small amounts of cash only to poor families, but condition receiving this cash on families following certain conditionalities, such as taking their kids to health check-ups and to school. The idea, then, was to combat poverty in the short-term, while creating the conditions to break the intergenerational transmission of poverty in the long run. As has been extensively documented, CCTs started timidly in Brazil and Mexico in 1995, and by 2018, they “seemed to be everywhere,” and 26 out of 33 countries in Latin America had adopted a CCT.10 As expected, the rise of CCTs and the considerable funding that they have attracted has not come without criticism. At the same time, CCTs have been celebrated by the international development community “as close as you can come to a magic bullet in development,”11 and have been praised for their impact on reducing poverty.12 CCTs have also been described as a “best-fit” for neoliberalism,13 as well as criticized for “being mere palliatives” for poverty reduction,14 and for serving mainly to “accommodate the impacts of neoliberal reforms.”15 In this chapter, it is not my intention to give a definitive answer on whether CCTs are neoliberal or not, nor to examine how they might have served the neoliberal agenda in Latin America (see Ladhani and Sitter 2018 for

7

Reis, “O Estado Nacional como desafio teórico e empírico.” Diniz, Globalização, Estado e Desenvolvimento. 9 Borges, “Neoliberalism with a Human Face?”. 10 ODI, “Cash transfers: What Does the Evidence Say?”; Sugiyama, “The Diffusion of Conditional Cash Transfer Programs in the Americas.” 11 Adato and Hoddinott, Conditional Cash Transfers in Latin America, 4. 12 Scholarly research has shown that CCTs have been effective in reducing the rate and, above all, the intensity of poverty (Medellin et al. 2015). Although there is evidence of inclusion and exclusion errors, CCTs have reached the poorest people, achieving targeting levels greater than those of most (if not all) previous social programs (Lindert et al. 2007). In addition, CCTs have had positive impacts on health service use, have reduced child labor and increased school enrollment and attendance in many countries (Fiszbein and Schady 2009). 13 Saad-Filho, “Social Policy for Neoliberalism.” 14 Huber, “Options for Social Policy in Latin America.” 15 Coraggio, “Crítica de la política social neoliberal.” 8

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a summary of this debate).16 Instead, my goal is to build on the case of CCTs to examine some of the paradoxes and national variations that characterized social policy provision in the neoliberal period in the region. The three defining characteristics of CCTs – i.e., targeting, distributing cash, and conditionalities – provide fertile ground to examine these questions. First, CCTs were targeted interventions. This means that instead of all citizens being eligible to receive the same publicly provided benefits, only those that meet certain criteria – in the case of CCTs, being identified as poor – received the government transfer. By focusing on targeting, CCTs embodied the neoliberal promise of making poverty reduction efforts more efficient, nimble, and cheap (see the chapter by Riggirozzi in this volume), and in doing so, they also fitted the aim of controlled spending and fiscal adjustment that characterized the neoliberal wave in Latin America.17 However, as I will show in detail below, targeting in CCTs was a broad policy idea that could be interpreted and operationalized in distinct ways. In some contexts, like in Mexico, targeting was indeed used as a way to make anti-poverty efforts more efficient, and in practice, this was translated into the state seeking to avoid including non-poor families in the program. In other contexts, like in Brazil, targeting was used instead to increase inclusivity by serving as a tool to find individuals who had been historically excluded from official safety nets, and the state sought to avoid excluding poor families.18 Hence, while all CCTs targeted the most vulnerable populations rather than aiming for universal provision, the scope and goals of targeting were highly uneven in the region. The second novel characteristic of CCTs was that they provided cash to beneficiaries. By “simply giving money to the poor,” CCTs envisioned to dismantle previous anti-poverty initiatives that involved complex infrastructure building, food subsidies, widespread service provision, and that were associated with clientelism and patronage.19 However, since their inception, the promise of “scalingback” anti-poverty efforts was met with the reality that CCTs’ successful operation required considerable state infrastructure to include and manage extremely hard-to-reach populations. Thus, while CCTs have been criticized for helping to dismantle welfare infrastructures in Latin America, in reality, CCTs required building a complex operational system to reach the extremely poor, and they are often built on existing welfare structures.20 Furthermore, as I will demonstrate below, CCTs differed greatly in their conceptualization of what “cash distribution” was supposed to achieve, varying from a short-term 16 17 18 19 20

Ladhani and Sitter, “Conditional Cash Transfers.” For example, the Brazilian and Mexican CCT cost only 0.5% of the GDP of each country. Paiva, Falcão and Bartholo, Do Bolsa Família ao Brasil Sem Miséria. Yaschine, The Changing Anti-Poverty Agenda in Mexico. Valencia Lomelí, “Conditional Cash Transfers as Social Policy in Latin America”; Jaccoud, Bischir and Mesquita, O SUAS na proteção social brasileira.

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solution that would allow for building human capital to a first step toward building a more comprehensive safety net for the poor.21 Third, CCTs required beneficiaries to follow conditionalities to receive the cash transfers. In most cases, the educational and health conditionalities were thought of as a form of behavioral incentives for families to invest in their own human capital, and thus to support them to get out of poverty “on their own.” Perhaps, this is the main reason why CCTs have been heavily criticized for punishing rather than helping the poor and for serving as a neoliberal emblem of transferring to the individuals the responsibility for their own well-being. However, as it became clear after the initial years of CCT implementation, conditionalities could also be used as a way for the federal government to verify if local governments were providing mandatory social services in health and education, and to act when this was not the case. Operationally, therefore, depending on the perceived goals of conditionalities, CCTs could vary in how strongly they prioritize monitoring them, as well as on the punitive measures taken when families did not follow conditionalities.22 In sum, when it comes to understanding the nuances of neoliberal policies in Latin America, the devil hides in the (operational) details. Put differently, underneath the broad umbrella of CCTs, national programs had distinct characteristics that could be considered more or less neoliberal. In what follows, I will further elaborate this point by going back to the origins of CCTs and focusing on the early history of the two pioneering programs, Progresa-Oportunidades in Mexico and Bolsa Família in Brazil that have been credited with ushering the CCT diffusion in Latin America.23 I demonstrate that while the Mexican and Brazilian states equally chose CCTs as their main strategy to reinvent social policy provision, they did so for different reasons, which resulted in the implementation of programs that followed distinct operational logics.

8.2  cct

variation : distinct methods of

targeting and monitoring the poor

In the very early days of Progresa-Oportunidades and Bolsa Família, policymakers in Mexico and Brazil grappled with questions of policy design and implementation. How would they know who was poor and where to find them? Once the state found these poor individuals, how would they distribute cash and monitor their behavior? These fundamental questions cascaded outward, forcing political actors to address several others. Considering that these two countries shared a history of local-level political clientelism,24 how would policymakers make sure 21 22 23 24

Soares, “Brazil’s Bolsa Família: A Review.” Borges, “Neoliberalism with a Human Face?”. Tomazini, “Beyond Consensus.” Hilgers, Clientelism in Everyday Latin American Politics; Susan Stokes et al., Brokers, Voters, and Clientelism.

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that CCTs would not be used for electoral purposes? And how would they be able to show to distinct audiences that CCTs were not corrupt? In answering these questions, it was clear that the decision about how the poor would be identified and monitored would be a key aspect for the legitimation and successful implementation of both programs. Yet, in the two contexts, a large part of the target audience for CCTs did not have an identity card and circulated mostly in the informal sector, making the task of “finding the poor” particularly challenging.25 Hence, to implement their CCTs, the Mexican and Brazilian states had to: 1) create a targeting system to first find and then monitor poor families, 2) generate detailed information about these families at the individual level, and 3) create beneficiary datasets to manage this information. Faced with the same challenge, the Mexican and Brazilian states chose different solutions for targeting and monitoring their policies. 8.2.1  Mexico’s Progresa-Oportunidades: Complex Targeting and Strict Conditionalities In Mexico, the federal government developed a governance system to find and monitor poor families, which was based on geographical targeting and meant to minimize inclusion mistakes. To identify poor families, Progresa’s team first used census data to identify poor localities in Mexico,26 where the probability of making targeting mistakes (i.e., including non-poor individuals in Progresa) was lower. Second, Progresa’s staff traveled to these poor localities and implemented a census-like survey in all households, asking questions about household demographics, quality of housing, and access to public goods, among others. With a comprehensive set of information in hand, thirty-three variables were used to run statistical analysis to predict which families fell under a poverty threshold. Only after this decision was made were the families categorized as poor offered to join Progresa. However, since it was organizationally complex for the federal government to go back to all poor localities and implement this initial survey, the poverty status of families was only recertified after 6–8 years.27 Perhaps one of the most controversial decisions regarding Mexico’s geographical targeting referred to the choice of excluding from the program the localities that did not have (or that were too far away from) schools or health clinics, since families in these localities would not be able to follow conditionalities (co-responsibilidades in Spanish). In practice, this meant that, initially,

25 26

27

Hunter and Sugiyama, “Transforming Subjects into Citizens.” Mexico defines poor localities as those that fall below an Index of Marginalization. Mexico’s National Council of Population calculates the Index of Marginalization by “considering the % population age 15 and older who are illiterate; do not attend elementary school; live without indoor toilets, electricity, or access to water; live with overcrowding, dirt floors, or in localities with less than 5,000 inhabitants; and have a household income lower than 2 minimum wages.” Dávila Lárraga, “How Does Prospera Work?”.

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Progresa chose to exclude from the implementation of the program precisely the extremely poor families that were in regions without schools or health clinics.28 Although most, but not all, of these localities would eventually be incorporated into the program, this choice reveals the centrality that was given to conditionalities as a key feature of the Mexican CCT. Accordingly, a very complex system was put into place to verify if families were following through with their co-responsibilidades. First, Progresa staff required that beneficiaries register all family members with designated health clinics and schools in order to complete their enrollment in the program. Then, doctors and teachers recorded household attendance at clinics and schools, and the information collected was then sent “every two months to Mexico City,” where Progresa staff verified whether the family was really in the program and whether it had complied with program requirements in the last two months.29 Depending on this information, the federal government decided on the level of payment for each family, which also varied according to household characteristics. This means that Progresa was designed to follow closely the behavior of poor families in relation to their educational, nutritional, and health conditionalities – checking, as an operational mid-level staff explained to me, “if beneficiaries were doing what they were supposed to do” every two months. Finally, whenever Progresa staff discovered that a family was not following through with its conditionalities, this family’s benefits were immediately interrupted, until an investigation was put into place to find out if they were compliant or not. 8.2.2  Brazil’s Bolsa Família: Simple Targeting and Loose Conditionalities In Brazil, the state did not adopt such a comprehensive system to find and monitor poor families. Contrary to Mexico, the federal government used the census not only to identify poor localities in the country but also to estimate how many poor families there were in Brazil, through a simple measure of income per capita. Through this strategy, the Ministry of Social Development (MDS) – responsible for implementing the Bolsa Família, planned to find poor families even in localities that were not considered poor at an aggregate level. Second, MDS instructed municipalities to register all low-income families that fit a “broader poverty profile”30 in Bolsa Família’s beneficiary dataset on an ongoing basis. In the registration process, families self-reported their income and the number of individuals living in the same household,31 and only income 28 29 30 31

Rocha and Escobar, Pobreza, transferencias condicionadas y sociedad. Dávila Lárraga, “How Does Prospera Work?”. Measured as 50% of the minimum wage per capita, which is considerably higher than Bolsa Família’s poverty threshold – around 25% of the minimum wage. Soares, Ribas, and Osório,“Evaluating the Impact of Brazil’s Bolsa Família.”

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per capita that was used by the Bolsa Família team to select eligible families that fell under the program’s poverty line. Since this targeting strategy increased the risk of patronage and fraud,32 the federal government also required that all data entered into the beneficiary database be updated every two years or whenever there was a change in income, family composition, or address.33 In a radically different approach to conditionalities, in Brazil, the federal government did not prioritize monitoring them. In fact, in the early years of the program, many families became Bolsa Família beneficiaries before the federal government had put an informational system in place to monitor their conditionalities.34 Further, the state followed conditionalities less periodically than what was done in Mexico. In Brazil, first, schools and local health clinics sent the municipality the attendance records of beneficiary families. Then, this information was consolidated by the municipality, which was responsible to send it to the Ministries of Education and Health. Finally, these two ministries prepared bi-monthly (education) and bi-annual (health) reports to the Social Development Ministry, which was responsible for linking this information to the beneficiary dataset, in order to invoke consequences for non-compliance. In Brazil, however, non-compliance was understood as a sign that a family faced additional vulnerabilities, and thus benefits were only suspended after a social worker verified the reasons for the family to be failing to uphold their co-responsibilities.35 Through these different strategies to identify and monitor poor individuals and their behavior, the Brazilian and Mexican states implemented conditional cash transfer programs that were quite different. In Brazil, the state developed a bottom-up targeting system, based solely on self-declared income per capita, that put less emphasis on monitoring conditionalities. In Mexico, on the other hand, the state developed a top-down targeting system that captured a multidimensional image of poverty at the initial moment of entry into the program, and that was designed to follow participants’ compliance with conditionalities.

8.3  reputational

dilemmas : the trade -

off between efficiency and inclusion

Why did Brazil and Mexico develop such different approaches to their CCTs? To answer this question, it is necessary to go back to the early days of Progresa 32 33 34

35

Handa and Davis, “The Experience of Conditional Cash Transfers in Latin America.” Hellmann, “How Does Bolsa FamíliaFamília Work?”. While by 2013, 100% of the municipalities had informational systems implemented, in the first four years of the program (2003–2006), municipalities and schools progressively entered the informational system. In 2004, 70% of municipalities reported beneficiaries’ attendance in education, and only 21.9% did so in Health. By 2006, while almost 100% of municipalities reported compliance with educational conditionalities, 81.7% did the same for health (own calculation, MDS data). Bischir, “Mecanismos federais de coordenação.”

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and Bolsa Família to examine how stark differences in the contexts in which each CCT was implemented influenced the choices made by policymakers. In what follows, I will argue that while there were similar fears of corruption, the need to fight poverty under fiscal constraints, and implementation challenges in the two contexts, Mexican and Brazilian state officials had different understandings of the goals of CCTs and faced distinct legitimation challenges to implement them. In turn, these differences shaped the forms that each CCT took by making certain operational options and legitimation strategies seem more viable than others – especially in the initial years of each program. To understand the challenges faced by policymakers, it is worth recapping a trade-off that every social policy targeting faces, i.e., excluding eligible beneficiaries versus including ineligible individuals (by mistake or because of data manipulation). This is because similar to medical testing that provides positive vs. negative results (e.g., with pregnancy home testing, you are either pregnant or not)36, when designing poverty targeting systems, policymakers had to choose if they preferred to avoid having false positives (Type 1 error) or false negatives (Type 2 error). As with every trade-off, there were rewards and penalties associated with each option, which created different reputational dilemmas for programs, and required different strategies for CCTs to project an image of objectivity, precision, and political neutrality.37 The strategies adopted by Mexico and Brazil to make Progresa and Bolsa Família governable reflect the choices made by each state regarding this trade-off. It is to these that I now turn. 8.3.1  Mexico: Legitimation through Efficiency In Mexico, when deciding how to find and monitor poor families, policymakers prioritized minimizing inclusion mistakes (i.e., they prioritized avoiding false positives, or type 1 errors), which was considered crucial to legitimating Progresa in a political environment marked by a general suspicion of povertyalleviation efforts. To understand this decision, it is necessary to situate it in Mexico’s political and institutional context in the initial years of the program. Decisions regarding Progresa’s initial design were made between 1995 and 1997, during the tenure of President Ernesto Zedillo, who took office in a context of great economic and political instability due to the 1994 Peso Crisis, the indigenous Zapatista rebellion in the state of Chiapas and widespread dissatisfaction with what was considered an undemocratic political regime.38 Zedillo was also the first president to enter office after the inauguration of the North American Free Trade Agreement (NAFTA) on January 1st, 1994. This represented a continuation of the orthodox economic policies implemented since 1982 (see the chapter by Knight in this volume), but it dramatically changed the conditions for 36 37 38

Robinson, “Bringing the pregnancy test home from the hospital.” Carpenter, Reputation and Power. Yaschine and Orozco, “The Evolving Antipoverty Agenda in Mexico.”

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the design and management of social policies because of a perceived necessity to promote competitiveness through human capital development, legitimating the fight against poverty also in explicitly macroeconomic terms. (For an explanation of the link between the macroeconomic changes brought by NAFTA and anti-poverty policies, see Cortés and Rubalcava 2012).39 As part of what became known as the PRI’s “technocratic group,” Zedillo formed a cabinet whose views were congruent with his own academic training in economics at Yale University. This was especially true of his Finance Ministry (SHCP), the agency that would be responsible for leading the Mexican economy out of the 1994 Peso Crisis, and that, together with Mexico’s Population Council (CONAPO) would make the initial decisions about Progresa. As such, Zedillo recruited a mix of politically appointed US-trained technocrats led by Santiago Levy, who came to the government after writing a prestigious report about poverty at the World Bank;40 as well as career civil servants who were recruited from CONAPO,41 led by José Gomez de León, who, while himself Harvard-trained, had a background in demography, sociology, and statistics and whose multi-disciplinary team consisted mostly of Mexico-trained staff.42 These actors aimed to legitimate Progresa as being efficient and free from political interferences. Cultivating this reputation involved institutional and technical decisions. First, to show that they would change business-as-usual in Mexico, Progresa was not affiliated with the Social Development Ministry (SEDESOL), which was associated with local-level political clientelism, and the program had insulated, centralized operations in Mexico City.43 In addition, a series of administrative measures were taken to create transparency regarding the governance of the program and to “insulate the day-to-day running of the program from political pressures by state or municipal governments to change eligibility criteria, operations and size of benefits.”44 On the technical side, the adoption of a very comprehensive means-testing system to determine poverty status was intended to signal that Progresa would be economically sustainable and fiscally responsible, which was particularly important to those policymakers from the Finance Ministry. Indeed, targeting was framed not simply as a way of reaching the extremely poor, but as a way of combating poverty in economically efficient ways, transferring resources solely to those that really needed it without incurring big financial deficits. 39 40 41 42

43 44

Cortés and Rubavalca, “El Progresa como respuesta a la Crisis de 1994.” Santiago Levy, “Poverty Alleviation in Mexico.” World Bank’s Policy Research Working Paper 679, 1991. Cortés and Rubavalca, “El Progresa como respuesta a la Crisis de 1994.” De León was later nominated the first National Coordinator for Progresa, providing strategic leadership for the program. With his combination of academic and bureaucratic prestige, he was better received by other federal government agencies than Joaquin Levy (Yaschine and Orozco 2010). Graizbord. “Democratic Accountability and its Discontents.” Levy, Progress against Poverty.

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As explained by Santiago Levy, “While it was commonly acknowledged that poverty alleviation required more budgetary resources, the difficult budgetary situation at that time contributed to strengthening the view (…) that the quality and effectiveness of public spending in general and poverty programs in particular should be a matter of greater concern.”45 As a consequence of its strict targeting strategy, Progresa expanded in a more gradual fashion: while, in 1997, the program covered around 300,000 families, by 2002 it reached nearly 2.5 million families, and by 2016, it reached 6 million families (or 23% of the Mexican population). Furthermore, the comprehensive targeting scheme, based on a rigid means-testing formula, allowed Progresa’s high-level staff to frame their decisions as being technical and free from any political consideration. Similar to what Mudge (2008) described as a neoliberal way of doing politics, Progresa’s attempt to legitimate its decision in technical terms was based on an understanding of state actors as inherently interested and involved in taking active measures to resist these perceived limitations of the state.46 As a mid-level poverty expert working for Progresa explained in an interview, “We would not select which families would benefit from this program. The discriminant analysis would do it.” The power of numbers in their narratives was used as a legitimation strategy against not only the risk of political clientelism at the local level but also of the potential disruptions of trusting bureaucratic judgment. Another Progresa high-level manager said, “We did not trust the municipalities. We knew we would fail if we counted on them, so we invested a long time in formulating our statistical model, in a way that not even we could influence the targeting results. It was important to let the numbers decide.” This strategy of legitimation spoke to domestic and international audiences. Internally, the goal was to legitimate Progresa in technocratic terms to an audience of key academics and politicians, in order to demonstrate the program’s independence from the PRI.47 To do so, before launching the program, Progresa staff organized countless briefings with high-level “strategic” politicians and bureaucrats and “information [about the program] was directly communicated to key actors in Congress, subnational government, academia, and interested parties.”48 Additionally, by perfecting a means-tested targeting system following what at the time were considered international best practices, Progresa secured its legitimation with international multilateral organizations that celebrated Mexican policymakers’ commitment to methodological excellence. Finally, the strict focus on monitoring conditionalities as a means to secure human capital accumulation was in line with mainstream development 45 46 47 48

Levy, Progress against Poverty, 15. Mudge, “What is Neo-Liberalism?”. Maldonado, “The Political Economy of Conditional Cash Transfers in Mexico and Brazil.” Levy, Progress Against Poverty, 110.

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economic thinking at the time, with academics celebrating Mexico’s decision to pursue this model of social policy provision.49 In sum, in Mexico, the legitimation strategy of Progresa involved presenting the program as efficient and free from politics, which shaped the decision to create a comprehensive targeting and monitoring scheme, which was designed to minimize inclusion mistakes and to closely enforce conditionalities. This decision was made by a centralized high-level staff that focused its efforts on convincing key domestic and international audiences of the merits of its operational choices.50 This strategy was designed to work in the particular context of Mexico in the 1990s, which has been described by Fourcade and Babb (2002, 561) as a “single-party system, coupled with weak democratic institutions, strong corporatism, and a powerful centralized presidency,”51 in which policy-makers were relatively insulated from pressures from social movements, political parties, and the media.52 As we will see next, this was not the case in Brazil. 8.3.2  Brazil: Legitimation through Inclusion In Brazil, the bureaucratic groups implementing Bolsa Família understood their role and worked to project an image of being inclusive and politically impartial. This is reflected by the choice to place less emphasis on verifying poverty in strict terms – beneficiaries self-declared their income, and by deprioritizing enforcement of conditionalities. There was a greater emphasis on avoiding the exclusion of poor individuals, and on providing a basic safety net to as many poor families as possible.53 To understand this choice, we have to take into consideration that Bolsa Família was consolidated during the tenure of Brazil’s first leftist president after the end of the military dictatorship (1985), in a period of economic growth and public optimism, and after almost 10 years of the policy experimentation with different versions of CCTs.54 Specifically, the Brazilian CCT gained momentum under President Luiz Inácio “Lula” da Silva, who gained power by pledging that “every Brazilian [would] have food to eat three times a day,”55 and by vowing to adopt orthodox economic policies – a commitment made public through a letter 49 50 51 52 53 54

55

Lustig, “Scholars Who Became Practitioners.” Hernández, Historia de Oportunidades. Fourcade‐Gourinchas and Babb, “The Rebirth of the Liberal Creed.” Centeno, Democracy within Reason; Babb, Managing Mexico. Loureiro, “Social Structure and Distributive Policies under the PT Governments.” The Brazilian path toward Bolsa FamíliaFamília began in January 1995 with the first two municipallevel CCTs, implemented in Campinas and Brasília. Federal-level CCT programs were implemented in 1996 (the Eradication of Child Labor Program) and 2001 (School and Health grants). In 2003, with President Lula’s election, all of these programs were consolidated into the Bolsa Família Program. The CCT governance system described in this paper was implemented at the federal level in 2003, building on the previous efforts that were started since 2001. Hall, “From Fome Zero to Bolsa Família.”

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directed to all Brazilians, “Carta ao Povo Brasileiro,” in which Lula pledged to adhere to austerity and macroeconomic stabilization policies if elected. Building on the political message of combating poverty with fiscal austerity, the federal government invested great efforts to increase the territorial reach of the program very fast. As a Bolsa Família senior manager explained, “[The idea] was not to be the police, checking if the poor is really poor or not – this we could do later. First we had to find these people that had always been invisible to us.” Under this premise, asking municipalities to register all lowincome families under a very loose definition of poverty status made sense, since it allowed policymakers to collect information about many families quickly and shape social policy efforts accordingly. As such, since its inception, Bolsa Família was not defended on the grounds of being more efficient as was the case with Progresa in Mexico, but as an initial step toward a more inclusive social policy that would reach and include as many Brazilians as needed. This explains why, especially during its first years, more attention was placed on expanding the size of Bolsa Família fast than on verifying if families were following conditionalities. The numbers are striking: When Bolsa Família was created in 2003, it reached 3.6 million families, by 2008, it had tripled its size benefiting 12 million families, and it would reach 14 million families by 2010 (26% of the population). Similar to Mexico, in Brazil, there was great concern about politically shielding Bolsa Família from corruption and clientelistic politics, but the Brazilian case differed in that it did not require institutional insulation of the program from existing social policy agencies. Instead, state bureaucracies within the Ministry of Social Development focused on recruiting “the right people” to shield Bolsa Família from party politics and legitimate the program in the eyes of national and international audiences. They did so by recruiting federal managers from the most prestigious civil servant career in the country, who had been trained in public administration and the specificities of Brazilian federalism,56 as well as a diverse set of respected social scientists specializing in poverty studies. As such, the group of actors involved in the Brazilian CCT operational decisions differed greatly from the majority of politically appointed and foreign-trained technocrats in the Mexican case. Accordingly, these actors understood that the legitimation of Bolsa Família would come from finding and reaching those “13 million poor Brazilians” that had historically appeared in the census but had been continuously excluded from official safety nets.57 56

57

During the period of state reform in the 1990s, the Brazilian federal government aimed to strengthen its managerial capacity by creating the prestigious federal manager career path (PGPE), a program that sought to recruit through public competition the “top minds” in the country to be trained in Brazilian federalism and implement innovative solutions for public policy problems (Souza 2013). These would be the managers recruited to implement Bolsa Família (Alesso and Ambrózio 2016). Cohn, Cartas Ao Presidente Lula.

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A second difference between the legitimation strategies adopted in the two countries is that Brazilian policymakers rejected the technocratic discourse, instead valuing their bureaucratic expertise, which they believed was sufficient to portray their political objectivity. Both in interviews and in official documents, these actors maintained that making Brazil more inclusive was the main purpose that stimulated the design of Bolsa Família. The main reputational challenge was to demonstrate that the program was politically impartial, despite its loose targeting mechanism, and nonpartisan. To secure the program’s reputation, Bolsa Família also adopted several administrative measures, such as: i) all cash transfers were made through debit cards by a public bank (in contrast, in Mexico, initially, 70% of the transfers were distributed through envelopes) and ii) audit and control agencies closely supervised the work of Bolsa Família staff, who in turn used a very transparent governance structure to reduce suspicions about the program. The Brazilian model of CCT, therefore, sought to secure domestic legitimacy by showing that for the first time in Brazil’s history, “the poor would finally be put at the center of social policies and would not be left hidden in the most remote, rural parts of the country,” as explained by a former Minister of Social Development. This image resonated well not only with social movements, academia, and political parties (particularly those closer to the Workers’ Party),58 but it also raised suspicion among other groups that Bolsa Família would be used for electoral purposes. Since its inception, then, Bolsa Família staff had to walk the fine line of managing a program that was designed to be “popular” but that could be easily labeled as “populist,” facing great scrutiny from politicians and the media with an intensity that had no parallel in the Mexican case.59 Furthermore, in the initial years of the program, the choice of expanding the program without close monitoring of conditionalities or poverty status came at the cost of great international skepticism, since Bolsa Família did not follow international standards of poverty targeting. As a senior MDS manager said, “The disagreements with the World Bank were radical … In the beginning, they thought that our approach of including as many poor families as possible in the program was a scandal.” To reiterate the point made earlier, Brazilian policymakers responded to this international skepticism by emphasizing their objectivity and impartiality as civil servants. Objectivity was to be guaranteed not only by numbers per se but also by the integrity and professional norms of the Brazilian CCT staff – a stark contrast with Mexican officials stating that “not even us could influence the targeting results.”

58 59

Garay, Social Expansion in Latin America. Lindert and Vincensini, “Social Policy, Perceptions and the Press.”

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8.4  discussion

283

and conclusion

By focusing on the operational differences between Progresa and Bolsa Família, in this chapter, I have argued that the adoption of CCTs in Mexico and Brazil was highly uneven in their goals, nature, and scope. Nationally specific institutional and political dynamics shaped policymakers’ perceptions of the necessity and purposes of CCTs, influencing whether governments designed programs that had stronger or weaker neoliberal traits. Put differently, beneath the broad policy idea that characterized conditional cash transfers, programs had distinct understandings of how targeting, cash distribution, and conditionalities would lead to poverty reduction, and implementation differed greatly. In this conclusion, I summarize a few implications of my findings for the study of neoliberal states in Latin America. First, I have argued that although Bolsa Família and Progresa were very similar in their policy conceptualization (i.e., giving small cash transfers to poor families conditioned on certain requirements), the devil hides in the operational details, with Mexico prioritizing efficiency and Brazil focusing on inclusivity. This finding can be read through the lenses of the distinct approaches to neoliberalism that characterized the period of state reforms in the two countries. As has been documented in the comparative literature, when compared to most Latin American countries,60 Brazil’s approach to economic and state reforms in the 1990s was highly selective and gradual, with a nuanced interpretation of neoliberalism (see also the chapter by Bersch in this volume). Similarly, Brazil’s interpretation of what has been considered a neoliberal mode of social policy was also nuanced, with Bolsa Família presenting a very lax implementation of targeting and conditionalities, leading some to characterize the program as “neoliberal but with a human face.”61 As such, similar to generalist interpretations of neoliberal reforms in Latin America, this chapter reminds us that the simplistic labeling of CCTs as neoliberal ignores the great variation that existed between these programs. Second, in this chapter, I directed attention toward the critical role that the orientations and intentions of policymakers played in the design and legitimation of each conditional cash transfer program. While in Mexico, state officials believed that it was important to limit the reach of political decision-making and invested in a technocratic legitimation of Progresa, in Brazil, bureaucrats were invested in the political project of making Brazil more inclusive. Here, my findings connect to a point that has been made in the comparative literature on the importance of the type of state official promoting state reforms.62 Pushing

60 61 62

Magaldi and Maldonado, La integración de políticas públicas para el desarrollo; Fernández de Castro, Amorim Neto, and Ortiz Mena, Brasil y México. Borges, “Neoliberalism with a Human Face?”. Babb, Managing Mexico; Dezalay and Garth, The internationalization of palace wars; Montecinos and Markoff, Economists in the Americas.

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this idea forward, my work also demonstrated that beyond the type of actor, the location of these actors within the institutional arrangement of each state also influenced the operational choices regarding each CCT. To this point, the Mexican case reminds us of a key Polanyian insight: Even when actors attempt to push for neoliberal policies, these do not necessarily imply “retrenchment” or elimination of state bureaucracies,63 rather they have their necessary bases within the bureaucracies of the state, and on actors invested in the creation, one might say, of the “neoliberal state.”64 bibliography

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Dávila Lárraga, Laura. “How Does Prospera Work?” Technical Note. IDB Publications, 2016. De La O, Ana Lorena. Crafting Policies to End Poverty in Latin America: The Quiet Transformation. Cambridge: Cambridge University Press, 2015. De Souza Leão, Luciana. “A Double-Edged Sword: The Institutional Foundations of the Brazilian Developmental State, 1930–1985.” In Agustin E. Ferraro and Miguel A. Centeno, eds. State and Nation Making in Latin America and Spain: The Rise and Fall of the Developmental State. Cambridge: Cambridge University Press, 2018, pp. 157–76. Dezalay, Yves, and Bryant G. Garth. The internationalization of palace wars: lawyers, economists, and the contest to transform Latin American states. Chicago: University of Chicago Press, 2002. Diaz-Carneiro, Alberto. “Fiscal Federalism and Redistribution in Mexico.” In Scott Greet, Alan Trench and Heather Elliot, eds. Federalism in Good Times and Bad. Stanford: Stanford University Press, 2016. https://papers.ssrn.com/sol3/papers .cfm?abstract_id=2886703 Diniz, Eli. Globalização, Estado e Desenvolvimento – Dilemas do Brasil no novo milênio. Rio de Janeiro: FGV Editora, 2007. Ferguson, James. The Anti-Politics Machine: Development, Depoliticization, and Bureaucratic Power in Lesotho. Cambridge: Cambridge University Press, 1990. Ferguson, James. Give a Man a Fish: Reflections on the New Politics of Redistribution. Durham, Duke University Press, 2015. Fernández de Castro, Rafael, Octavio Amorim Neto, and Antonio Ortiz Mena. Brasil y México: Encuentros Desencuentros. México, D.F.: Instituto Matías Romero, 2005. Ferraro, Agustin, and Miguel Centeno. The Rise and Fall of the Developmental State in Latin America. Cambridge: Cambridge University Press, 2018. Fiszbein, Ariel, and Nobert Schady. “Conditional Cash Transfers.” Policy Research Report. World Bank, 2009. Fourcade‐Gourinchas, Marion, and Sarah Babb. “The Rebirth of the Liberal Creed: Paths to Neoliberalism in Four Countries.” American Journal of Sociology 108, no. 3 (2002): 533–79. Gaarder, Marie, Amanda Glassman, and Jessica Todd. “Conditional cash transfers and health: unpacking the causal chain.” Journal of Development Effectiveness 2, no. 1 (2010): 6–50. Garay, Candelaria. Social Expansion in Latin America (Cambridge: Cambridge University Press, 2016). Graizbord, Diana. “Democratic Accountability and its Discontents: Social Policy Evaluation and Expertise in Contemporary Mexico.” PhD Dissertation, Department of Sociology, Brown University, 2017. Haggard, Stephen, and Robert R. Kaufman. Development, Democracy, and Welfare States: Latin America, East Asia, and Eastern Europe. Princeton, NJ: Princeton University Press, 2008. Hall, Anthony. “From Fome Zero to Bolsa Família: Social Policies and Poverty Alleviation under Lula.” Journal of Latin American Studies 38, no. 4 (2006): 689–709. Handa, Sudhanshu, and Benjamin Davis. “The Experience of Conditional Cash Transfers in Latin America.” Development Policy Review 24, no. 5 (2006): 513–36.

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Hellmann, Aline. “How Does Bolsa Família Work?” Technical Note. IDB Publications, 2015. Hernández, Daniel. Historia de Oportunidades. Inicio y cambios del programa, México, DF: FCE, 2008. Hilgers, Tina. Clientelism in Everyday Latin American Politics. New York: Palgrave Macmillan, 2012. Huber, Evelyne. “Options for Social Policy in Latin America: Neoliberal versus Social Democratic Models” In Gosta Esping-Andersen, ed. Welfare States in Transition. London: Sage Publications, 1996, pp. 142–90. Hulme, David, Joseph Hanlon, and Armando Barrientos. Just Give Money to the Poor: The Development Revolution from the Global South. Sterling: Kumarian Press, 2012. Hunter, Wendy, and Nathalia Sugiyama. “Transforming Subjects into Citizens: Insights from Brazil’s Bolsa Família.” Perspectives on Politics 12, no. 4 (2014): 829–45. Jaccoud, Luciana, Renata Bischir and Ana Cleusa Mesquita. O SUAS na proteção social brasileira: Transformações recentes e perspectivas, Novos estudos CEBRAP, 36 no. 2 (2017), 37–53. Krippner, Greta. “The Making of US Monetary Policy: Central Bank Transparency and the Neoliberal Dilemma.” Theory and Society 36 (2007): 477–513. Ladhani, Sheliza and Kathleen C. Sitter. “Conditional Cash Transfers: A Critical Review.” Development Policy Review 38 (2020): 28–41. Levy, Santiago. Progress against Poverty. Washington: Brookings Institution Press, 2006. Levy, Santiago. “Poverty Alleviation in Mexico.” World Bank’s Policy Research Working Paper 679, 1991. Lindert, Kathy, and V. Vincensini. “Social Policy, Perceptions and the Press: An Analysis of the Mediá s Treatment of Conditional Cash Transfers in Brazil.” World Bank Social Protection Discussion Paper no. 1008. Washington, D.C.: Word Bank, 2010. Lindert, Kathy, Anja Linder, Jason Hobbs, and Bénédicte De la Brière. “The Nuts and Bolts of Brazil’s Bolsa Família Program: Implementing Conditional Cash Transfers in a Decentralized Context.” World Bank Publications, no. 0709 (May 2007): 1–144. Loureiro, Pedro Mendes. “Social Structure and Distributive Policies under the PT Governments: A Poverty-Reducing Variety of Neoliberalism.” Latin American Perspectives 47, no. 2 (2020): 65–83. Lustig, Nora. “Scholars Who Became Practitioners: The Influence of Research on the Design, Evaluation, and Political Survival of Mexico’s Antipoverty Program Progresa,” Center for Global Development Paper No 263, 2011. Magaldi, Mariana, and Claudia Maldonado. La integración de políticas públicas para el desarrollo: Brasil y México en perspectiva comparada. Mexico City: CIDE, 2014. Maldonado, Claudia. “The Political Economy of Conditional Cash Transfers in Mexico and Brazil (1997–2006).” PhD dissertation, Department of Political Science, University of Notre Dame, IN, 2012. Medellin, Nadin, Pablo Ibarraran, Marco Stampini, and Juan Miguel Vila. “Moving Ahead – Recertification and Exit Strategies in Conditional Cash Transfer Programs.” IDB Monograph 348, (2015): 1–47. Montecinos, Verónica, and John Markoff. Economists in the Americas. UK: Edward Elgar Publishing, 2010.

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Mudge, Stephanie. “What is Neo-Liberalism?” Socio-Economic Review 6, no. 4 (2008): 703–31. ODI. “Cash Transfers: What Does the Evidence Say? A rigorous review of programme impact and of the role of design and implementation features,” July, 2016, www.odi .org/publications/10505-cash-transfers-what-does-evidence-say-rigorous-reviewimpacts-and-role-design-and-implementation. Paiva, Luis Henrique, Tiago Falcão and Leticia Bartholo. “Do Bolsa Família ao Brasil Sem Miséria: Um resumo do percurso brasileiro recente na busca da superação da pobreza.” In Tereza Campello and Marcelo Neri (orgs), eds. Programa Bolsa Família: Uma década de inclusão e cidadania. Rio de Janeiro: IPEA, 2013, pp. 25–46. Rawlings, Laura. “A New Approach to Social Assistance: Latin America’s Experience with Conditional Cash Transfer Programs.” International Social Security Review 58 (2005): 133–61. Reis, Elisa. “O Estado Nacional como desafio teórico e empírico para a sociologia política contemporânea” In Felipe Schwartzman, Isabel Schwartzman, Luisa Schwartzman and Michel Schwartzman, eds. O sociólogo e as políticas públicas. Rio de Janeiro: FGV Editora, 2009, pp. 27–52. Robinson, Joan. “Bringing the Pregnancy Test Home from the Hospital.” Social Studies of Science 46, no. 5 (2016): 649–74. Rocha, Mercedes, and Agustin Escobar. Pobreza, transferencias condicionadas y sociedad. Mexico: CIESAS, 2012. Saad-Filho, Alfredo. “Social Policy for Neoliberalism: The Bolsa Família Programme in Brazil.” Development and Change 46, no. 6 (2015): 1227–52. Saavedra, Juan, and Sandra Garcia. “Impacts of Conditional Cash Transfer Programs on Educational Outcomes in Developing Countries: a meta-analysis,” RAND Working Paper, 2012. Schmitter, Philippe. Interest Conflict and Political Change in Brazil. California: Stanford University Press, 1971. Schneider, Ben. Business and the State in Developing Countries. Ithaca: Cornell University Press, 1997. Soares, Fabio. “Brazil’s Bolsa Família: A Review.” Economic and Political Weekly 46, no. 21 (2011): 55–60. Soares, Fabio, Rafael Ribas, and Rafael Osório. “Evaluating the Impact of Brazil’s Bolsa Família: Cash Transfer Programs in Comparative Perspective.” Latin American Research Review 45, no. 2 (2010): 173–90. Souza, Celina. “Modernisation of the State and Bureaucratic Capacity-Building in the Brazilian Federal Government.” In Jeni Vaitsman, Jose M. Ribeiro, and Lenaura Lobato, eds. Policy analysis in Brazil, University Press Scholarship Online, 2013, pp. 39–52. Stokes, Susan, Thad Dunning, Marcelo Nazareno, and Valeria Brusco. Brokers, Voters, and Clientelism: The Puzzle of Distributive Politics. Cambridge: Cambridge University Press, 2014. Sugiyama, Natasha Borges. “The Diffusion of Conditional Cash Transfer Programs in the Americas.” Global Social Policy 11, no. 2–3 (2011): 250–78. Tomazini, Carla. “Beyond Consensus: Ideas and Advocacy Coalitions around Cash Transfer Programs in Brazil and Mexico,” Critical Policy Studies 17, no. 1 (2017): 1–20.

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Valencia Lomelí, Enrique. “Conditional Cash Transfers as Social Policy in Latin America: An Assessment of their Contributions and Limitations.” Annual Review of Sociology 34, no. 1 (2008): 475–99. Yaschine, Iliana, and Monica Orozco. “The Evolving Antipoverty Agenda in Mexico: The Political Economy of PROGRESA and Oportunidades.” In Michelle Adato and John Hoddinott, Conditional Cash Transfers in Latin America, pgs 55–77. Baltimore: John Hopkins University Press, 2010. Yaschine, Iliana. “The Changing Anti-Poverty Agenda in Mexico.” IDS Bulletin 30, no. 2 (1999): 47–60.

9 Neoliberal Reform of Transport Institutions in Brazil, Argentina, and Chile The Tortoise Beats the Hare Katherine Bersch

During the 1990s, neoliberal reforms led to dramatic changes in ideas about the social and economic roles of state institutions. A central tenet of the neoliberal project is that a free market system, responding to price signals, better copes with complexity and allocates resources more efficiently than the state. This faith in the market has led political leaders to prioritize swift, comprehensive overhauls that reduce state intervention in the economy. This chapter examines neoliberal reforms by focusing on a sector crucial for understanding state capacity: transportation infrastructure. As scholars have long noted, railroads extend the territorial reach of the state so can serve as a proxy of state capacity.1 Railways boost economic activity and promote development outside urban centers; they are generally considered an important public good along with transportation infrastructure more broadly, including highways and urban commuter rails.2 Transport infrastructure thus provides an important lens for examining neoliberal overhauls and their effects on state capacity. In many countries, neoliberal overhauls of transport infrastructure in the 1990s initially seemed to bear out faith in markets and a root-and-branch approach to reform. In many countries, swift auctions that placed stretches of road and rail in the hands of the private sector filled government coffers with the proceeds. Large government bureaucracies and planning agencies were downsized, and their roles were outsourced to the private sector. Many countries across Latin America showed efficiency gains and impressive quality improvements. In the title of a 1996 report, the World Bank declared that such countries as Argentina, which had pushed through sweeping neoliberal reforms, were “Heading Down the Right Track” and heaped praise 1 2

See Kurtz, Latin American State Building in Comparative Perspective, and Schenoni, “Bringing War Back In.” Also see Soifer, State Building in Latin America. Saylor, State Building in Boom Times, 66–71, 96–9.

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on an approach that had successfully transformed the transport sector in record time.3 Years later, however, a different picture emerged in Latin America. Unprecedented protests in Chile triggered by fare hikes led to the burning and looting of metro stations. In 2012, a railway car collision in Buenos Aires killed 51 people and injured 700, resulting in the re-nationalization of nearly all passenger and freight rail lines privatized in the prior decade. Small towns disappeared after railway lines fell into corporate hands, spawning a genre of Argentine cinema as a critique of neoliberalism more broadly. Underinvestment in roads, rails, and urban transport then reignited demands for further reform. Why did success derail? This chapter analyzes state transportation reforms in Argentina, Brazil, and Chile to explore the varied implementation of neoliberal reforms and their far-reaching effects. I argue that neoliberal approaches hastened the adoption of a particularly problematic strategy – namely, powering reforms that emphasize swift, comprehensive change pushed through with political will.4 Although neoliberal reforms seemed a blueprint for solving fiscal and governance challenges while allowing presidents to concentrate power, initial reform efforts often stripped the state’s capability to manage subsequent challenges. Without the bureaucratic experience, mechanisms for citizen input, and coordinating bodies that could solve new problems, progress slowed. In Brazil, a more gradual reform process allowed for the rebuilding over time of a civil service corps with essential engineering, legal, and auditing skills. Yet in Argentina, the shock therapy approach triggered counter-reforms in the 2000s. Similar patterns can be found elsewhere in Latin America, where the poor quality of infrastructure and transport service along with weak civil services can be linked to the implementation of neoliberal reforms. Notably, Chilean reforms that concentrated power in the hands of technocratic teams left little room for broader planning and citizen input; subsequent attempts to improve transport by raising costs have often triggered popular protests. A comparative analysis reveals that comprehensive overhauls pushed through by political will – what I call a powering approach – tend to compromise the capacity of the civil service, whereas gradual public sector reforms emerge as more successful. Variations in reform strategy thus do much to explain the different outcomes of neoliberal policies in Latin America.

3 4

Carbajo and Estache, “Railway Concessions,” 2; World Bank, “Federal Railways Restructuring and Privatization Project” (1996). In When Democracies Deliver, I argue that reform strategy explains much of the variation in effective and enduring reforms, arguing that rapid overhauls led by political will (“powering” reforms) are less effective that incremental changes implemented overtime by actors within the state and coalitions. My argument here connects Bersch to neoliberal reforms by emphasizing the extent to which neoliberal policies promoted the powering strategy.

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blueprints for transport

infrastructure champion powering reform

Latin America was once home to some of the most impressive transportation developments in the world.5 Between 1860 and the 1950s, railroads in Chile became an exemplar of modernization, integration, and economic development.6 By 1914, Argentina’s railroad and tram systems were some of the most extensive in the world. Between 1945 and 1980, the highway network in Brazil expanded rapidly under the direction of the very capable and fiscally autonomous Transport Planning Agency (GEIPOT). By the 1980s, Chile, Argentina, and Brazil had developed expansive transport infrastructure networks.7 Such achievements relied on central infrastructure planning and large public bureaucracies that constructed, maintained, and (in the case of rail) operated lines. By 1989, the national rail company in Argentina, Ferrocarriles Argentinos, counted 94,800 public employees.8 Public spending on infrastructure plummeted in the 1980s, however, as a result of the fiscal challenges of the “lost decade.” Whereas public investments in transport reached 3.3 percent of GNP in 1975, transport accounted for less than 1 percent in the 1980s.9 Roads, bridges, and railways deteriorated without proper maintenance. Fiscal crises also meant that compensation for public sector employees, including planners, architects, engineers, welders, and train conductors, consumed a sizable part of public budgets. Most state-owned and private rail lines ran large deficits sustained by government subsidies.10 At the same time, a broad consensus developed across Latin America that long-term fiscal growth relied on improving transport infrastructure. Thus, Latin America faced the dual challenge of reducing spending while modernizing infrastructure. Neoliberal recommendations offered by international financial institutions in the 1990s connected numerous problems in transportation to one issue: overburdened, inefficient states that responded to political or social demands rather than price signals. The proposed policy solutions emphasized privatization to reduce the size of the state and increase competition. Concession agreements were touted by the transport sector as a type of public–private partnership through long-term management and investment contracts. The state would auction off the rights (e.g., the ability to charge fees/tolls) and responsibilities (e.g., operation, maintenance, and in some cases development) of owning roads, railways, or ports in return for a fee (canon) paid by the highest bidder. Private companies that obtained concession agreements could use the infrastructure for the duration of the concession agreement and obtain revenues 5

Schenoni, “Bringing War Back In.” Soto, “Rail Transport in Chile,” 129. 7 Barat, Logística, transporte e desenvolvimento. 8 Kogan, “Experiencias Ferroviarias”; Gómez-Ibáñez, Regulating Infrastructure, 96. 9 World Bank, “Federal Railways Restructuring,” 7. 10 Araneda, “La metodología de la tarificación.” 6

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directly from the consumer until the end of a specified period, after which infrastructure assets would return to state authority. Government officials and international policy advisors expected this approach to generate substantial revenue in the short term from canons, provide sorely needed infrastructure investment for modernization as well as maintenance, and reduce state expenditures. Perhaps most importantly, these policies made public sector transport workers redundant, reducing the public sector payroll. Concessions, as a neoliberal policy, seemed to solve the challenges of providing high-quality transport infrastructure at a low cost.11 The political challenges of implementing neoliberal reforms were considerable, however, and public unions protested. In response, political leaders – often encouraged by the international community – adopted powering strategies that advanced swift, wholesale changes during crises, “windows of opportunity,” or turning points.12 The logic seemed compelling: If changes were too gradual, opponents would have time to organize against them. Rapid, comprehensive reform would break any opposition by undercutting vested interests in the status quo. Indeed, shock therapy, Thatcher’s reforms, and Åslund’s case for radical reform in post-communist countries all relied on the logic of powering as do many contemporary reform theories.13 Yet political leaders, scholars, and practitioners have often overlooked the challenges inherent in powering as a reform strategy. In particular, powering rests on three assumptions that are often unfounded in practice. The first is that a comprehensive solution can be rationally designed. Cognitive psychology reveals that rational decision-making depends on two factors: the complexity of the task and the capabilities of decision-makers.14 Powering reforms, particularly neoliberal transportation reform efforts in the 1990s, placed constraints on both factors, limiting the capacity for rational solution design. Powering reforms like the privatization of infrastructure overhaul the state apparatus itself, with far-reaching consequences in the public and private sectors. Furthermore, designing reforms that address the root causes of many problems at once only exacerbates the difficulties.15 Neoliberal powering reforms are often led by political 11 12 13

14

15

World Bank, “Federal Railways Restructuring.” Bersch, When Democracies Deliver, 305. For example, see Åslund, “The Case for Radical Reform”; Durand and Thorp, “Reforming the State”; Graham and Naím, “The Political Economy of Institutional Reform in Latin America”; Rothstein, “Anti-Corruption”; and Rothstein, The Quality of Government. As Herbert Simon has noted, rational behavior is shaped “by a scissors whose two blades are the structure of the task environment and the computational capabilities of the actor[s].” Simon, “Invariants of Human Behavior,” 7. I make this argument at greater length in When Democracies Deliver, as does the economist John Kay in his book The Truth About Markets, writing that “most decisions are wrong, most experiments fail” (p. 105). He argues for pluralism rather than big blueprints: “because the world is complicated and the future uncertain, decision-making … is best made through a series of small-scale experiments” (p. 108). I thank Alan Knight for highlighting this point.

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leaders and their technocrats who possess the “will” and authority to implement reforms but often lack technical expertise and experience in government.16 The second assumption holds that power is essential for breaking resistance.17 Yet powering has three problematic side effects: it breeds opposition, dismantles established institutions, and disrupts bureaucratic continuity. In essence, powering can destroy the status quo but not easily rebuild a functional system. The third assumption is that comprehensive reforms will endure.18 Yet, given the difficulties of designing complex changes (assumption 1), comprehensive changes might not produce clear benefits. Even if they do, the drastic disruption to the status quo (assumption 2) and the sidelining of existing interests tend to generate concentrated opposition that often outlasts reformers. When political constellations shift and reformers leave, changes are vulnerable to reversals. Over time, this process chips away at bureaucratic capacity and experience, reducing the possibility of learning from past mistakes and leaving reforms without defenders. An alternative approach proves more successful in the medium and long term: incremental changes sequenced over time by a coalition. Collaborative problem-solving allows for corrections and modifications; instead of tackling everything at once, problem-solving addresses smaller problems each in turn, allowing time to observe the effects and adjust the approach. Such efforts draw on local expertise and experience rather than abstract economic planning. Coalition-building also tends to confer a greater degree of authority on civil servants. Outsider technocratic reform teams are often protagonists of sweeping changes to the bureaucracy; however, more limited or targeted changes tend to be led by public policy experts and civil servants are more likely to have more of the experience and expertise that cognitive psychology suggests is crucial for tackling difficult problems.19 Thus, a problem-solving or coalition-building approach tends to safeguard the civil service. Finally, instead of seeking to break the existing status quo, coalition-building relies on tactics that avoid conflict – in some cases by achieving broad support, in others by proceeding under the radar until they have proven results. As beneficiaries begin to see reforms working, reformers are able to problem-solve the next step. While powering relies on the postulates of comprehensive rationality, problemsolving and coalition-building are more likely to be effective and enduring in a complex and uncertain world. This argument complements recent research on development, markets and globalization, state capacity, social policy, and 16

17 18 19

I use the term “technocrat” to describe experts appointed by elected politicians, and “civil servants” or “public servants” for experts in public service whose employment is not based on political connections but only on merit. Grindle, Despite the Odds; Rothstein, “Anti-Corruption.” Burki and Perry, Beyond the Washington Consensus. It is important to note that outsider technocrats can, and often do, adopt a problem-solving or coalition-building approach, which is particularly important in weak states where reformers cannot rely on a permanent civil service. I thank Eduardo Dargent for this observation.

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institutional reform that rejects big-bang, one-size-fits-all approaches.20 It also builds on the work of earlier scholars who have highlighted the superiority of the coalition-building and problem-solving approach over powering. Hirschman’s “revolutions by stealth,” Popper’s “piecemeal social engineering,” Lindblom’s “muddling through,” Scott’s account of utopian schemes failing in Seeing Like a State, and Heclo’s analysis of public officials “puzzling” through problems in developing modern welfare states all reject, in one way or another, ambitious plans holistically implemented to emphasize instead the importance of incremental changes or coalition-building.21 This earlier criticism of the powering strategy or approach rings true: Grand schemes overlooking local conditions and complex interdependencies often fail at a great human cost.22

9.2  neoliberal

transportation infrastructure

reforms in argentina , brazil , and chile

Neoliberal reforms to transportation infrastructure in Chile, Argentina, and Brazil initially sought to shift responsibility for highways and railways from the state to the private sector. Ideal-type models failed to account for changing conditions and unforeseen circumstances, and swift reforms often excluded broader public participation. A comparative analysis reveals that the most radical transformations weakened the state. Contrary to predictions that markets were better at handling complexity, transport reforms show that a capable state was essential for neoliberal reform success, and countries that pursued a gradual approach to neoliberal reform were more successful. 9.2.1  Argentina: Powering Begets Powering The rapid overhaul of the Argentine transport sector in the 1990s offers one of the clearest cases of powering and the adoption of neoliberal policies whole cloth. It illustrates how neoliberal blueprints hastened the adoption of the powering approach and reveals its danger: The reformed transport sector deteriorated, prompting a reversal of the changes powered through just a decade before. 9.2.1.1  Menem’s Neoliberal Transport Overhaul: From Success to Disappointment Upon assuming office, President Carlos Menem confronted severe fiscal challenges by implementing a neoliberal overhaul. Transport infrastructure was 20

21 22

Tendler, Good Government in the Tropics; Huber and Stephens. Democracy and the Left; Abers and Keck, Practical Authority; Matt Andrews, The Limits of Institutional Reform; Andrews, Pritchett and Woolcock, “Escaping Capability Traps”; Levy, Working with the Grain. Hirschman, Journeys Toward Progress; Popper, The Poverty of Historicism; Heclo, Modern Social Politics in Britain and Sweden. For example, although Scott focused on the schematic visions of high modernist ideology, the faith in the free market during the neoliberal era echoed this earlier approach.

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central to this transformation, as demands for modernization and maintenance strained public coffers. Working closely with the World Bank, Menem’s tight-knit team of like-minded experts23 accomplished the unthinkable. In a few short years, railways and highways were transferred to the private sector in rapid-fire concession auctions.24 Menem’s teams slashed public payrolls by dramatically downsizing and reorganizing the state. The workforce of Ferrocarriles Argentinos, the state-owned rail company, was cut by eighty-two percent in Memen’s first term. By dismantling inefficient institutions, Menem consolidated authority and undercut rivals during this first phase of reform while implementing neoliberal blueprints at a record pace. Menem’s powering approach was initially met with praise from international financial institutions and foreign investors, who remarked that this approach turned Argentina into a “miracle” by taming inflation and restoring growth.25 A World Bank article from 1996 entitled “Heading Down the Right Track in Argentina”26 argued that the reforms improved services while controlling costs.27 This assessment was premature. By the late 1990s, investment promises had gone unfilled, private companies had failed to pay for the right to operate roads and rails, and the government began subsidizing concessionaires. What went wrong? First, the scope and speed of reform at the height of an economic crisis meant that rational calculations were simply not possible. Demanding quick turnaround of complex concession agreements lasting anywhere from twelve to thirty years was particularly problematic. Such agreements specify how tariffs, quality, investment, exclusivity, etc., evolve over time,28 in an attempt to protect both the interests of the public and concessionaires; however, experts argue that given the fluidity of the economic situation, there was no systematic way of making such estimates.29 Projections wildly under- and over-estimated traffic, especially for highway privatization. Freight 23 24

25 26 27

28 29

See Teichman, “Mexico and Argentina,” 33–4, and “The World Bank and Policy Reform,” 60; and N’haux, Menem-Cavallo, 248, 267. By 1990, the government had auctioned off about a third of the intercity highways. Soon, the government initiated a second wave of concessions, this time for Buenos Aires access roads. Meanwhile, a similar privatization process began to break up Ferrocarriles Argentinos’ fully integrated and centralized network, dividing it into monopoly franchises that combined track and service operations for both freight services and metropolitan commuter rail. Between 1991 and 1993, five thirty-year freight concessions were completed; within the next two years, seven Buenos Aires commuter service lines were auctioned off for twenty-year periods. Blustein, And the Money Kept Rolling In (and Out), 58; Manzetti, “Public Opinion Backlashes,” 147. Carbajo and Estache, “Railway Concessions,” 1. Centro de Estudios Económicos de la Regulación (CEER), “Las empresas privadas de servicios públicos en la Argentina”; Manzetti, “Political Manipulations and Market Reforms Failures,” 346; Sharp, Results of Railway Privatization in Latin America, 16. Campos-Méndez, Trujillo, and Estache, Processes, Information, and Accounting Gaps, 23. Author interview with Armando Norberto Canosa (Secretario de Transporte de la Nación, Ministerio de Economía y Obras y Servicios Públicos de la Nación, 1996–1999), November 21, 2012.

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concessions, implemented a few years after the economic crisis, did not create the same immediate disaster that afflicted highway concessions, but the speed and scope of the changes still meant that they failed to account for evolving circumstances and unanticipated developments. Thus, scope and speed were inversely related to success. The scope allowed Menem’s team to undercut the status quo but reduced opportunities for testing approaches or sequencing changes; the speed of reforms prevented organized opposition but left little time for careful calculations or public input. Perhaps more problematic was that the very process of powering – destroying the status quo, circumventing existing institutions, autocratically imposing changes, and concentrating power in the hands of political technocrats – weakened transport institutions, leaving very few public servants with the expertise and experience to manage the new challenges. Tight-knit teams of outside experts enhanced the government’s ability to move quickly and institute ideal-typical models of change, but reform designers were unfamiliar with the particular concerns of Argentine citizens and public servants. The concentration of authority in the hands of Menem’s technocrats allowed for decisive decisionmaking and rapid implementation of deep cuts to the public sector but left few permanent technocrats or civil servants to consolidate reforms over time. The Highway Agency, which was responsible for supervising concessions, lacked adequate independence, organization, and staffing.30 Regulatory agencies, crucial for monitoring and enforcing compliance of concession agreements, were understaffed, weak, and ineffective without the authority, capacity, or autonomy to modify contracts or collect accounting information from private firms or monitor and enforce concession agreements.31 For instance, the National Transportation Regulatory Commission (CNRT) was created in 1996 but was later placed under the direct control of the Ministry of Economy and Public Works, weakening its independence.32 High-level political technocrats thus retained exclusive oversight over the rapidly evolving transport sector; as a result, reversing course or addressing problems became ever more difficult. Issues with the design of concession agreements and weak oversight mechanisms soon became evident. Due to the flawed calculations, many companies received inadequate revenue, but in other cases, private companies were distributing record profits despite receiving state subsidies and failing to pay the mandated canon to the government.33 In other cases, increased usage meant that roads and rails required more maintenance and investment than specified ex-ante.34 30 31

32 33 34

Estache, Carbajo, and de Rus, “Argentina’s Transport Privatization.” Campos-Méndez, Trujillo, and Estache, Processes, Information; author interview with Dr. Luisa Maria Hynes, August 28, 2012. Author interview with Beatriz López (Administrador Gubernamental and Engineer), November 14, 2012. Campos-Méndez, Trujillo, and Estache, Processes, Information, 6–7. Baer and Montes-Rojas, “From Privatization to Re-Nationalization,” 332. Fundación de Investigaciones Económicas Latinoamericanas (FIEL), La regulación de la competencia, 188–90.

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By 1998, the government was renegotiating all railway concessions,35 spending US$400 million per year on subsidies, with a commitment from the state to pay US$6 billion in investment over the following twenty years.36 Once such changes occurred, it was very difficult to create new institutions, employ individuals with adequate expertise and experience, develop mechanisms for broader participation in decision-making, or distribute authority that had been concentrated in the upper echelons of ministries. When President de la Rúa took office in 1999, nearly all of the political technocrats responsible for transportation changed. The same occurred once more when the Kirchners came to power. Menem’s reforms continued to deteriorate during subsequent administrations, underscoring the deleterious and enduring effects of the powering approach. Weak institutions and centralized control meant that the state lacked the capacity and will to address issues. Under the Kirchners, officials failed to act on ominous reports that predicted catastrophe without corrective actions.37 The external audit body (AGN) released report after report revealing the calamitous state of the railways and the corruption in public works contracts. NGOs, labor unions, and government agencies pointed to the dire state of service provision and the government’s failure to hold concession companies accountable.38 Railway accidents rapidly mounted throughout the 2000s, averaging 400 deaths per year in the Buenos Aires Metropolitan Area alone. In 2008, there were more than 3,200 accidents, resulting in 2,700 injuries.39 Protests over the quality of transit increasingly turned violent. Reforms never consolidated the way that theories of historical institutionalism had predicted; instead, the policies in the 1990s that weakened the public sector shaped the civil service for years to come. Problems continued to escalate, and then tragedy struck. 9.2.1.2  Cristina Fernández de Kirchner’s Powering Reform Reverses Menem’s Changes (2012–2015) In 2012, a train on the busy Sarmiento line crashed into the Once (“Eleven”) station, killing fifty-one people and injuring 700. Although modern equipment would have prevented railway cars from careening into each other, the carriages on the line operated by TBA were more than fifty years old. In the following year, collisions and deaths increased, triggering an abrupt shift in executive attention to long-festering problems. Yet, instead of making adjustments and improvements (e.g., monitoring private companies, requiring companies to 35

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Government officials at this time renegotiated over forty-two percent of infrastructure contracts on Argentina outside the mechanisms established in the contract, nearly fifteen percent more than the regional average. Guasch, Granting and Renegotiating Infrastructure Concessions. Estache, Carbajo, and de Rus, “Argentina’s Transport Privatization and Re-Regulation,” 10. Nota CNRT 445/2011; AGN 2008; La Nación, February 29, 2012; La Nación, February 23, 2012. (ACIJ) Asociación Civil por la Igualdad y la Justicia, La situación institucional actual; Baer and Gabriel Montes-Rojas, “From Privatization to Re-Nationalization,” 331. Verónica Pérez. “Cambios y continuidades,” 126.

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fulfill contract promises, or modernizing train cars),40 the Fernández administration radically overhauled the sector, rescinding concessions and centralizing control of railway services in the state-owned rail companies. Government negligence in monitoring contractual agreements, experts argued, should have raised red flags regarding the state’s capacity to take on the formidable task of updating, maintaining, and operating rail lines.41 Policymakers overreacted to the problems, causing a major shift in transport policy.42 Fernández employed the same powering strategy, centralizing power in presidential appointments to head erstwhile autonomous agencies, restructuring organizations, and using executive decrees. From 2013 to 2014, the Fernández administration canceled one concession after another before creating a state-owned agency, Ferrocarriles Argentinos Sociedad del Estado, known as Ferrocarriles Argentinos, named after its predecessor that Menem had destroyed. The state was again responsible for operating and maintaining most rail lines. This time, the changes faced less resistance: The crisis was so bad something needed to be done – even though it was a crisis of the administration’s making. Concession companies, having benefitted from extravagant subsidies, could now return the dilapidated assets to the state, washing their hands of responsibility; the civil service agencies had been gutted and could not stand in the way of change or propose more moderate changes; and poor performance meant neoliberalism had been thoroughly discredited. Many citizens were in favor of dramatic reform after years of underinvestment and neglect. The change brought more change, all through powering and without any attempt to consolidate reforms. New institutions over time grew corrupt and inefficient while bureaucratic stability suffered, leading perversely to new comprehensive reform attempts. 9.2.2  Brazil: Neoliberalism Curtailed, Problem-Solving Inches Forward Neoliberal powering reform in Brazil dramatically changed the state’s institutional framework but ended before policy changes could be implemented. Aborted powering was followed by coalition-building and problem-solving, introducing elements of the neoliberal agenda in a more piecemeal and 40

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More moderate approaches seemed possible according to many experts. While the Fernández administration cited noncompliance to renege on its contractual agreements, the government had failed to sanction companies such as the Brazilian company ALL. According to the external audit body (AGN), in only one case did the regulatory body (CNRT) effectively apply the appropriate penalty. ElAuditor.Info, May 29, 2013; (AGN 2013). Author interview with World Bank official, September 28, 2012; López, interview. Political motivations may have influenced the decision to adopt a powering approach. Hugo Moyano, leader of the General Confederation of Labor (CGT), the truck drivers’ union and the largest trade union in the country, had been the Kirchners’ key ally; however, he broke with the administration in with a series of truckers’ strikes in 2012. Investing in freight in 2013 may have been intended to weaken the power of the truckers’ unions to shut down the country.

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incremental fashion, with the state playing a crucial role in modifying neoliberal blueprints. While illustrating the enduring challenges created by the initial gutting of transport institutions, this case also underscores how coalition-building and problem-solving allowed policymakers to adopt aspects of neoliberalism more successfully than in Argentina. While the pendulum of reforms in Argentina swung from privatization to re-nationalization, different transport models – both neoliberal and state-led – in Brazil have strengthened over time. 9.2.2.1  Neoliberal Powering Halted Transportation reforms in Brazil during the 1990s began as in Argentina, with a powering attempt to privatize roads and rails intended to eliminate the financial burden on the state.43 In the early 1990s, President Collor slashed half of public employees, with most dramatic changes in the transport agencies, which during the 1960s and 1970s had revolutionized highway travel in Brazil.44 Within a year, the highway agency experienced a fifty-eight percent reduction. Planning expertise was particularly hard-hit, losing over eighty-six percent of personnel.45 Nonetheless, the reforms that followed – concession auctions and the transferring of the highway network to the states – were soon halted as Collor’s powering approach encountered political challenges. His unilateral imposition of drastic reforms and unwillingness to negotiate ultimately resulted in his impeachment in 1992. Although he eliminated most of the transport institutions and their ability to block reform, his neoliberal program was never fully implemented. Therefore, the state remained responsible for roads, bridges, railways, and ports. 9.2.2.2  Neoliberal Reforms Inch Forward under Cardoso Learning from Collor’s failures, Cardoso pursued a coalition-building approach, implementing far more gradual reforms. Cardoso may have preferred loyal technocrats to lead neoliberal changes, but he recognized the importance of including coalitional allies in the broader process plus conferring many details to state experts. In this way, non-partisan experts in key agencies such as the Developmental Bank (BNDES) helped insulate many technical decisions from political influence.46 Civil servants often questioned, then 43

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As Cavalcanti (1995) highlights, the effects on the institution were profound. “Retirement and dismissal of personnel resulted in intense consequences for the technical-organizational world within DNER [the old acronym for the highway agency],” Cavalcanti explains, “because it resulted in a great loss of the accumulated institutional memory, experience, and technical competence that left with the individuals that left the agency” (86–7). Barat, Logística, transporte e desenvolvimento. MT (Ministério dos Transportes), “GT – DNER.” For example, a privatization council took responsibility for setting policy guidelines, but the powerful Development Bank (BNDES) was to manage much of the reform process. Author interview with Rodolpho Tourinho Neto (President, Sindicato Nacional da Indústria da Construção Pesada, 2011–2015; Senator and Minister of Mines and Energy, 1999–2001), April 18, 2012. World Bank, “Federal Railways Restructuring”; Manzetti, Privatization South American Style, 187.

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modified, off-the-shelf neoliberal blueprints that disregarded Brazilian realities. While reformers in Argentina were selected based on their commitment to a neoliberal agenda, Brazilian civil servants in key reform agencies were chosen through competitive exams that tested their technical capabilities instead of their commitment to a particular ideological model.47 Pluralism and expertise among permanent civil servants guarded against the neoliberal groupthink48 so common among tight-knit neoliberal technocratic teams across many countries in Latin America.49 The smaller-scale plans implemented over time by agencies that enjoyed a number of organizational and information advantages meant that Brazilian neoliberal designs circumvented the pitfalls encountered by Argentine technocrats. For example, whereas Argentina charged high canons that companies failed to pay later, Brazil’s rates were lower and charged upfront.50 Argentine technocrats assumed that market mechanisms would correct problems, but Brazilian planners foresaw challenges that the state could address in the design and implementation phase before they become full-blown crises.51 As a result, the reforms that ultimately advanced in Brazil were quite limited in comparison to changes in Argentina. Railways represented the most extensive privatization in Brazil but constituted only a small portion of the transport infrastructure. In the late 1990s, seven railway concession auctions granted the operation and maintenance of lines to private companies for thirty years. Highway concessions commenced as well but accounted for only two percent of the federal highway system, dwarfed by what Argentina accomplished in a few short years.52 These modest neoliberal changes proved more effective and enduring than those powered through in Argentina. Labor productivity increased, performance improved, debts were resolved or rescheduled with proceeds from sales, and the cost of freight decreased by thirty-one percent from 1996 to 2000.53 Smaller-scale changes phased in over time also forged greater political 47 48 49 50 51

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Cunha, Pereira and Gomide, “State Capacity and Utilities Regulation in Brazil”; Willis, “Explaining Bureaucratic Independence in Brazil”; Pereira, Brazil in Transition. Page, The Difference. Teichman, “Mexico and Argentina,” 48. Estache, Goldstein, and Pittman, “Privatization and Regulatory Reform in Brazil,” 224. On transferring debt to concession companies see De Castro, “Privatization of the Transportation Sector in Brazil.” On regulatory issues see Pinheiro, “Two Decades of Privatization in Brazil,” 268. Regulation of railway transportation was established by Decree 1832 of March 1996, which created the Federal Railway Transport Commission under the Ministry of Transportation (De Castro, “Privatization of the Transportation Sector,” 11; Gomide, “A política das reformas institucionais no Brasil,” 85. Subsequent sections address the establishment of the regulatory agencies, which would occur only years later. Organisation for Economic Co-operation and Development, Brazil: Strengthening Governance for Growth,178. World Bank, “Federal Railways Restructuring and Privatization Project” (2003), 3; De Castro, “Privatization of the Transportation Sector.”

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consensus at the outset, which made changes more durable. Cardoso included a range of parties in his coalition, which were also represented in previous and subsequent administrations. An inclusive approach slowed reforms and downsized ambitions but fostered the political support crucial for sustaining change in addition to ensuring reforms were scrutinized and overseen. Indeed, observers noted that neoliberal changes to transport in Brazil were remarkably transparent compared to other Latin American countries.54 The comparison with Argentina brings advances in Brazil into sharper relief. By the late 1990s in Argentina, failures of the neoliberal reforms were undeniable; transport subsidies were again a strain on public coffers and the government apparatus had been drained of individuals with adequate expertise to diagnose the problems. While Brazil seemed a neoliberal laggard, changes were working as expected. Finally, neoliberal changes did not replace the state’s ability to rely on procurement or state-led models, which allowed presidents to choose from approaches rather than radically eliminate one model and create a second de novo. 9.2.2.3  Powering Legacy In reaction to corruption scandals within the highway agency during the late 1990s, Congress in a knee-jerk move voted to abolish the highway agency (DNER) as well as the planning agencies. Both had once been considered “islands of excellence”55 but had been eviscerated during Collor’s overhaul. Although this act came from Congress rather than the president, it resembled the powering approach. Congress did eventually replace the highway agency with an even weaker one, DNIT, but the damage had already been done. Many of the most capable civil servants, with years of expertise, exited during the Collor purge of transport agencies. Attrition continued, with the transport workforce shrinking by ninety-three percent from 1989 to 2000.56 Thus, President Cardoso left office with very few experts within transport institutions prepared to supervise concessions and address the planning, contracting, engineering, and auditing required to modernize and maintain roads, bridges, ports, and railways. The legacy of powering in Brazil, when it did occur, weakened the public sector’s capacity, and most transport challenges today can be attributed to institutions stripped of resources and autonomy. Weak institutions allow for the concentration of authority in the hands of political appointees and “political dominance” of transport agencies by particular parties,57 making them particularly vulnerable to high-level corruption. Efforts to rebuild such 54 55 56 57

Lora, ed., The State of State Reform in Latin America. Barat, Logística, transporte e desenvolvimento. Author interview with André Pachioni Baeta (Diretor da Secretaria de Obras, TCU), May 25, 2011; Correia, “Por que as reformas permanecem?”, 116, 186. Bersch, Praça, and Taylor, “Bureaucratic Capacity and Political Autonomy,” 157–83.

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institutions continue, but reconstructing institutional memory, experience, expertise, and political autonomy is a long and arduous process. 9.2.2.4  Presidents Lula and Dilma Pursue a Heterogenous Approach (2003–2016) President Lula da Silva (Lula) relied on both state-led and neoliberal approaches to infrastructure while endeavoring to strengthen transport agencies. At first, the Lula administration misdiagnosed the problems in transport infrastructure as underinvestment in the sector; however, the administration later recognized that the transport sector’s inability to effectively spend funds underpinned nearly all of its issues. Focus then fell on strengthening the agencies that lacked sufficient lawyers, engineers, and auditors to translate budget outlays into improving the quality and quantity of roads, bridges, rails, and ports that Brazil’s commodity-heavy economy still needed for economic growth. The Lula administration drew on existing transport expertise within the state – the external audit agency, for example, and the Army Corps of Engineers – rather than teams of outside technocrats. President Dilma Rousseff continued Lula’s policies and relied on an ideologically diversified approach to challenges: expanding privatizations, accelerating the use of public-private partnerships, and seeking to substantially increase transport agencies’ capacities. Both Lula and Dilma avoided the false choice of privatization versus nationalization and strengthened the model for different gradual reforms. When new opportunities for change later arose, reform options had been proven, tested, negotiated, and discussed. Whereas Argentina’s executives relied on a tight-knit team to overhaul institutions and create a fully public or private infrastructure model, governments in Brazil drew upon existing agencies encompassing a wide-ranging group of officials and the lessons learned from earlier pilot projects. In the absence of a planning body, Rousseff relied extensively on the few talented specialists within the transport sector. To address transport expertise challenges, these individuals initiated discussions with transportation experts and the Army’s transport planning body about creating a foundation or public company to provide research and strategic planning as well as a forum for federal, state, and municipal coordination.58 In 2007, the government created the National Logistics and Transport Plan to provide long-term strategic plans.59 As the government drew upon embedded expertise in the transport sector, improvements began to accelerate and public–private partnership agreements offset extensive investments by the public sector.60 By the end of Rousseff’s first 58 59

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Correia, “Por que as reformas permanecem?”, 211. MT (Ministério dos Transportes), “Plano Nacional de Logística de Transportes.” While this was an achievement, the planning body developed in increments. In no way did it immediately fill the void left by GEIPOT. Private Participation in Infrastructure, “Road Transport Project.”

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term, in 2014, Brazil’s problem-solving efforts had developed one of the strongest institutional frameworks for private investment in infrastructure in Latin America.61 Lula’s and Rousseff’s governments were not free from scandals or failures; indeed, transport infrastructure represents a serious bottleneck for development in Brazil62 and remains vulnerable to cartels.63 Corruption persists, and critics rightly observe that the coalition-building and problem-solving process in Brazil have been expensive. Nonetheless, various indicators suggest that gradual advances have helped Brazil make important gains. In 2001, over eighty percent of Brazil’s transport network was in bad or terrible condition; by 2011, over sixty percent was deemed to be in good repair.64 By 2014, Brazil’s regulatory and institutional framework, project experience and success, investment climate, and financial facilities had succeeded.65 Concessions and public–private partnerships increasingly accounted for more of the transport sector.66 Once Latin America’s neoliberal laggard, Brazil now boasts a privatized road network second in expanse only to China’s.67 When powering did occur in Brazil, it left negative and enduring repercussions. The destruction of transport agencies under Collor in the 1990s left few individuals with experience in the transport agencies. In the absence of a capable highway agency, one DNIT leader sought to recreate embedded expertise by drawing on other areas of the state that retained engineering and legal expertise, namely the military. That the process of problem-solving has advanced very slowly underscores the importance of a minimal level of bureaucratic capacity and autonomy for smaller-scale improvements to advance. Indeed, nearly all of the problems in the transport sector in Brazil today are in some way related to the challenges of rebuilding institutions stripped of capacity and autonomy. Weak institutions allow for the concentration of authority in the hands of political appointees and “political dominance” of transport agencies by particular parties,68 making them particularly vulnerable to high-level corruption. Protests in 2013 and 2014 over the quality of urban transport in Brazil occurred for good reasons. Earlier in the twentieth century, GEIPOT planned and coordinated urban transport development with states and municipalities. 61 62 63

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The Economist Intelligence Unit, “The 2014 Infrascope.” The Economist, September 28, 2013. Author interview with Rodolpho Tourinho Neto (Senator and Minister of Mines and Energy, 1999–2001; President, Sindicato Nacional da Indústria da Construção Pesada), April 18, 2012; author interview with Beatriz Nunes (Confederação Nacional da Indústria), December 12, 2011. Confederação Nacional Do Transporte (CNT), “Pesquisa CNT de Rodovias 2014.” The Economist Intelligence Unit, “The 2014 Infrascope.” Martin, Briceno-Garmendia, and Sirtaine, “Caribbean Infrastructure PPP Roadmap.” World Bank, “Implementation Completion and Results Report,” 25. Bersch, Praça, and Taylor, “Bureaucratic Capacity and Political Autonomy.”

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In the absence of a planning and coordination agency – or even a forum for discussion – municipalities have been left to hash out the complex engineering designs, jurisdictional questions, and investment issues on their own. Despite efforts to rebuild such institutions, reconstructing institutional memory, experience, expertise, and political autonomy is a long and arduous process. Indeed, transport infrastructure represents a serious bottleneck for development in Brazil69 and remains vulnerable to cartel behavior.70 Yet the legacy of underinvestment and the near-destruction of transport agencies takes time to undo. 9.2.3  Chile: Neoliberal Reforms Reduce Mechanisms for Coordination and Citizen Input 9.2.3.1  Early Weakening of Transport Institutions under Pinochet While Chile faced challenges similar to Argentina and Brazil, reforms followed a different path. Prior to the Pinochet years, Chile developed a sophisticated rail system, including passenger and freight services under a public company, EFE. Thus, like Brazil and Argentina, transport had been run by large, complex state agencies with considerable planning expertise; again, like many other countries in the region, the sector required significant subsidies. Under Pinochet, however, reforms to the state-led model, specifically reductions in subsidies and the workforce, began much sooner. In the mid-1970s, Pinochet cut all subsidies to EFE,71 resulting in the closure of branch lines, sell-offs of track and rolling stock, and personnel layoffs (from 15,000 workers in 1978 to 7,000 in 1981).72 At the same time, the government deregulated the interurban passenger transport market while allowing truck and car imports, which increased competition for EFE in both freight and passenger services. Pinochet initiated the agencies’ destruction but did not fully privatize rail or roads, which meant that neoliberal transport reforms in Chile can be compared to Collor’s reforms in Brazil: These changes were successful in reducing the size of the bureaucracy and cutting spending, but there was no clear plan for the sector thereafter. The result was severe underinvestment. The longestablished planning agencies, which had been endowed with developmentalist mandates and strong internal commitment to expertise rather than political expediency,73 lost significant personnel when transport responsibility was decentralized. As Greaves points out,74 such reforms fragmented the state’s planning apparatus but did not transfer substantive authority to municipalities 69 70

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The Economist, September 28, 2013. Author interview with Rodolpho Tourinho Neto (Senator and Minister of Mines and Energy, 1999–2001; President, Sindicato Nacional da Indústria da Construção Pesada), April 18, 2012; author interview with Beatriz Nunes (Confederação Nacional da Indústria), December 12, 2011. Soto, “Rail Transport in Chile,” 129–30. Ibid., 136. Violich and Daughters, Urban Planning for Latin America. Edward Greaves, “Municipality and Community in Chile.”

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or provide the Ministry of Planning with a central role,75 significantly reducing the arenas for planning and coordination. 9.2.3.2  Neoliberal Reforms of the 1990s: Experts Shield Reforms from Broader Scrutiny Political leaders in post-Pinochet Chile had to grapple with years of underinvestment as well as road and railway deterioration. Despite the sector’s earlier subsidy reductions, for example, by the early 1990s, EFE still required major support: It transported around 9  million passengers in 1994 in addition to 17 million tons of freight, while running a USD51 million deficit.76 Rail deterioration only increased traffic on roads and highways. Whereas Argentina was the first in the region to adopt neoliberal blueprints wholesale and implemented them at lightning speed, Chilean experts modified the approach considerably, tailoring it to local conditions and staggering concessions over time so as to apply lessons learned from one auction to the next. Furthermore, whereas Argentina and many other countries bypassed existing institutions and reduced the role of planning agencies, Chile worked within existing institutions. State-owned EFE and the state interest in the railway sector were largely preserved,77 and the privatization process sought to rely on the Ministry of Public Works, complementing the resources of the Ministry rather than eliminating existing agencies.78 Still, there were some similarities to the powering experience of Argentina, notably the urgency that prompted a top-down approach with small, technocratic teams often working in secrecy and resistant to change. In the case of highway concessions, some Chilean technocrats intentionally shielded reforms from scrutiny. As Silva notes, “MOP [The Ministry of Public Works] under Carlos Hurtado consciously designed the legal and institutional framework of the concessions system in a technical and political vacuum that excluded not only social actors but also stakeholders within the government and state bureaucracy.”79 Beyond secrecy, other senior officials in the Ministry of Public Works noted the Chilean state’s lack of coordination mechanisms and local expertise.80

75 76 77

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Sabah Zrari, “Les Concessions routières au Chili.” Soto, “Rail Transport in Chile,” 137. Freight was privatized to a certain extent from 1993–2001. EFE retained 18% participation. Soto contends that Chilean reforms failed because they were based on cutting financial losses and avoiding political backlash rather than improving the railway transport system. Enrique R. Silva, “Deliberate Improvisation,” 10. Ibid., 43–4. See Silva on fragmentation of transport policy and turf battles between agencies that resulted in lack of coordination (Silva, “Deliberate Improvisation,” 44). “The Chilean state was … not institutionally set up for meetings and collaboration among ministries. There is no authority to coordinate efforts. In the absence of these spaces for collaboration, things either falter or someone at some point takes the lead and pushes through a particular project” (quoted in Silva, “Deliberate Improvisation,” 45).

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The Ministry of Public Works’ technocratic, secretive approach came to a head with the first urban concession, the highway Costanera Norte. In 1997, the minister of public works Ricardo Lagos (later president from 2000–2006) sought to create a highway to improve car travel from the wealthy suburbs in the eastern Andes westward into the city center and the airport, ports, and resorts on the coast. Costanera Norte cut through mostly low-income neighborhoods where the vast majority of people traveled by foot, bicycle, and public transport. As Sagaris documents, twenty-five organizations from the affected communities formed the Coordinadora, an anti-highway movement. The Coordinadora did not stop the project but did force negotiations between the firm and government to redirect the road away from the most populous neighborhoods and provide compensation for those displaced.81 The group revealed how concentrated power had become in certain parts of the technocratic Chile state and insisted on the importance of engaging a broader set of interests. By the late 1990s and early 2000s, much of the road and rail network had been partially privatized. Holding auctions was often easier than developing a robust regulatory institution, and the Chilean experience, similar to so many others in Latin America, emphasized “privatization now, regulation later.”82 Moreover, the same agencies interested in the success of the concession program were usually those supervising the concession contract, which meant that they tended to be lax on enforcement and leaned toward easing restrictions on concessionaires. Vested interests resulted in increased budgets for transport to the detriment of users and taxpayers.83 Similar challenges arose in the rail sector as legal disputes highlighted EFE’s failures to upgrade and maintain the quality of tracks as required by the original contracts.84 Accidents occurred ten times more frequently than in the US and were costly, with an estimated social cost of USD16 million in 2007 alone.85 9.2.3.3  Transantiago: Powering in Urban Transport Political leaders in Chile also sought to address the challenges arising from the absence of a robust passenger rail system, years of deregulation, and the lack of planning capabilities. The Transantiago was the government’s “Big Bang” attempt in 2007 to comprehensively revamp the Santiago bus system. On paper, the plan developed under President Lugo seemed like an effective way of replacing an informal system with a comprehensively planned one that

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Sagaris, “Citizens’ Anti-Highway Revolt.” Because the government policy affected many different neighborhoods there was more pushback. The Coordinadora sparked a movement of citizen organizations and in the 2000s established Living City, an urban planning initiative that still yields influence in Santiago today. Engel, “Privatizing Highways in Latin America.” Engel, “Privatizing Highways,” 4–5. Soto, “Rail Transport in Chile,” 146. LIBRA Ingenieros Consultores, “Análisis de la seguridad en el transporte ferroviario.”

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relied on large, modern buses to reduce noise, congestion, and exhaust fumes. High-level technocrats worked closely with consulting companies to run software models of the new system, which was implemented in, as one congressman described it, a “Big Bang … one day we had one network of bus routes and the following day we had a completely different one.”86 The implementation of the Transantiago powering reform under President Bachelet was an immediate failure, however, creating chaos throughout the city. There were not enough buses and a lack of information about routes; users had to show drivers what routes they should follow.87 Commuters spent untold hours attempting to return home, and the general mismanagement spurred multiple protests and riots.88 Over the next weeks, months, and years, the Bachelet administration sought to address the initial disaster and considered it “fixed” by 2009. Yet many still criticized the results. Although the Transantiago system vastly improved, a significant financial deficit was only partially mitigated by fare hikes. By the end of 2011, 50 percent of Chileans reported being highly dissatisfied with the metro, while only 17 percent were highly satisfied.89 The government continued using subsidies to offset high fares, but Gómez-Lobo finds that the trend is still defined by more expensive fares and higher costs.90 Many scholars have been even more critical of the continued problems and have used the reform as an example of a policy failure.91 Even though the failed powering attempt resulted in some subsequent problem-solving efforts, addressing the shortcomings remains challenging. The Transantiago failure has many causes.92 First and foremost, the government implemented a Big Bang that sought to do too much (e.g., renovate the bus fleet, formalize labor relations, and introduce technological upgrades) too quickly. The radical revamping of the old “yellow bus” system required a comprehensive understanding of the existing system and the new model. Given the complexity of urban transport and the breakneck speed of implementation, a redesign across the board, in one fell swoop was nearly impossible. In addition, 86

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“Big Bang desde el momento en que un día había una malla de recorrido y al día siguiente había otra” (diputado Carlos Montes, in Quijada, Tirachini, Henríquez, and Hurtubia, “Investigación al Transantiago,” 83). Olavarría-Gambi, “Policy Failure Revisited,” 699. The Economist, February 7, 2008. Gómez-Lobo, “The Ups and Downs of a Public Transport Reform.” Ibid. See Olavarría-Gambi, “Policy Failure Revisited,” 699. Chile sought to integrate and centrally control the bus and metro system. The main reasons it failed include: insufficient public investment, failure to build new corridors and subway lines, the bus control systems crashed, fines for non-compliance for concessions were so low that operators absorbed the costs (a worse service), a lack of cooperation between firms and local government delayed the construction of essential facilities (bus stops, priority lanes, etc.), and divisions between national departments delayed policies and confused assigned responsibilities (Quijada, Tirachini, Henríquez, and Hurtubia, “Investigación al Transantiago”; Figueroa, “Four Decades of Changing Transport Policy in Santiago, Chile.”)

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a homogeneous group of technocrats and consultants was empowered to push through the changes. Numerous scholars have highlighted the homogeneity of many design teams.93 For example, a relatively small group of transportation technicians, primarily from the Universidad de Chile y Pontificia Universidad Católica de Chile, worked on the changes.94 The lack of diversity and ideological commitment to the project meant that there was an absence of discussion, negotiation, and compromise, which made criticism or voicing concerns about plans problematic. Furthermore, technocratic decision-making by homogenous groups failed to incorporate the detailed knowledge of citizens, yellow bus micro-enterprises, and local authorities. According to a former member of the Transantiago planning team in 2006, the technocrats “widely used the justification that a process of public participation would slow down the implementation of this project.”95 The approach privileged high-level consultants and technocrats who could develop rational plans, but without the participation of permanent civil servants or citizens the concerns of those using the system went unaddressed. Finally, technocrats in charge were unable to better anticipate challenges partly because remnants from earlier powering and neoliberal reforms had weakened the central planning agencies and coordination mechanisms that might have provided continuity in moments of turnover; moreover, the Transantiago lacked a permanent civil service.96 In this context, recommendations from consulting agencies were paramount.97 Some scholars suggest that political decisions regarding Transantiago policy were developed in a semi-closed system where a small number of technocrats and consultants interacted.98 Ignacio Briones notes that such key variables as

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“Un experto en transporte sostiene que la construcción de la alternativa, de alguna manera, estuvo basada en la teoría, más que en datos, que en información o en datos empíricos que los definieron la estrategia fueron los técnicos, expertos, pero las autoridades se dejaron convencer por ellos. Hubo mucha teoría, mucho modelamiento, y hubo poco análisis empírico y la verdad lo que debiera haber ocurrido es que la transformación del sistema debió haber sido gradual y hubo mucho fundamentalismo, mucho dogmatismo en ese proceso.” Author’s translation: “A transportation expert argues that the construction of the Transantiago, in some way, was based on theory, rather than data, information, or empirical data. Those who defined the strategy were the technicians, experts, but the authorities allowed themselves to be convinced by them. There was a lot of theory, a lot of modeling, and there was little empirical analysis and the truth is that the transformation of the system should have been gradual and there was a lot of fundamentalism, a lot of dogmatism in that process.” Fuentes González, “De Estimaciones y Modelamientos,” 144. Fuentes González, “De Estimaciones y Modelamientos,” 121; Olavarría-Gambi, “Policy Failure Revisited.” Quoted in Höhnke, “Potentials and Pitfalls of Transport Innovations,” 16. Economic Commission for Latin America and the Caribbean (ECLAC), “Toward an Integrated Transport Policy.” Quijada, Tirachini, Henríquez, and Hurtubia, “Investigación al Transantiago.” Fuentes González, “Investigación al Transantiago,” 144.

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network or fleet size were defined by small groups of engineers with the advice of external consultants based on sophisticated modeling software. Such models are extremely sensitive to minor changes in parameters, but modelers often lacked empirical data. Inordinate faith was placed in abstract models, and Briones suggests an arrogance in the modeling approach.99 Under Bachelet, some scholars argue that the administration became even more hermetic and focused on elite technocrats, with the Transantiago championed by high-level technocrats, such as her Ministers of Finance and Transport,100 who convinced Bachelet go ahead with the implementation decision despite the postponement recommendations.101 The investigative commission of the Chamber of Deputies reveals that high-level political actors and technocrats overlooked warning signs that the reform was not yet ready, arguing that they did so largely because of tight deadlines and the tendency to opt for courses of action that maximized the goals they pursued – especially making the new system self-financing.102 The Bachelet government emphasized a highly technocratic approach in implementing and improving Transantiago, despite her campaign promise to pursue citizen-led reforms.103 Although she did vastly improve the system after the initial failure, her approach exposed Chileans’ growing – and now erupting – sense of inequality and political detachment. Thus, even with Chile’s high levels of state capacity, powering failed to deliver the expected results. There remain two divergent views of transport in Chile. On one hand, the Chilean highways are a point of pride for many Chileans, and international observers often highlight Chile as a success story compared to other Latin American countries. On the other hand, many argue that highways in Chile have conferred disproportionate advantages on some Chileans while excluding others.104 In recent protests, citizens have claimed that the transportation fee hike is “not about 30 pesos” but “about 30 years,”105 meaning thirty years of dealing with inequality enshrined in the 1988 Constitution. In transportation, in particular, economic inequality has fueled segregation within cities. Scholars have noted that costs for traveling in the system are

99 100 101 102

103 104 105

Briones, “Transantiago,” 83. Silva, In the Name of Reason. Olavarría-Gambi, “De la formulación a la implementación del Transantiago,” 389. “If there had not been pressure for deadlines, this [contract details] could have been studied with more precision and contracts designed that, offering a reasonable deal to private parties, would not put the operation of the system at risk.” Quijada, Tirachini, Henríquez, and Hurtubia, “Investigación al Transantiago,” 2. The “yellow bus” system was not even seen a problem among many Chileans. See Briones, “Transantiago,” and Olavarria-Gambi, “Policy Failure Revisited.” I thank Veronica Montecinos for highlighting this divergence of views. As quoted in Stacy Torres, “The Protests in Chile Aren’t about 30 Pesos,” Washington Post, October 23, 2019, www.washingtonpost.com/opinions/2019/10/23/protests-chile-arent-about-pesostheyre-about-years-failure/.

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enormous for significant portions of the population. Iglesias et al. analyzed transport use among socioeconomic groups, showing that certain urban population groups are systematically disadvantaged.106 In relation to costs, the richest quintile generated 6.7 times as much pollution and used 7 times as much energy, but spent a significantly lower share of their income (10 percent of total income for the richest quintile vs. 45 percent for the poorest) on transportation.107 Time and income spent on commuting as well as effort expending surmounting transportation hurdles (e.g., lack of connections between poorer neighborhoods and wealthy urban centers) systemically disadvantage already marginalized populations;108 people may also be cut off from desirable employment opportunities or from the social and material resources that accessible social networks can provide.109 The top-down and often secretive planning, which excluded citizen input, resulted in a clearly inequitable transportation framework. In sum, early transformations under Pinochet significantly reduced state planning and coordinating mechanisms along with the government’s ability to channel public input. When transport privatization occurred, it was more successful in Chile than in such countries as Argentina – in large part because some experts remained in the state and coalitions gave technocrats longer tenures. Reformers could thus see changes through and tailor neoliberal blueprints to local conditions. Moreover, reforms were staggered over time. This more gradual approach allowed reformers to learn along the way. In this sense, Chilean reforms followed a problem-solving approach. Nonetheless, other aspects of reform resembled powering: destruction of institutions, limiting avenues for input, prioritizing pushing through changes before resistance mounts, use of political will, and high-level technocrats. These dynamics have had damaging results in the long term. Notably, the technocratic approach and limited avenues for input meant that changes have lacked broad-based support. This approach also resulted in inequalities in transport, which have triggered popular discontent on a scale shocking for a country long known as the exemplar of neoliberal reform.

9.3  conclusion Examining transport infrastructure in Latin America reveals how neoliberal reform blueprints often produced a particular strategy for reform. Comparing reforms in Brazil, Argentina, and Chile shows that powering, comprehensive overhauls pushed through with political will by like-minded teams, tended to 106 107 108 109

Iglesias, Giraldez, Tiznado-Aitken, and Muñoz, “How Uneven Is the Urban Mobility Playing Field?”. Ibid., 67. Bocarejo S. and Oviedo H., “Transport Accessibility and Social Inequities,” 153. Carrasco and Lucas, “Measuring the Influence of Social Capital and Personal Networks.”

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compromise civil service capabilities and contributed to institutional weakness in much of the region, whereas coalition-building and gradual public sector reforms preserved the permanent civil service and proved more successful in producing resilient changes. Thus, I argue that reform strategy was crucial for the varied outcomes of neoliberal policies in Latin America. Destroying transport institutions – ministries, agencies, planning bodies, and mechanisms for collaboration, coordination, and citizen input – was far easier than managing their construction or reconstruction. As a result, reform depth and speed were often inversely related to long-term success. One tenet of neoliberal reform is that markets are far better at coping with complexity because they orient toward price signals, whereas bureaucracies focus on political or social demands so produce disorder.110 This chapter shows instead that bureaucracies played an essential role in making privatizations successful and are perhaps even better at coping with complexity than free enterprises because they have longer time horizons. Areas like transport retain the character of a public good; it is simply not possible completely privatize them. Thus, this comparative analysis underlines the hubris of replacing developmental states and imposing the neoliberal project while complementing findings in other policy areas. Souza Leão (in this volume) compares two public policy programs in Brazil and Mexico for fighting poverty. As Souza Leão demonstrates, the Mexican program “Progresa” relied on a technocratic approach with a focus on efficiency. As a result, for example, civil society was excluded from the management of the Mexican program, an approach that has been strongly criticized. Neoliberal reforms are not always the problem per se; rather, neoliberal reforms coupled with powering, which reduce the state’s capabilities and subsequent ability to address problems, prove problematic. The swift destruction of planning and coordinating mechanisms along with the failure to address the concerns of citizens and democratize decision-making procedures fuels popular discontent, and indeed, many of the problems in Latin American transport today reflect a lack of buy-in, long-term planning, and expertise. Privatization, or any inclusion of the private sector, requires a state capable of planning, regulating, and coordinating complex systems plus the sustained input from technical teams connected to local realities and responsive to the concerns of citizens. In the transport sector, highways and railroads are essentially too important to fail, and the political costs too great. Transport retains its nature as a public good, meaning that the state might be called to bail out companies that failed in their duties. Even when partially privatized via concession agreements, the infrastructure required state capabilities. Because much of the state apparatus was all but destroyed by neoliberal overhauls, the road to rebuilding is long.

110

I thank Lars Döpking for making this observation.

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bibliography

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10 The End Game of Social Policy in a Context of Enduring Inequalities Assessing “Post-neoliberalism” in Latin America Pía Riggirozzi and Jean Grugel

The battery of pro-market policies introduced in Latin America in the 1980s and 1990s that become known as the Washington Consensus decisively shifted the regional paradigm of development. Governments dismantled tariffs, cut public spending, and dramatically reduced the role of the state, both in terms of driving the economy and in the promotion of well-being and human security. But, despite the sweeping ambitions of neoliberal development, the achievements of this period were, in fact, chiefly fiscal in character, namely deficit reduction and inflation control. Trade liberalization encouraged exports, but also meant much higher levels of imports, partly as a result of currency over-valuations and, more significantly, due to the region’s declining manufacturing performance in the face of global markets.1 Meanwhile, the failure to create opportunities for decent work combined with the reduction in public investments over a sustained period had both dramatic social costs, most notably greater concentration of income and a major rise in poverty. By 2002, 226 million Latin Americans lived in poverty, with over 11 million living in extreme poverty or destitution, a situation that was significantly worse than at the start of the neoliberal revolution.2 The top 10 percent of households in Brazil, to take one of the most extreme cases, possessed 50 percent of national income, while the bottom 40 percent had only 10 percent.3 Clearly, two decades of neoliberalism had failed to produce anything close to equitable development. Instead, it had encouraged governments to “solve” troubling aspects of regional economies without considering how the “solutions” would impact on persistent inequalities of income, ethnicity, gender and place, job

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Moreno-Brid, Pérez Caldentey, and Ruíz Nápoles. “The Washington Consensus.” Economic Commission for Latin America (ECLAC), “Panorama económico y social,” 22. Ibid.

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creation, and limit investments in health provision, education, and public services which were essential for future prosperity. Given this, it is hardly surprising that the question on the lips of policymakers and development specialists alike was “after neo-liberalism, what?.”4 The problem was that there was no consensus as to the answer, at least not beyond the somewhat vague agreement that addressing the social deficit, equity, and a redistribution of income and opportunities was needed to deliver governability and growth. The absence of a clear international agreement setting out the way forward in the aftermath of the Washington Consensus had the effect of leaving governments in Latin America with an unusual degree of latitude in the early years of the twenty-first century, at exactly the point when the economic fallout and widespread public dissatisfaction with the social costs of market-led development led to demands for political transformation. The result was that a raft of new left governments took office across the region, promising dramatic change.5 How would “pink tide” or “post-neoliberal” governments deal with the triple challenges of lackluster economies, skewed and limited welfare provision, and the region’s historic inequalities of income, gender, and ethnicity? They promised to repurpose the economy not just for growth but also for human development by linking new state investments, expanded public expenditure, and increased taxation to redistribution and meaningful citizenship.6 The introduction of new and expanded social policies was central to these promises and social expenditure came to represent over 11 percent of GDP by 2009, accounting for over 52 percent of total public spending.7 Yet by 2015, the left was once again losing office and, despite some important social policy achievements, the reduction in inequalities plateaued. 185 million Latin Americans remain poor. In the end, the new left failed to decisively embed a new model of equitable development. In this chapter, we explore the left’s trajectory from electoral successes to attempts to articulate a new end game for social policy and its ultimate failure to make equity the hallmark of the region’s model of development. We reject the view that the new left lacked genuine transformative ambition and that the introduction of social policies, in particular, was just another form of neoliberalism lite or that they were introduced simply as a political tool to channel anti-neoliberal sentiment for electoral gain.8 Instead, we explore two critical and interlinked weaknesses in the strategy. In the first place, a failure to be clear about the end game of social spending; and secondly, the absence of consensusbuilding and commitment from across society to a political economy of 4 5 6 7 8

Rodrik, After Neo-liberalism, what?. Grugel and Riggirozzi, eds., Governance After Neoliberalism. Grugel and Riggirozzi, “Post‐neoliberalism in Latin America.” ECLAC, Panorama económico y social, 110. Fischer, “The Dark Sides of Social Policy.”

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long-term transformation based on equitable growth, job creation, and market regulation. These failures were not, we suggest, simply the result of sectarianism, a lack of vision or will on the part of post-neoliberal governments. They rather reflect the profound difficulties of tackling enduring intersectional inequalities amassed since Independence, long-standing and profound political frictions over historic and deeply embedded economic and social challenges, which neoliberalism strengthened rather than weakened. These difficulties have become evident once again, as the electoral compass began to move to the left again, from Argentina in 2019 to Ecuador a year later, in a context of persistent inequalities made worse by the impact of the COVID-19 pandemic. Our argument unfolds in two parts. In the first section, we explore the rise of the post-neoliberalism left, putting it in the context of Latin America’s struggles for equitable development and the region’s tumultuous twentieth-century history. In the second section, we explore the focus on welfare and equity that characterized all post-neoliberal governments in the first part of the twentyfirst century, despite their many differences, and their plans for growth. Here, we identify a focus on short-term and redistributive gains and examine how the political context and in particular the failure to build consensual and inclusive democratic regimes contributed to the limitations of left-wing governance and, ultimately, account for the persistence of the very inequalities the left had sought to address.

10.1  post - neoliberalism in the context of latin america ’ s “ entangled ” inequalities The emergence and electoral appeal of the post-neoliberal new lefts in Latin America in the early years of the twenty-first century should be understood in the consequences of three distinct but related political phenomena: the region’s limited success in tackling historic inequalities rooted in both colonialism and post-Independence politics; the nature of democratization during and after the 1980s and the social and political pact that underpinned it; and the brutal impact of neoliberalism in term of poverty and inequality in Latin America. The history of state formation in Latin America is directly linked to struggles for Independence against colonial powers, which was only achieved in the nineteenth century. Decolonization led to independent nation-states profoundly shaped by the interests and ideas of the new national elites, not society as a whole, cementing inequalities inherited from the Spanish and Portuguese crowns in place. As Huber et al. note, “inequalities in landholding and political power originating in the colonial order are at the center of theoretical explanations for the deep roots of inequality in Latin America and the Caribbean.”9 Extreme inequalities in terms of access to land were 9

Huber et al., “Politics and Inequality in Latin America and the Caribbean.”

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reinforced by elite dominance of political institutions well into the twentieth century, supported by racist ideas and practices that reproduced power asymmetries between and within the small number of elites and the mass of the population. These “entangled inequalities” inherited from the past remain critical for understanding contemporary social inequalities and determining who has a voice – and whose voice is heard – in national decision-making.10 The inequality inherited from the past in Latin America is not, in other words, a matter of individual disadvantage; it is rather a reflection of structures and systems, whether political, social, economic, or cultural, that actively re-create intersectional group advantages and disadvantages. They are what Tilly (1998) calls “categorical” inequalities: black/white, formal/informal workers, rural/urban, men/women, citizen/migrant, etc.,11 and as, lived experiences, are reinforced by the interplay between them, shaping access to housing, water, energy, employment, justice, health and education, the building blocks of a dignified life.12 The nature of the region’s “entangled” inequalities, and their persistence over time, makes them very difficult to resolve. Inequalities based on race and ethnicity intersect and are reinforced by economic and political inequalities creating obstacles, even in contexts of reform. Anthias (2018), for example, details the difficulties of redressing the historical exclusion of Latin America’s indigenous communities from land ownership, showing how the Guarani in Bolivia have encountered persistent opposition and found structural impediments put in their way when trying to claim land that this now recognized as legally theirs; some of these obstacles are embodied in apparently neutral land boundaries and maps that form the basis of landowner resistance to change.13 Similarly, in Brazil, Cavalho14 and Villen-Perez et al.15 have shown that, despite a progressive constitution that recognizes indigenous communities’ right to land, lack of voice and disenfranchisement mean that their claims are in practice excluded from the policy process. Oliveira (2013) reveals the heterogeneity of policymaking in Brazil which means that the government enables illegal land grabs of indigenous land while simultaneously trying to encourage land titling.16 And, in relation to health provision, again in Brazil, Riggirozzi (2020) shows how racialized, gendered inequalities are rooted in institutional arrangements and power relations that trump official discourses about the “right to health.”17

10 11 12 13 14 15 16 17

Costa, “Entangled Inequalities.” Tilly, Durable Inequality. Costa, “Entangled Inequalities.” Anthias, “Indigenous Peoples and the New Extraction.” Carvalho, “The Politics of Indigenous Land Rights Brazil.” Villén-Pérez et al., “Brazilian Amazon Gold,” 31. Oliveira, “Land Regularization in Brazil.” Riggirozzi, “Everyday Political Economy.”

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Despite the difficulties of sustaining a reform agenda, tackling inequalities, promoting just social, economic, and political relations, and reforming government in ways that incorporate the voice of groups traditionally ignored in policy has historically been the territory of the Latin American left.18 But in practice, the left, in Latin America and elsewhere, has focused on some kinds of inequalities more than others. We can see this historically if we look at two neighboring countries in the Southern Cone, Chile and Argentina both of which embarked on ambitious reforms in the mid-twentieth century. Here, two quite different lefts, one based on coalitional party politics and the other in the form of a populist/corporatist movement, both focused on institutional reform and new social policies to redress the grievances of the same constituency, namely male formal workers in large cities, including those in the growing public sector, and “traditional” unionist sites of employment such as mines, while ignoring other inequalities based on race and gender. Mid-way through the twentieth century, Chile’s extremely limited and exclusionary democracy gradually gave way to an era of center-left government under the Popular Front, elected in 1938. Until then, Chile’s parliamentary model of politics had exclusively served the interests of the landed elite and the mining bourgeoisie. The numbers of Chileans entitled to vote were kept low, with estimates of under 10 percent of the population enfranchised as late as 1949.19 But in 1938, a Popular Front, composed of a centrist party and the left won the Presidency, promising reform. Its most notable achievement was CORFO, established in 1939 as part of a response to a devastating earthquake, designed to be a motor of economic growth and national development, through support for industrialization and business and, therefore, of job creation in the cities. At the same time, a pension system, especially for public sector workers, was introduced and the trade union movement was recognized as a political and economic force, which, alongside the incorporation of the Socialists and Communist parties into the political system, extended democratic inclusion considerably. But it did so at the cost of leaving rural relationships and the authority of landowners relatively untouched. The country’s significant indigenous population in the south of the country also remained excluded. Meanwhile in Argentina, just a few years later, Peronism (1946–1955) expanded social and economic incorporation to the growing numbers of urban workers, via a populist strategy of incorporation. Peronism imposed a strategy of development that combined a more ambitious approach to welfare spending than in Chile, along with state-sponsored industrialization. Economically, a version of the desarrollista (developmentalist/nationalist) school of the political economy associated with the Economic Commission of Latin America

18 19

Rueschemeyer, Huber and Stephens, Capitalist Development and Democracy. Cruz-Coke, Geografía electoral de Chile, 12.

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(ECLAC/CEPAL), Peronism aimed to foster national-owned capitalism. Nevertheless, as Barbeito and Goldberg show, Peronism sought to deal a decisive blow to the political dominance of the upper class rather than building a social consensus for development.20 This was to lead ultimately to the downfall of Peron in 1955. These limited and uneven attempts at tackling inclusion and historic manifestations of inequality came to an end in the 1960s and 1970s, in Chile and Argentina, and elsewhere in the region, as political instability and military dictatorships took power across the region. These governments introduced a combination of fierce repression of trade unions, the elimination of left-wing parties, and a violent policing of public and civic life, radically reshaping the parameters and expectations of ordinary people for more than a generation. Inequalities were made worse by brutal suppression of human rights, and increasing economic hardship, a process intensified by the intensification of market-led development in the 1980s and 1990s, exactly as the cycle of military dictatorships gave way to a new era of (re)democratization. The survival of democratic institutions across the region since then is, in many ways, remarkable. But at the same time, Latin America’s democracies initially proved very timid in terms of tackling the inequalities they inherited. Efforts to reform tax or introduce financial reform were resisted.21 Democratization did not lead to the creation of inclusive or labor-friendly regimes22 and the social policy agenda focused on addressing the needs of the very poor, but rather the creation of an inclusive welfare state. As Cruz shows social and economic elites continued to live in the grip of fear of revolt and mass mobilization from below, and it was precisely the “deficits” in the quality of regional democracy that enabled it to survive.23 One of those tacit silences referred to inequality. One consequence of timid democratization was that it became difficult, if not impossible, to speak of inequality, class conflict, or question the fundamentals of economic policy after the transitions to democracy. The introduction of market-led governance produced little overt opposition in the 1990s.24 This social silence grew as the privatization of public assets, the reduction in public services, and the deregulation of the labor market led to a period of relative macroeconomic stability, even though both also intensified poverty and deepened the intersectional inequalities on which the region’s nation states had been built.25 And the silences were not only around the class and economic inequalities. Latin American governments were exceptionally slow to tackle gendered 20 21 22 23 24 25

Barbeito and Goldberg, Social Policy and Economic Regime in Argentina. Boix, Democracy and Redistribution. Garretón, Incomplete Democracy. Cruz, “Latin American Citizenship,” 315. Gwynne and Kay, “Views from the Periphery.” Gasparini and Cruces, “Poverty and Inequality in Latin America.”

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inequalities,26 inequalities based on disability27 and of course the multiple ways in which race and ethnicity impacted on inequality.28 The center-left, meanwhile, traumatized by the era of repression and uncertain how or even if, to challenge the new pro-market policies, chose to put their commitments to an expansion of social rights, welfare entitlements, and labor reform on ice. Instead, in an era where the zeitgeist was shaped by economic liberalism, they also discursively linked democracy to the market.29 In terms of people’s everyday lives, this means that market-based incentives and personal economic resources came to determine the extent and nature of political and social inclusion, and shaped access to education, health, housing, etc.30 At the same time, collective identities were replaced with concepts of individual – or household – responsibility. These dramatic changes also directly shaped the nature of contentious politics in the first stage of democratization. On the one hand, the return of liberal democracy and the introduction of the (partial) rule of law made protest a considerably less dangerous endeavor than in the past; and, on the other, the introduction of sweeping market reforms gradually opened up a new era of contestation as the neoliberal roll-back of the state, and the rise of labor insecurity created a constituency of economically and culturally disenfranchised citizens. In the end, the attempt to successfully re-engineer state–society relations through market reforms at the end of the twentieth century failed in the face of the fact that markets reproduced the entangled inequalities of the past, igniting both trades union and social movement-based protests.31 The impossibility of reconciling neoliberalism with popular expectations became clear at the end of the 1990s. Although economic growth resumed in the 1990s (averaging 3.3 percent a year for the region during 1990–98) after the disastrous decade of the 1980s, governments failed to reduce poverty; roughly 70 million more Latin Americans were living in poverty, in 1997 than in 1980,32 and inequality increased across the region reaching a very bleak scenario that only began to improve in the first decade of the new millennium.33

10.2  the

neoliberal social policy revolution

Neoliberalism rested on a profound critique of state-sponsored welfare, with arguments that ranged from the fact that it created a fiscal burden on states to

26 27 28 29 30 31 32 33

Grugel and Fontana, “Human Rights and The Pink Tide in Latin America.” Grugel and Riggirozzi, “New Directions in Welfare.” ECLAC, “The Social Inequality Matrix in Latin America.” Dagnino, “We all have rights, but…,” 18. Oxhorn, “Citizenship as Consumption or Citizenship as Agency.” Grugel, “Basta de Realidades, Queremos Promesas.” Lustig and Arias, “Poverty Reduction.” See Gasparini and Cruces, “Poverty and Inequality in Latin America,” 54.

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the view it created moral hazard and set up incentives for the poor to avoid their individual obligations to exit poverty through behavior change, responsibility, and education. Welfare, it was argued, discouraged ambition.34 So, it might seem at odds with the neoliberal vision that pro-market regimes in Latin America invested as heavily in social policy as they did. But they did so with a twin vision of encouraging the poor to adapt to the market and investing to improve the region’s human capital. The purpose of welfare, now, was not to address inequality, still less “entangled” inequalities. The end game of social policy, in other words, dramatically shifted. The “point” was not to ensure equality of citizenship or opportunity but to meet basic needs and encourage integration into a flexibilized labor market. At the policy level, this meant a shift away from investments in public provision and the introduction of greater privatization of health and education, as well as services such as energy and water. Social policy in particular now aimed to tackle not inequality but poverty and extreme poverty through extensive but small-scale programs.35 There was a shift to targeted, conditional welfare provisions which were designed exclusively for the poor. Rather than promoting shared services and the collectivisation of social risk, the new social policy paradigm accepted that the poor would face greater insecurity because of their greater vulnerability in the market, especially in the context of weakened trade union power. While policies were intended to encourage the poor not to evade their individual obligations, the absence of universalism contributed to tiered citizenship through a selective and hierarchical model of inclusion.36 This social policy transformation was not just of course the result of the dominance of “new right” welfare framing; it was also driven by real-world imperatives, including a lack of funding into the state due to the impact of debt and structural adjustment. This was interpreted to mean that there was little choice but to design social policies in ways that ensured a minimum of stability and prevented a social backlash.37 The result was the rise, above all, of targeted conditional cash transfer programs (CCTs) in the 1990s, which were discursively wrapped up on the vision of behavior change and human capital but increasingly were implemented as sticking plaster solutions to address some of the worst effects of austerity, labor market deregulation and privatization of education, healthcare, pensions, and services. CCTs were marketed as a cost-effective way of combining the notion of improving “human capital” with the principle of pro-poor targeting. They were consistent with the “logic of the market” and the view that direct handouts or subsidies distorted relative prices and should therefore be 34 35 36 37

Cox, “The Consequences of Welfare Reform.” Barrientos, “Latin America: A Liberal-Informal Welfare Regime?” Deacon, Perspectives on Welfare. Nooruddin and Rudra, “Are Developing Countries Really Defying the Embedded Liberalism Compact?”

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avoided.38 CCT programs worked as income-support and safety net schemes through monthly allowances for the poorest households, contingent on school attendance, and medical checkups as a way to improve human capital.39 And they became an inescapable part of the social policy landscape across the region, enabling many of the poorest families to survive but condemning others to dependence on welfare since opportunities for decent work remained limited. At the same time, with social policy redefined as targeted welfare for the poor, lower middle class communities became more market-dependent than in the past. These groups were generally not covered by CCT programs, despite also experiencing the effects of service privatization. It is no surprise that lower middle communities were key in making demands for a return to state-funded investments, in education for example, as the example of Chile after 2010 demonstrated.40 Lower middle-class families, many of whom took on debt to access higher education, experienced particular and new forms of social exclusion that ultimately led young Chileans to organize to demand not only well-funded public education but a wider rethink of the regional model of development. From their perspective: neoliberal economies in Latin America have … created a vast number of young people who are doomed to failure, either by being unable to complete school, attending the “wrong” college or university, or simply being unable to find decent employment after graduation. As a result, young people living in a neoliberal democracy [found] themselves negotiating a very confusing, uncertain and contradictory landscape in which the pervasive and dominant ideas about how to be a ‘citizen’ contradict their own experiences of insecurity and even impoverishment.41

Particularly once growth began to slow after 2012, these young people and their families found themselves vulnerable to low-paid employment and inflation, yet they were outside the reach of social policies where the underpinning philosophy was based on safety nets for the poor. The remarkable electoral success of the new left across the region in the first two decades of the twenty-first century – in Venezuela (1998), Brazil (2002), Argentina (2003), Uruguay (2004), Bolivia (2005), Ecuador (2006), Nicaragua (2007) and, for shorter periods, in Paraguay (2008), El Salvador (2009), and Peru (2011) – has to be understood in this context. It was a response not only to the widespread exhaustion and dissatisfaction with market-led development but also to the failures of market-compensatory welfare schemes, aimed only at the poorest. Whatever judgment we make now in hindsight, it is crucial that we recognize that this suite of governments came in on a wave of enthusiasm,

38 39 40 41

Rawlings and Rubio, Evaluating the Impact of Conditional Cash Transfer Programs. Also, Solimano and Soto, Economic Growth in Latin America. Stampini and Tornarollo, The Growth of Conditional Cash Transfers in Latin America. Grugel and Nem Singh, “Protest, Citizenship and Democratic Renewal.” Grugel and Nem Singh, “Protest, Citizenship and Democratic Renewal,” 356.

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promising the beginning both of neoliberal roll-back and a new approach to citizenship, inclusion, and welfare. They offered a politics of hope to middleclass citizens made vulnerable through marketization and uncertainty in a context of rising levels of poverty and inequality, as well as to the poor.42 And a new approach to social policy, a new end game, was a key part of their offer.

10.3  welfare

under post - neoliberalism :

how far did the end game change ?

The extent to which “post-neoliberalism” delivered a genuine alternative to the neoliberal basic needs for the poorest model and create new forms of inclusive and distributive welfare is the subject of contentious debate. We have argued elsewhere that the initial ambition was to radically reform the basis of welfare and to refocus the economy in order to combine growth, fiscal stability, and some forms of income redistribution within the context of capitalist economies.43 Without abandoning many elements of market-focused development, the new left nevertheless tried to articulate a political economy that changed the purpose and role of welfare. Discursively, welfare was no longer seen as a simple matter of compensation for the rigors of the market. It was tied to a vision of equality of citizenship. Key elements of universalism crept in, such as universal child benefits or old age pensions. But it is equally the case that this vision was not delivered. Indeed, in many ways, policies fell considerably short. The CCT model, on which the survival of the poor now depended, was not abandoned. Markets, it was recognized, were not going to generate “decent work” for many of the poorest. In this context, the government made choices based on a combination of principle – to extend coverage and introduce some new forms of universalism – and pragmatic and electoralist concerns, taking advantage of rising export prices to fund expenditure.44 The end game shifted; policies were no longer designed to regulate and discipline the poor to the rigors of the market. But neither were they going to be the basis of wholesale societal transformation. Change and continuity, reform and accommodation sat alongside each other. What quickly became evident was a change in the language and purpose of social policies. Social policies under the post-neoliberal left were couched in a new language of human rights.45 New ideas and commitments to greater inclusion and recognition of human rights transformed the language around how the duties of the state itself were understood, shifting the pendulum of welfare 42 43 44 45

Londoño and Székely, Distributive Surprises After a Decade of Reforms. Also, Grugel and Riggirozzi, eds., Governance After Neoliberalism. Grugel and Riggirozzi, “Post‐Neoliberalism in Latin America.” Papadopoulos and Velázquez Leyer, “Two Decades of Social Investment in Latin America,” 435. Grugel and Fontana, “Human Rights and the Pink Tide in Latin America.”

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responsibilities back once more from the individual to the state. New left governments, especially in the Southern Cone and the Andean region, began to use the idea of human rights as a basis for social policy and, at the same time, as a way of challenging conservative norms in an effort to engineer wider ideational changes in society. This change would also, of course, be more likely to favor the left electorally. At the same time, income supplement programs, new pension entitlements, social insurance schemes, and child benefits began to be couched in the language not of safety nets or human capital but as socio-economic rights. This discourse came to underpin redistributive and public spending, serve as the foundation of new forms of social incorporation,46 and establish a “‘floor’ of social rights which cannot be left up to market forces.”47 As such, a raft of new initiatives emerged. In Bolivia, where social coverage was previously very poor, reforms have included the introduction of a minimum non-contributory pension scheme (Renta Dignidad), which offers a pension to the self-employed and workers in the informal sector for the first time to prove education and infant and maternal health have also been set up (Bonos Juancito Pinto and Juana Azurduy). Similar schemes were introduced in Ecuador. New types of welfare programs targeted at specific sectors were also established, such as Discapacitados in Ecuador (for people with disabilities). In Uruguay, where social coverage was already high for the region, access has been expanded and primary care strengthened. A new national system of care (Sistema Nacional de Cuidados) emphasizes gender equality, gender rights, and recognition of the unequal burden of care upon women and girls as the basis for care provision.48 Argentina extended pension schemes for citizens who failed to pay social security contributions during working life, including women in the care economy and informal workers or unemployed.49 The government of Cristina Fernandez de Kirchner (2006–2015) also introduced in 2010 a non-contributory targeted program for children, the Universal Child Benefit (Asignación Universal por Hijo or AUH). AUH provides a monthly allowance for nearly 4 million children and families conditioned upon schooling and health targets, mainly vaccination.50 Spending on CCT programs grew and they acquired unprecedented significance. Coverage expanded to include families in rural areas, with school-age children, pregnant women, and women with care responsibilities for disabled people.51 The number of individuals living in recipient households increased 46 47 48 49 50 51

Rossi, The Poor’s Struggle for Political Incorporation. Martínez Franzoni and Sánchez Ancochea, The Quest for Universal Social Policy, 275. Grugel and Riggirozzi, “Neoliberal Disruption and Neoliberalism’s Afterlife.” Arza, “Extending coverage under the Argentinian pension system.” UNICEF, The Case of Argentina. Cecchini and Atuesta, Programas de transferencias condicionadas.

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from fewer than 1 million in 1996 to 131.8 million in 2015, or 20.9 percent of the region’s total population. Overall, CCT programs increased household consumption, reduced both poverty and inequality,52 and were the critical vehicle to improve the inclusion of the poor through health and schooling programs.53 Fiscal space for the new social policy expenditures came from economic growth as a consequence of a commodity boom and improved terms of trade, increasing the tax/GDP ratio. Renewed state activism and state spending thus sat alongside an increase in commodity prices that between 2002 and 2012 allowed leftist governments to access revenue for social spending.54 This involved tax on export and renegotiation of contracts and concessions to foreign investors, especially in the commodity sectors where growth and expansion made a higher tax burden more palatable to them. All of this was positive, at least fiscally, in that traditionally, welfare in Latin America has been financed by external borrowing because of historic difficulties in collecting income tax and taxes on assets and wealth, due to non-compliance, tax avoidance, and concessions to foreign investors.55 But it created vulnerabilities: how would governments continue to spend at these levels once growth began to decline? Would their electorate accept reductions in expenditure, or would the government continue to fund social policies by other means? Dependence on the natural resource export sector also had other weaknesses. It intensified a series of environmental crises across the region, from deforestation for soy production to incursions on indigenous land. It has also created a fiscal trap for the region by reinforcing dependency on growth based on the export of primary goods. And it created political weaknesses in that it made governments vulnerable to pressure from extractive industries, whether from domestic producers and landowners, as in Argentina, or from corporations, as in Brazil and the Andean region. Ultimately, the left failed to balance the need for welfare with the need to invest in the long-term management of the region’s natural resources for sustainable and inclusive development. As Riggirozzi argues (2020), welfare regimes highly dependent on income from extractive economies which created “tensions between the socio-economic and ecological spheres that undermined inclusive citizenship and democracy.”56 Delivering welfare reliant on resource rents meant that progressive governments were more successful in adopting redistributive policies to reduce socio-economic inequalities than redressing other forms of inequalities that intersect with gender, disability, race, and ethnicity. The result was, far from 52 53 54 55 56

Ibid. Also, Molina Millan, Barham et al. “Long-term impacts of conditional cash transfers.” See chapter by Leão in this volume. Jenkins, ‘Latin America and China: A New Dependency?’, 1338. OECD, The Pursuit of Gender Equality. Riggirozzi, “Social Policy, Inequalities and the Battle of Rights.”

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addressing the entangled inequalities inherited from the past, new left governments sought to push extractivism even sometimes through the introduction of repressive legislation and the criminalization of indigenous protest, curtailing, sometimes violently, rural and indigenous communities and environmental activism.57 These difficulties were manifested in the fact that poverty alleviation programs were delinked from fundamental questions of resource and land distribution, fiscal planning, and seeking to create a national consensus around welfare and taxation.58 In short, the real criticism of the new left’s social policies is not how social policies were delivered or the underpinning philosophy of its welfare approach. It is the over-focus on redistribution in the cities, for the urban working and lower middle classes alongside the failure to address the long-term challenge of how to finance welfare sustainably and over time.

10.4  the challenges of incorporation through welfare : how far did the new model address