Author: Stefano Gatto

The development of international scenarios after Seattle has also had important repercussions for Latin America. On one hand, the rise of an influential protest movement against globalisation and its effects focused world attention on themes traditionally deeply felt in the region, as well as in developing or ’emerging’ countries.Summing up,we maysay there has been a renewed awareness of the unevenly weighted relations between the North and the South of the world. Thus an appаrently no longer fashionable topicclearly still concerns major sections of world public opinion.

On the other hand, as never before in its history, the sub-continent has become the centre of a complex trade zone, characterised by the overlapping of several fronts: the launching of a new multilateral round of negotiations by the World Trade Organisation (WTo) is still the mostprobable general prospect, or at least the most desired, but after Seattle the possibility of fresh failure in Qatar has suggested a number of scenarios for the region:

• – hemispheric integration as part of the Free Trade Agreement of the Americas (FTAA);
  – the conclusion of bilateral trade agreements with the European Union.Already established with Mexico, this kind of agreement is currently being negotiated by the Eu and MERCOSUR;
  – the consolidation of the sub-regional economic integration processes – primarily MERCOSUR, currently undergoing a major internal crisis because of economic divergences between Brazil and Argentina, but still a regional bloc with solid prospects and significant results in terms of trade volumes. The Andean Community is also strengthening and, with it, the prospect of a South American Common market, which would be the outcome of the possible integration of the two groups;
  – the possible alternative solution of signing bilateral agreements with the USA and the Eu,
  eschewing membership of regional blocs: i.e. the Chilean model, which other countries in
  the region would like to follow.

But it would be misleading to think that these possible alternatives only appeared on the scene after the failure at Seattle. The overall games are much more complex and must be seen in the context of the a ‘Spring’ in Latin America, or at as least part of it, a feature of the 1990s.After the so-called ‘lost decade’, all the countries in the region continued to pursue – with varying degrees of success – ambitious modernisation programmes for their economic and social systems, demonstrating that Latin America, far from being composed of countries destined to fail, has a future full of opportunities.

Thus we can talk of a new Latin America, albeit still beset by crude problems, but now on the right path. The first to recognise this new real situation was multinational and other enterprises (hardly surprising?),which invested en masse in the most promising countries in the region both in the framework of the privatisation processes and outside them.

When, in the 1990s, Brazil registered the most foreign investments among emerging countries after China, the reason was certainly not a sudden new-found love ofthe samba by international capital, but rather the success of the economic reforms pursued by Fernando Henrique Cardoso’s government and the solid long-term prospects of the Brazilian and MERCOSUR markets. Although a similar process affected Mexico, where a great deal of capital was invested, despite political unrest, it was because the international entrepreneurial community viewed the ongoing economic and social progress in the North American country as irreversible.

The current Argentine difficulties must not deceive us. The most ‘European’ Latin American country was the first to attract the attention of international business. The Argentine privatisations of the 1990s were cited as a model to be emulated by emerging countries. But today we are aware of the economic lessons of this first-generation of ‘wild’ privatisations. In Argentina, as in the USA and Britain, privatisation without clear transparent rules for the privatised sector often ran into serious problems of efficiency. In this first stage of the history of privatisations (1980s and 1990s), there was an attitude of almost blind trust in privatisation conceived as an absolute panacea and the emphasis was not on the modalities but rather on the gains to be made for the public coffers.After initial brilliant results, in the long run problems began to appear.

Argentina is a clear case in point. It privatised everything immediately, creating the illusion of having solved its problems overnight. But this ‘accounting’ approach to privatisation was not accompanied by a parallel process streamlining and modernising the economy and public sector, thus leading to the current impasse, with a crisis in competitiveness of the country as a whole, aggravated by the effects of the peso being bound to the dollar to the detriment of Argentine products on the international markets.

The Argentine problems can thus be explained by serious structural difficulties and solving them will take years of virtuous economic policies and sacrifice. It will be far from easy, but it seems that Argentina has learned its lesson: economic stabilisation and freezing inflation are not the ultimate objective,but only the initial step in the long path of reforms.

For years Chile was considered a paragon of sound economics and although its macroeconomic situation is still much better than its neighbours, paradoxically for this very reason the country must reckon with a certain lethargy in the country considered as a system.
This, however, has not prevented Santiago from moving with considerable skill and ease on the international scene – a necessity for a small-sized country (in terms of population), half of whose gross national product depends on exports.

The other countries in the region are characterised by similar, more or less successful processes. But the road taken seems fairly clear and even rigorously taking into account all the differences, we can now speak of Latin America entering the twenty-firstcentury with renewed economic credibility.

And this new dimension enables Latin America to play a greater role in international relations. Economic credibility brings greater international credibility, more obviously in the case ofthe larger countries, like Mexico or Brazil, but also for other countries.

While LatinAmerica now attracts interest as a market, arguably for the first time in its history, it also seems to have its own voice, and is no longer simply a passive protagonist of its own destiny. The age of dependence has ended, and the sub-continent has shown that it has a lot to say and offer in the age of interdependence and globalisation.

Having said this, we should not like to give a misleading impression ofungrounded optimism. The region still has very serious problems, everywhere there is a social gap between the educated elite, an integral part of the First World, and the much larger sections of the population still on the sidelines of the modern world. Reducing this gap is still the great challenge for Latin America in the twenty-first century. Only a determined move towards social policy by the ruling elites throughout the region will enable them to tackle this problem and the signs so far in this sense are not always encouraging.

Once vacillating and subjugated by political power, the Latin American civil societies made giant steps forward in the 1990s and in a certain sense have forced the ruling oligarchies to heed their demands.

Part of this phenomenon is due to the wide scale of the privatisation processes in countries where the state presence has always been very strong and heavy-handied. The withdrawal of the state’s long hand has forced once passive citizens to take on responsibility for collective problems. In Europe something similar happened, but in an economic context and with much greater available resources. In this sense, the reawakening of Latin American civil society has something almost heroic about it, yet is still real and tangible.

The ongoing experience in Latin America involves several themes: social development, education, the struggle against crime and drugs, environment, and access to new technologies. In twenty-first-century Latin America citizens simply no longer expect magical solutions from the state, but have come to adopt a hands-on approach.

Thus the phenomena is not only explained by a defensive attitude (i.e. replacing the failed state) but is also the outcome of a virtuous process. The Latin American countries have shown they really can function and have built up a sense of confidence in their populations that was often missing in past.

While criticism of the perverse effects of globalisation are now found worldwide, Latin America certainly led the way in this process. On one hand, the insistence on an objective diffidence in the dominant Us-based model – adored and hated by Latin Americans – and, on the other. the existence of serious imbalances in the continent, aggravated by growing globalisation (the striking contrast in Latin American cities shock European visitors), have definitely been grist to the mill of those criticising certain aspects of globalisation.

If globalisation reaps many victims, then most of them live in the South of the world.
Not surprisingly, in Latin America critical but constructive approaches to globalisation have emerged, such as the Porto Alegre Social Forum, which, when launched this year, caught the attention of half the world.

With hindsight, we can say that Porto Alegre set the tone for worldwide movements criticising various aspects of globalisation. The subsequent spiral which took some fringes of the anti-globalisation movement from Prague to Genoa wrongly debased themes of great interest and relevance through the use of violence.

The Porto Alegre Social Forum was a product of the Latin American Left and it was a positive constructive example of how to tackle major themes peacefully. Its great merit was as a sounding board speaking out and saying things that many had thought without having the courage to articulate.

Although the Social Forum also expressed anxieties present in Latin American society for some time, the governments in the region, boosted by the relative success of the reforms and spurred on by an increasingly dynamic and demanding society, had the courage to put on the international agenda topics of great importance for Latin America and for emerging and developing countries in general. Incidentally, these themes also turned out to be of interest to many industrialised countries.

Some time after the practical end of the nonaligned group, countries which in the past had often sought an independent role on the international scene found themselves in the front line over themes also arousing considerable sympathy in the North of the world, especially in Europe.

Let’s look at some examples.The struggle by South Africa, India and Brazil for access to low-cost medicines against Hiv and otherendemic diseases through the partial suspension of intellectual property rights is a very delicate theme because it threatens one of the foundations of the market economy. But at the same time it is obviously a just cause, given that tackling this kind of problem requires bold mechanisms, based on solidarity.

This issue would have dragged on foryears in the chambers of the WTo onlv to end with a victory for the multinational drug companies, if the world climate had not dramatically changed over the last year, and if there had not been strong international pressure in favour of the claims made by the countries of the South.

Brazil and its allies would never have had their way, if they had not received significant support from the European Union, whose Access to Medicines initiative is wholly in line with the claims of emerging countries (and very far from the United States’ position).

On the subject of climatic change and biosecurity (see the Kyoto and Cartagena protocols) as well as biodiversity (see the convention on biological diversity at Rio in 1992) the Latin American countries, and especially Brazil on the strength of its good health and economic and strategic influence, abandoned its previous world ambitions and took on a much more realistic role as leader of the sub-continent, defending with strong stances, critical of the extreme freemarket visions of the United States and Japan.

In the United Nations conferences, Brazil and the Latin American bloc have usually shown considerable unity, due not only to their common culture, butalso shared objective interests. In this context there is also considerable agreement with the African and Asian countries, enabling countries like Brazil or Mexico to be part of the leading group of developing countries. In the recent Durban conference, the Latin American countries played asignificant role. Without being in the front line on such topics as the claims associated with slavery, nor the theme of the ideological definitions of racism, led by Brazil, Latin American took on the role of broker, and exercised considerable influence in reaching a final compromise.

At last Latin America tends no longer to unreservedly accept social and cultural models imported from abroad, but develops its own positions and defends them on the international scene by creating alliances of variable geometry often involving convergences with emerging African and Asian countries, but also with the Eu.

There are of course also significant differences, for example, on the subject of accepting GM food, rejected by Brazil but wholly acceрted by Argentina. In general, however, Latin America today has its own personality and
stance towards the G8.

Latin America is also showing great dynamism in the cultural field. An awareness of the theme of ‘cultural exception’ is growing and the idea of access to a multilingual information society has developed fast in a region speaking Spanish and Portuguese (the second and fourth international language in the world, respectively). Although the information society tends to be global in its content, it can not be so only in English, but must also reach the majority of popиlations in theirnative tongues. Here, too, there are common denominators with the Asian countries and Europe, by definition multicultural, and friction with the mono-cultural Us globalising model.

But what is the Latin American position on economics vis-à-vis the G8?

On the strength of its renewed credibility, which seemed to have been lost for good in the 1980s, Latin American countries are now objectively in line with the other emerging countries in demanding the democratisation of international trade based on growing access to the developed world markets and a revision of the Wro mechanisms, now leaning heavily in favour of industrialised countries, so that they are better balanced in favour of the South.

Very few Latin American countries are part of the Less Advanced Countries group which benefited from the debt forgiveness decided by the G7 in Cologne (1999). But perennially beset by severe problems of financial instability, Latin America is very aware of the need to design a new architecture of the international financial system to promote stability in emerging countries.The crises in Mexico (1994), Brazil (1990) and Argentina have highlighted the financial fragility of even the strongest countries in the region, still dependent on the flow of international capital and often penalised by market speculation not always based on objective elements in the countries involved.

The international financial community responded positively to the subsequent Brazilian and Argentine appeals by conceding an ad hoc financial packet, but the problem is still far from being solved and is a priority for the Latin American governments. But apart from the above-mentioned specific contributions, it seems unlikely there will be a definition in the near future of stabilisation mechanisms for the monetary markets, which continue to fluctuate violently, as they have done since 1973.

While the problem of foreign debt, although still not solved, is no longer as crippling as it once was, the Latin American countries have found that the path of growth, the key factor in economic development, now depends on access to international markets.

The Uruguay Round gave rise to a sweeping trade liberalisation process for industrial goods and some services. The emerging countries, mainly agricultural producers, now ask for a counterpart for their great effortto open up their economies in the 1990s. This is particularly true for some Latin American countries, who opened up considerably to international capital and enterprise and would be ready to export farm produce to European, North American and Japanese markets, if the liberalisation of the Uruguay Round were to be followed by a significant liberalisation of the agricultural markets in the next trade round. The United States, the Eu and Japan all have various mechanisms severely limiting the import of agricultural products from the biggest producers (united in the socalled Cairns Group). They also grant subsidies to exports (USA and Eu), thus penalising the Cairns countries even on third-party
markets.

While in the case of the Eu, the 1992 CAP reforms and the Berlin financial agreement of 1999 gave rise to a gradual reduction in subsidies, especially those granted to exporters, the United States is undergoing a considerable escalation in agricultural protectionism.

In the view of the Latin American countries. especially big agricultural producers like Argentina, Brazil and Uruguay, the fresh round of Wro negotiations, due to be resumed at Doha in November after its failed launch in Seattle, should firstly focus on liberalising agricultural trade, a genuine priority, but should also revise the mechanisms used for protectionist purposes and strongly biased in favour of industrialised countries (such as anti-dumping measures and intellectual property rights).

Only in that eventuality – the Latin Americans claim – will it be possible to talk about further reductions to industrial tariffs and the further liberalisation of services and public tenders. The Latin American resolve, inspired, however, by a constructive spirit, is accompanied by the even more rigid stance of the emerging Asian countries (India, Indonesia, and Malaysia), which are very unwilling to support the launch of a fresh round of negotiations.

Before Seattle, these objections from emerging countries would have been relegated to the background. The three big blocs of international trade, and especially the USA and the Eu,would practically have decided the fate of world trade on their own. But this is no longer the case, and the consensus of a dozen key emerging countries has now become indispensable. Here we are talking about Brazil, Mexico and Argentina for Latin America, plus India, Indonesia, Malaysia, Singapore, South Africa and Egypt (in addition to developed countries like Canada, Australia and a few others).

It is very difficult to foresee any significant progress being made in the negotiations or even if they will take place, without obtaining an overall prior consensus from this ‘club’.

But if, despite all these efforts, it turned out to be impossible to set up a new round of multilateral negotiations, what would be the repercussions for Latin America?

As mentioned at the beginning of this article, it would be a mistake to depict alternative scenarios as second best to the multilateral round of negotiations. In fact, while the United States and the European Union are now engaged in ambitious initiatives in Latin America, these processes actually began in the early 1990s, and coincided with the beginning of economic stabilisation and structural reforms in the region.

Since the signing of the Treaty of Asunción (1991) instituting MERCOSUR, the European Union has given the new South American sub-regional bloc considerable political support as well as offering economic cooperation. This approach led to the signing of the agreement for inter-regional cooperation in Madrid (1995), and one of its clauses made provisions for setting up trade liberalisation negotiations between the two blocs, when the necessary conditions were fulfilled. The significant evolution of economic relations between the Eu and MERCOSUR (in the second half of the decade, the Eu was the foremost trade partner and the foremost investor in the South American bloc) has laid the basis in avery short period for setting up negotiations, with the aim of creating the first ever Inter-regional Association Agreement in the history of international relations.

At the time of the first Euro-Latin American summit at Rio de Janeiro (June 1990) the launch of negotiations was approved, and although they initially ran into difficulties, after five rounds of talks a draft agreement was proposed by the Eu, and MERCOSUR should respond with a counter-proposal by the end of October.

The conditions thus exist to conclude the agreement over the next two years, and the next Euro-Latin American Summit in Madrid (June 2002) should establish a schedule for the talks to create an ambitious common economic area involving the fifteen Eu members and the four MERCOSUR Countries, plus Chile,with which the Eu is simultaneously negotiating an equivalent agreement.

In addition to the trade agreement, there will also be a political agreement and an accord in the field of cooperation, both integral parts of the Association Agreement.

As regards the United States, the launch of the ambitious project to create a hemispheric common market (FTAA, or ALCA in Spanish) dates back to the administration of President Bush senior.

The process made little progress during the Clinton administration, but in the second half of his term of office, he acknowledged the growing strategic importance of markets in the region, which the USA can no longer consider as their own, while there were difficulties in the multilateral framework (the Seattle failure).

The United States have always preferred a strategic multilateral approach to trade agreements, basically fighting shy of signing bilateral regional agreements which, however have been a feature in practically all world regions.

American analysts and companies have warned incoming President George W. Bush about this situation, and he decided to push forcefully along the road of regionalism, without relinquishing the possibility of launching a multilateral round this year.

The prospect of a Common Market of the Americas has re-emerged, and the thirty-four countries in the region at the Americas Summit in Quebec (April 2001) established a calendar and structure for negotiations, which are due to be completed by 2005.

These negotiations, however, must tackle numerous difficulties, not least the influence of the American lobbies. This makes it difficult to foresee President Bush being allowed a broad negotiating mandate (the Trading Promotion Authority, previously known as the ‘fast track’).

But there is another fundamental difference between the FTAA as conceived in the early 1990s and the present set-up. At that time the negotiation process was clearly Us led, with little chance of the Latin American countries exercising significant influence on the talks, but the renewed strength of some countries, especially Brazil, and the re-balancing influence of the European Union have shuffled the cards. The Latin American countries have much more room for manoeuvre and, as in the case of Brazil, intend to make the most of it.

This does not mean that the FTAA will not be created, but it will probably no longer simply be the mirror image of NAFTA (North America Free Trade Agreement). It will be a wide-ranging ambitious agreement with the United States being forced to grant concessions on important issues (access to markets, sanitary regulations, the use of anti-dumping measures, and farm subsidies).

In fact in the run up to Quebec, Brazil already successfully imposed its time-scale on the United States and its closest allies (i.e. Chile and Uruguay), which had pushed for a conclusion to the agreement in 2003, before the end of Bush’s term in office. This was a wholly unrealistic prospect, given the complexity of the talks. But, attracted by the illusion of striking a quick deal with the United States, many Latin American countries had been willing to accept it.

The Brazilian position, supported by other countries like Venezuela and Argentina, albeit with some reservations, is that fast negotiations would only result in imbalances in favour of the United States. The Brazilians believe the USa showshould their willingness to conclude the agreement by granting real concessions.

Another very important point for Brazil is the consolidation of MERCOSUR. Although since 1990 the regional bloc has been beset by an internal crisis, basically due to the incompatibility of the Argentine and Brazilian exchange systems, and now aggravated by the Argentine crisis, this takes nothing away from the fact that it is a significant common market. Here Brazil has acquired considerable political influence, which it obviously does not wish to give up. Hence the decision to negotiate as a bloc in the FTAAtalks (a move viewed coolly by Uruguay and to some extent also by Argentina).

That MERCOSUR still counts for a lot, despite its internal problems, is demonstrated by the fact the USA, in tackling the difficulties of multilateral negotiations (WTo), and hemispheric negotiations (FTAA), have agreed to set up a dialogue called 4 + 1 with MERCOSUR on trade issues of common interest. These are not fully-fledged negotiations, but talks acknowledging an important role for MERCOSUR, often denied by the Usa in the past.

The future of Latin America in the new century will depend on the evolution of these situations as well as the 4 + 5 negotiation between MERCOSUR and the Andean Community, which could lead to the creation of a South American Common Market, as a premise for the FTAA.

Clearly anyone who still sees Latin America as reed rocked by winds much stronger than itself will have to change their mind in light of the foregoing observations.

The new Latin America is still beset by enormous problems, but now has its own voice and personality. Within the region, countries like Brazil and Mexico, but also Chile and Venezuela have cards up their sleeves which they are now in a position to play.

Given the crisis in the G8 model over the last two years, it is unlikely that the organisation will continue in its present structure and ways of working. The idea of an ‘executive board’ of rich countries (G7) or armed countries (Russia) exercising world leadership alone is now losing ground, or has been abandoned completely.

The G7 must be widened and in fact some countries already participate in a G20, the first meeting having been held in Berlin in December 1999.

In addition to the members of the G8, the participants in this new forum are Argentina, Brazil, Mexico, Australia, South Africa, Turkey, China, India, Indonesia and South Korea plus the Presidency of the European Union and the Bretton Woods institutions. Although the G20 has still not attracted as much media interest as G8, the international community will probably head in this direction, without, however, forgetting to include in the wider group mechanisms for the involvement of excluded countries and civil societies.

In this picture, Latin America has already cut a fine figure and it will surely continue to make its own voice heard in the process to define new worldwide balances.

The Brasilia South American Summit (30 August – 1 September 2000) brought together for the first time in history the presidents from the twelve countries in the subcontinent (in addition to Brazil and the nine Spanish-speaking South American republics, Suriname and Guyana were also present). It comes as a surprise to learn that in a world in which summits featuring heads of state and governments no longer even make the news and are often devoid of any real new interest, the South American countries had never previously organised a meeting of this kind.

There are already various high-level multilateral forums in the region. The summit of Latin American countries (with the participation of Spain and Portugal) has convened every two years since 1991, while the Washington-based Organisation of American States (OAS, or OEA in Spanish) goes back much further, and since the 1980s the Rio Group has been a forum for political discussion dedicated to the defence of democratic values and human rights involving twelve countries in the Iberian American subcontinent plus Mexico and Panama. But the geographically South American countries had never created their own specific forum. In a cursory analysis of what was discussed in Brasilia, we see why this kind of initiative has only been implemented now and how the South American summit fits into a crucial time of transformation for Latin American countries at the turn of the twentieth-first century.

The Brasilia summit focused on three key topics: the defence of democracy and human rights in the region, the promotion of economic development and integration, and the lack of region-wide infrastructures to encourage such economic development.

At the summit the consolidation of democracy and the promotion of human rights were seen as the essential conditions for boosting the development of countries in the region and for their economic integration processes.

The democracy clause, already introduced in MERCOSUR, was extended to the whole of South America. The respect for democracy is considered to be a sine qua non for admission to further summits and for involvement in regional political negotiations. In short, any country failing to respect the rules of democracy will be ostracised from the SouthAmerican community.

The existence of this democracy clause in MERCOSUR was crucial in curbing any authoritarian drifts in the various Paraguayan crises. The most recent were in February 1999, when President Cubas Grau was deposed and replaced by the president of congress, González Macchi, now president of the country, and the subsequent attempted military coup in May 2000, apparently orchestrated by elements linked with the exiled general Lino Oviedo.

Although the Paraguay situation can still not be considered stable, the tough line adopted by the three members of MERCOSUR (Brazil, Argentina and Uruguay), stressing at every opportunity that an authoritarian outcome would have automatically meant the expulsion of Paraguay from MERCOSUR exercised a positive influence on developments in the country. Now all Latin American countries are aware that authoritarianism will lead to isolation, and isolation, in turn, leads to economic depression. In this sense Latin American democracy – often criticised as being in crisis on the grounds of past performance than any up-to-date rigorous assessment of the current situation – is practically forced to exist, almost out of a lack of alternatives. The old-style dictatorships are simply no longer feasible in the context of economic openness and globalisation.

The crisis in the progress of Latin American democracy is – if anything – of a different nature. Although fundamental democratic forms can no longer be called into question, the current great challenge, after almost two decades of democracy in the region, is to eхtend substantial democracy and equal oрportunities to the vast majority of the population. This is still a distant prospect, if we bear in mind the dramatic inequalities in education and the economic field throughout the region.

The Brasilia summit thus reiterated the key importance of democracy in the family of South American nations. At the time, however, another prevalent issue in the minds of most was of course the Peruvian situation.

The newly re-elected President Fujimori kept a low profile at Brasilia, happy to be in the shade of Colombian President Andrés Pastrana, who was faced with the difficult task of defending the Colombia Plan launched together with Clinton on the previous day at Cartagena. But more of this below.

Described in a recent article in this magazine (Acque & Terre 3.2000), the Peruvian situation has become even more complicated since the Brasilia summit. The fiercely challenged re-election of President Fujimori, criticised byalmost the whole ofthe international community, was not the object of sanctions, despite Us efforts to convince the Organisation of American States to adopt them.

Various Latin American countries, and especially Brazil, although deploring the evolution of the situation in Peru and sparing no criticism of Fujimori, did not welcome Us activism, considering it to be excessive and verging on interference. The OAS thus simply sent some observers to Lima to help the Peruvian government adopt measures to improve the workings of democracy
in the country.

This mission was already underway and the main weaknesses in the system had been identified as the excessive power of the secret services and the army, as well as a complete
lack of pluralist information, when a local television programme denounced the activity of Vladimir Montesinos, the president’s eminence grise, who had corrupted an opposition member of parliament by cajoling him into supporting Fujimori. This led to completely unforeseen developments.

Having used all the legal and illegal means to obtain a second term of office only a few
months earlier, and totally ignoring all international pressure, Fujimori, confronted with this clear demonstration of the vast network of complicity holding up his regime, announced his retirement, albeit in a year’s time, but still much earlier than the end of his term of office in 2005.

Faced with protests from the opposition, led by Alejandro Toledo, who demanded new elections immediately, fearing that this was simply another ploy by the unpredictable
Fujimori, the president shilly-shallied for a while withoutclearly stating his intentions.

In the meantime Vladimir Montesinos who had left the country and the army – previously suspected ofplotting a coup – declared hisbelief in democratic institutions. Montesinos spenta month in Panama where he unsuccessfully applied for political asylum, and then at the end of October unexpectedly turned up again in Peru, where Fujimori had been personally directing operations to trace him. In the meantime, the Minister of Justice had presented a plan of national reconciliation involving a wide-ranging amnesty for any abuse of power by the army as part of the struggle against terrorism or drug traffic: the opposition came out against this move in very vehement terms.

At this point, the Vice-president and former foreign minister, Francisco Tudela, the leading light of moderate Fujimorism and probable Oficialista candidate for the presidential elections next year, threwin the towel and resigned. Now total chaos reigned in Lima.

In this situation, the enlarged MERCOSUR (including Chile and Bolivia) issued an official statement warning Peru of the negative consequences of any authoritarian developments: further proof of the new ‘Brasilia doctrine’.

At the time of writing, the prime minister Salas has announced the forthcoming resignation of the president, currently in Japan. This could mean bringing forward the next elections, planned forApril 2001, due to mark a kind ofnew beginning for Peruvian democracy, which has been sorely strained by the abuses of power under Fujimori.

What conclusions may we draw about the Peruvian question? The situation in the country was undoubtedly the most complex in the firmament of Latin American democracies and also seemed to be the most hopeless. But even in this case the explosive cocktail of ‘economic crisis and political authoritarianism’ was eventually defused. We are no longer in the 1970s, and democracy is taking hold in South America despite a host of difficulties. The whole political system in Peru must be reconstructed, since the traditional parties had crumbled because of their lack ofcredibility and Fujimori’s initial successes during his first term of office. But the response bycivil society in the last election of Fujimori suggests there is hope for the future, despite the at times alarming institutional confusion in Lima today.

Although the consolidation of the democratic dimension in the region was the main focus at the Brasilia summit, the two other big issues tackled were stepping up economic integration processes in the region and the launch of an initiative aimed at closing the structural gap penalising the whole of South America.

The 1980s in South America saw monumental economic transformations compared to the past. The massive reduction in state intervention in the economy, the opening up to foreign investments, the removal of tariff barriers, and the spectacular progress in economic integration processes – especially MERCOSUR, Wwhose success has overcome decades of diffidence between the two large countries in the region, Brazil and Argentina – are all signs of the consolidation of new political and economic values, which seem to be unrivalled (although there is now also a certain focus on the concept of economic nationalism, a major force a few decades back in Latin America).

In this picture the countries on the sub-continent are beginning to develop an almost completely new vision of economic integration on a continental scale. This is not a question of removing frontiers Shengen-style, but transforming them from impermeable barriers- as they have been for two centuries – into factors of economic development.

The two economic integration processes in Southern America – MERCOSUR and the Andean Community of Nations (the former Andean Pact) – are not destined to disappear but have become the starting points for a new process of aggregation on a continental scale.

The South American Free Trade Area (SAFTA, or ALCSA in Spanish) has been established as a short-term target to be achieved as early as early as 2002. It will be the outcome of negotiation process between MERCOSUR and the Andean Community, also involving Chile through its forthcoming membership of MERCOSUR (announced for the end ofthe year, but probably some time in 2001) and Guyana and Suriname through specific agreements.

The schedule is arguably over-ambitious, if we bear in mind the difficulties in the past or even recent negotiations between the Andean countries and those from the Southern Cone. On theother hand, time is short in view of the probable acceleration of the Free Trade Area of the Americas (FTAA), the hemispheric integration process in which the Latin American countries wish to participate as a joint front.

After the American elections, the FTAA will probably enter the active negotiation phase in 2001 and be concluded before the end of office of the new president in 2004, and therefore even earlier than 2005, the date previously generally targeted.

The Latin American countries already involved in negotiations on asub-regional rather than national basis (MERCOSUR, CAN, Central American Common Market, CARICOM, except for Chile and Mexico) have every interest in making their markets operational before the end of the FTAA talks, in order to increase their specific weight vis-à-vis the United States and Canada.

This is a crucial time for the destiny of Latin America in the twenty-first century. As some have observed, the strategic choices in the next five years will be decisive in deciding the future developments in Latin American countries.

From this point of view, it is vital that Latin America successfully modernises to keep
abreastof globalization, demonstrating that it will be capable of being the captain of its own fate. Hence the importance of domestic challenges (such as adopting successful models for economic and social development) and external challenges (such as the emergence of an original Latin American model in the context of a frontier-free world).

Latin American countries, and especially South American countries, must therefore seek to create independent mechanisms for dialogue and development, without a return to the closed-door policies ofthe past, but rather with a greater awareness of their own international role and the strength of their bargaining power.

The first five years of the newcentury will not only be characterised by a deepening of regional, sub-continental and hemispheric integration, but also by negotiations with the European Union, which had already began in the case of MERCOSUR and had been concluded in the case of Mexico, and by multilateral talks within the World Trade Organisation, they, too, of key importance for the future of Latin America as well as for world trade.

The set of interlocking scenarios creates a complex picture whose developments are difficult to interpret and it is very hard to forecast what international trade will be like in 2005, when the day of reckoning comes. But the Latin American countries certainly seem aware of the importance of what is currently at stake.

In this sense the Brasilia summit was no ordinary meeting, but a demonstration of a new fast developing awareness in countries in the region.

The lack of infrastructures (roads, ports, railways, and logistics) on a South American scale is a legacy of the past and arguably represents the more serious drawback to regional economic development.

On one hand, it is partly the consequence of the geographical features of the sub-continent: its dimension and the presence of formidable natural barriers such as the Amazon forest and the Andes.

But the current situation is above all the outcome of the approach adopted by South American countries in their plans for infrastructure developments. Even in the 1970s, when these great public works were being thought of (see, for example, the Itaipù damn or the Trans-Amazon roadway) they were always on a purely national basis. That was the dominant vision at the time, centred on closed economies and development based on the national economy.

But at the end of the century priorities changed. Latin America had no regional infrastructure and was prey to almost insoluble logistics problems weighing heavily on the competitiveness of their products. We only need point to the lack of transport infrastructure from north to south or east to west on the continent. Each country is self-contained and products from the north and north-east of Brazil must be shipped down to the ports of Santos (São Paulo) and Rio, and transported in the opposite direction towards the market in the north.

Occupying half of South America and with borders on almost all the other countries in the region, Brazil is much more keenly aware of the problem. In 1998, the launch of a large internal infrastructure plan (Avança Brasil) attempted to make up for the lack of logical infrastructure policies.

Beginning from the conceptual base of this plan, Brazil has now proposed involving its neighbours in setting up a complex infrastructure plan. A preliminary study was entrusted to Inter-American Development Bank (IDB). The Andean countries can rely on a prestigious financial institution called the CAF (the Andean Development Corporation). MERCOSUR has no such structure but is able to involve the private sector in financing these structures. Naturally, the telecomcompanies play a leading role in the drive to modernise. This is an ambitious project, perhaps destined to fall shortof its current targets, because of the difficult financial conditions for Latin American countries in international financial markets.

But in this case, too, the Brasilia summit marked a significant break with the past in presenting a new look Latin America to the world. While democracy, economic integration and infrastructures were the main official themes of the summit, the situation in Colombia also inevitably attracted the attention of South American presidents. President Pastrana came to Brasilia after having welcomed President Clinton to Cartagena, where they jointly announced the launch of the Colombia Plan, presented as an aid programme for Colombia to help in the struggle against drug traffic.

What is the significance of the Colombia Plan? On one hand, its launch denotes the failure of the policy of dialogue with the guerrillas (FARC) which was one of the main issues in the electoral campaign of the Colombian conservative leader.

The talks, which had even led to a part of Colombian territory being handed over to be run by the FARC (the region of San Vicente del Caguán), were bogged down irremediably. But why did dialogue, which had successfully solved much more complexcrisis (such as those due to the Central American civil wars) fail in the Colombian case?

There is only one answer – drugs. The huge sums of money involved in drug traffic has upset all the balances in the country. Although years of struggle against the drug traffic cartels had led Columbia to the brink of collapse, the real subversive problem recently emerged are the ‘narco-guerillas‘. The guerrilla groups – in addition to the FARC the other main group is the ELN- have abandoned all ideological claims and concentrate on making money and self-financing from the drug traffic, thanks to their control over most of the national territory. The FARC alone is said to make an estimated 500 million dollars per year from drug traffic.

Far from demonstrating the guerrilla organisation’s effective capacity to govern, handing over the region of San Vicente del Caguán merely sanctioned the existence of an untouchable sanctuary for cultivating coca. The armed clashes between guerrillas and army continue, and dialogue must be declared a failure.

As regards the EIN, which was also given a protected zone in the south of the state of Bolivar, the creation of a group of ‘friends of dialogue’ (France, Spain, Switzerland, Norway and Cuba) whose aim is to aid negotiations, suggests there might be more positive developments, but the failure of the negotiations with the FARC leaves little room for hope.

In this situation, the United States government’s offer to the Colombian government of an aid package – mainly military in nature – of 1.3 billion dollars (out of a total of 4.5 billion for the plan, the majority share being paid by Colombia), marks a sharp change in tactics with the guerrillas. Dialogue having failed, at least as far as the FARC is concerned, more violent methods for re-conquering the territory and wiping out the crops, even using chemical means, have been adopted.

The initiative was given a very lukewarm reception by other countries in the region and by the European Union, always more inclined to a more co-operative approach to the problem.

In fact the European Commission has announced the offer of an aid package for Colombia of 105 million euro from 2000 to 2006 for the following sectors: economic and social development and the struggle against poverty, alternative development, reform of the judicial system, anddefence of human rights, to which must be added around 10.5 million per year for emergency and humanitarian aid.

The other South American countries look very coolly on the Colombia Plan. There is a real prospect of an escalation in this kind of conflict, and the presence of Us ‘military advisers’ in Colombia is reminiscent of disturbing scenarios, which no one wishes to see repeated in South America in the future.

Moreover, the military-type approach to the Colombian problem is nothing new. The United States had already proposed this method during the Republican administrations of Reagan and Bush, and it has now been put forward again with renewed vigour. The recent withdrawal of American troops from Panama must be seen as connected to this development.

South American countries, especially those bordering on Colombia, have expressed – both at Brasilia and the subsequent Conference of Ministers of Defence of the Americas (Manaus, 16-21 October) – their support for the struggle against drug traffic, but also their alarm at the possible consequences on regional balances due to any conflict in Colombia, which might give rise to flows of refugees, incursions by troops and environmental repercussions (e.g. the use of herbicides in the Amazon region).

The Brazilian Amazon border with Colombia is very difficult to control, and so Brazil is one of the most active in expressing its concern.

In conclusion, the Brasilia summit marked a particularly significant time for South America at the end of the twentieth century. A Brazilian initiative, madeat the behest of President Henrique Cardoso, the summit highlighted the major strategic changes now taking place in the region. Moreover, on the strength of its economic, demographic and territorial weight, and the success of its internal reforms and brilliant recovery from the financial crisis last year, Brazil wished to demonstrate that it is ready to take on the de facto South American leadership, which in the past it had been reluctant to assume.

Indeed, the fact that South American countries are showing an increasing awareness of their own international importance is probably a great step forward for the whole international community.

It had to happen. Although to many it seemed the time would never come, the victory of Vicente Fox in the Mexican presidential elections of July 2nd has finally marked a truly historic turning point: the Partido Revolucionario Institucional (PRI – Institutional Revolutionary Party) has lost power for the first time since its foundation, seventy-one years ago. In fact the vast majority of Mexicans, a young population, has always lived under PRI rule.

After seventy-one years and fifteen successive presidents, the PRi has at long lasthad to hand over the reins of the country. Certainly the writing was on the wall, but few Mexicans were sure they could reallybelieve it.

In reality, the monolithic PrI had already begun to fall to pieces. Since the days of President Miguel de la Madrid (1982-88) the PRi had had a kind of absolute power, exercising control over all aspects of Mexican political, economic and social life, assuming the form in practice of a ‘quasi single party’. At that time the opposition only consisted of the Partido de Acción Nacional (PAN – National Action Party), which represented entrepreneurial interests. But it had never really made any serious inroads into the PRI POwer structure.

Previously, the elections – presidential, legislative or administrative – had totally lacked in any suspense. The PRI candidate could count on an a priori victory, guaranteed by the powerful electoral machine, able to pulverise any attempts at resistance.

The PRI controlled every last corner of Mexican territory and the controlwas even tighter in rural areas. But even in the cities the very thoughtof a PRI defeat was a pipe-dream. Heir to the glorious early-twentieth-century Mexican revolution, the PRI embodied a set of values intrinsic to the Mexican nation and so defeat was an unthinkable contradiction. The Mexican model had often been described as a ‘perfect dictatorship’. But in fact it is incorrect to speak of a dictatorship, given that the party-state’s legitimate power was not simply based on the control of the electoral machinery. The PRI did not win by rigging the elections. If anything cheating was only used to make a victory seem greater and more inevitable than it actually would have been. The ideologically left-wing PRI pursued a policy based on the power of dogma, translated into what seemed to be national truths: secularism (absolute separation between Church and State), nationalism (with a special emphasis on independence from the United States), statism, agrarianism (permanent distribution of land), and trade unionism (vertically organised and identified with the party).

The combination of these factors satisfied society’s requirements for a long time. The PRI was never a dictatorship in the strict sense of the word because it was able to embody
state and society. So when itcame to election
time, society inevitably approved this model.

The system had no need to act in a particularly authoritarian way. Apart from a few excсерtions, such as the studentrevolt in 1968 leading to the Tlateloclo massacre, the PRI did not resort to repressive methods. The party exercised control upstream – on society itself.
Moreover, turning to the persuasive interpretation offered by Vargas Llosa, the ‘perfect dictatorship’ never degenerated because every six years the dictator was immolated: the President of the Republic exercised absolute powerfor six years over his country and party, and his privileges included the absolute rightto nominate his successor (the famous dedazo). But once out of office, the ex-president had to quit public life, to become a kind of untouchable national monument, stripped of any real influence. In this way the system was never allowed to degenerate through any long period of personal power. In fact power was always redistributed in the party.

During De la Madrid’s presidency, the foreign debt crisis led for the first time to serious restraints on public finances, the fulcrum of the PRI system. A new generation of technocrats emerged from the ranks. Trained in the USA, they aimed to modernise Mexico by pursuing a liberalist approach.

In the 1980s the election of Carlos Salinas de Gortari was challenged for the first time by a rival with an outside chance of winning: Cuauhtémoc Cárdenas, son of the former president Lázaro Cárdenas, a founding father of the party. A former PRI member, Cárdenas created his own party, the Partido de la Revolución Democrática (PRD – Revolutionary Democratic Party), which oppоsed the PRI. It did so not from the right, but from the left, claiming to uphold the authenticvalues of the Mexican revolution.

Salinas de Gortari’s narrow victory was arguably only possible because the computerised electoral system crashed for a few hours: by the time it was switched on again the swing to Cárdenas had suddenly became a defeat.

In the same period the PRI began to lose control over a number of states to the PAN and
the PRD.

Salinas’ term in office led to a number of remarkable new developments (FTAA, the end of land distribution, the concordat with the Vatican, and an end to the single trade union). The Mexico of 1994 was a very differentcountry from that of 1988.

Instead of going down in history as the man responsible for the great change, Salinas left the presidency after a series of mysterious incidents linked to corruption charges affecting his entourage (the murders of Posadas, Colosio and Ruiz Massieu). Salinas failed- or did not wish – to exercise close control over the party and this was to work against him.

Ernesto Zedillo Ponce de León, almost a chance President, took power the day the Chiapas revolt broke out and the Mexican peso collapsed (the Tequila effect). The omens could not have been worse. But in fact this grey eсоnomist, whose victory had been easier than expected, pursued the reforms to complete the modernisation begun by Salinas. The Mexican economic results were brilliant, the country overcame the prejudices of the past and completed its own perestroika.

Zedillo made a number of fundamental decisions concerning the party. The dedazo was abolished, and the presidential candidate for 2000, Francis Labastida was the winner of the first internal primaries in the history of the party.

The links between the government and the Federal Electoral Institute were severed and the institute finally became an independent entity. In the impeccable 1997 elections (legislative and for the governor ofthe Federal District) the PRI lost a good deal of ground. Although still the leading Mexican party, for the first time it no longer had an absolute majority in the Chamber of Deputies, and Cuauhtémoc Cárdenas scored a considerable success in the Federal District.

The 1997 elections proved that Mexico was becoming a pluralist state with three main parties: the PRI, PAN and PRD. From now on, an alternative to the PRI, even at presidential level, became a real possibility.

However, it seemed that a union sacrée of the opposition would have been required to oust the PRi in this year’s election.

The unnatural marriage of the PAN and the PRD only lasted a few months before being becoming unstuck on a very tricky question: the name of the single presidential candidate. Neither Fox nor Cárdenas were willing to step down and it was impossible to agree even on the rules for choosing a single candidate.

A part of the PRD (linked to the influential Porfrio Muñoz Ledo, internal rival of Cárdenas) decided to support Fox and left the party. The Mexican intellectuals mainly connected to the PRD were divided, but support for Fox grew in this group as well. Over and above the ideological differences what mattered was defeating the PRi to allow Mexico to turn a newleaf in its history.

The election outcome confirmed this trend: the PRD obtained a very poor result and Fox won his wager.

But who is Vicente Fox?
Fox, 58, is a former managing director of Coca-Cola, where he started life as a salesman before working his way up to become president of Coca-Cola Mexico. He then left the multinational to run his own business. In 1988 he joined the PAN, and became governor of the state of Guanajuato in 1995.

A businessman and fervent Catholic, he believes in the family and is an anti-abortionist. As an aggressive populist he is the exact opposite of the typical PRi party man, well represented by Francisco Labastida.

The PRI concentrated its campaign on Fox’s personal views, accusing him of wishing to challenge the achievements of the Mexican revolution, selling out the country to multinationals and giving into the positions of the Catholic Church.

The campaign became very heated in the last months ahead of the election when the PRI called out the so-called ‘dinosaurs’, senior party members who had been against Zedillo’s ‘technocratic’ line and deeply critical of him, but willing to forgive all in order not to lose power.

The return to the scene of the old men of the PRI may ultimately have damaged Labastida. Although a party man, he had won the primaries ahead of the more conservative candidates, especially Roberto Madrazo, and had come to symbolise a new democratic and pluralist PRI.

The spectre of a return to the past may well also have driven many of Cárdenas’ potential electorate to switch to Fox, convinced that if the PRI won again, it would have swept away any ideas of change.

Francis Labastida, also 58, was – as we said-a party man. Minister of Energy in 1982, he became a governor of the state of Sinaloa in 1987, where he was injured in a narco-traffickers’ assassination attempt. He then seemed to have quit the political scene when appointed ambassador to Portugal. But on returning from Lisbon he was given an administrative position, before coming to the fore again with Zedillo, first as Minister of Agriculture and then in the delicate role of the Minister of Interior, who had to deal with the open wound of the Chiapas and the growing influence of narco-traffickers.

Labastida had an image as a moderate reformer and enjoyed the confidence of President Zedillo, who viewed his victory in the primaries favourably.

Less charismatic than Fox, he clearly lost out in face-to-face confrontations (for the first time in Mexican politics a televised debate was organised with the six presidential candidates). The results eventually showed that his image as the well-groomed PRI man was not enough to meet the demands for change in the country.

Cuauhtémoc Cárdenas, the virtual victor in 1988 and since then the eternal challenger to the PRI, gradually lost the votes of those who reluctantly decided to go in for tactical voting. Cárdenas was in no way helped by the old-fashioned style of his programme, in many ways pre-1989 and drawing little inspiration fromthe values of the modern left. Even the Zapatists failed to give him much help: they certainly voted for him, but followed the campaign at a distance (moreover, ‘sub-commandant’ Marcos is much more influential in the collective imagination of the European left than in Mexican reality).

Cárdenas’ administration of the Federal District had not been particularly incisive and failed to serve as a springboard for the presidential race.

So Fox’s victory was ultimately greater than expected: he obtained 15,988,740 votes (42.52%), compared to 13,576,385 (36.10%) for Labastida and 6,259,048 (1.64%) for Cárdenas.

The margins of these results are large enough to allay the suspicions of rigging expressed on the eve of the vote: the election was transparent and fair, as was attested by the first-ever presence of international observers.

The PAN became the largest party in the Chamber of Deputies with 224 seats out of 500 (+102), the PRIobtained 209 (-30), and the PRD 124 (-57). Although massive, the swing to the PAN was not enough to obtain an absolute majority.

Following partial elections to the Senate, the PRI lost its absolute majority but is still the leading party, with 58 seats out of 128 (53 went to the PAN and 17 to the PRD).

There has thus genuinely been a political earthquake. But what scenarios now open up for Mexican politics? Despite the accusations made against him and his stated aim to ‘reform almost everything’, Fox will probably not be strong enough to introduce drastic changes to the country.

Moreover, Fox is not in discord with many of the guidelines pursued by Salinas and Zedillo (such as the international opening up of the country, modernisation, and an end to statism).

The fundamental strategic choices (such as NAFTA, recently completed and balanced by a free-trade agreement with the European Union, helping make Mexico one of the most open markets in the world) will not be challenged, but rather consolidated.

Fox will try and clear out a number of the old-fashioned aspects of the PRI system. But in doing so he will have to reckon with a probable revisionist alliance of the PRI and PRD making life difficult for him. He may also be slightly hindered by his inexperience. An unorthodox compared to the style of his party, he successfully personalised his electoral campaign. But the people around him are something of a mystery, since he hired head-hunters to find suitable candidates for government positions (corporate culture!).

Now become a ‘normal party’, the PRI is experiencing something of a witch hunt. An atypical party leader, Zedillo will certainly try to defend his modernist policies and to take the party into the twenty-first century. But he is now openly challenged by the ‘dinosaurs’, nostalgic for the old PRI. They will have to learn to live far from power, something which was utterly unthinkable until recently.

The PRD will probably move closer to the PRI and continue to court the left-wing electorate. But there is an urgent need to modernise its political line and to include new figures in the leadership to flank Cárdenas, who is highly respected butno longera winner.

Recently there has been a good deal of talk about the crisis in Latin American democracy. The developments in the Mexican situation reassuringly run counter to this tendency. The ‘perfect dictatorship’ has now become a full democracy to all intents and purposes. The country has taken difficult decisions in recentyears but has effectively implemented them after a long period of instability.

The problem of the social deficit persists, and is common to all Latin American countries. But this challenge can surely be won by a system with a rapidly growing economy, like that of Mexico in recent years. The main road forward now seems clear.

The events leading up to the second re-election of President Alberto Fujimori in Peru attracted a great deal of interest, even outside Latin America. Some observers saw this debatable victory of the outgoing president as confirmation of a regression of democracy supposedly afflicting the region.

Some of the recent events are in fact quite alarming: in Ecuador there was an aborted coup by some sections of the military in conjunction with Native Indian militants, which led to the- legally spurious- replacementof President Mahuad byVice-President Noboa. In Venezuela the process that took Chavez to power has generally been seen as a worrying trend for democracy: for a more detailed description see a recent article on the subject (‘Constitutional reform in Venezuela: a return to authoritarianism in Latin America?’ Acque & Terre no. 1.2000), but clearly the hopes raised initially by Chavez are now wilting, since he has been unable to maintain his promises, and has already lost much of the enormous stock ofconfidence he enjoyed in 1999,. In Bolivia PresidentBanzer has declared a state of emergency to repress popular unrest. In Colombia the peace process is backfiring without any practical solutions in sight. And now in Peru in elections whose legitimacy has been called into question not only by the opposition but also by international observers, Fujimori won a third term of office to which he probably doesn’t even have the right, if the spirit of the constitution he himself introduced was respected.

The five countries in the Andean Community are thus all faced with complex, very diverse problems that do, however, have a common denominator: the difficulty in consolidating democracy in a world region in which economic modernisation has failed to produce results able to defeat the substratum of poverty and social inequalities affecting most of the population.

There can be no doubt that Fujimori’s political career reveals his authoritarian and opportunist nature. His ten-year presidency of Peru (1990-2000) has been characterised by ups and downs, although his efforts have mainly been focused on consolidating personal power and the systematic search in Peruvian society for the right backing to strengthen his absolute control over the situation.

In an article in 1995 (‘The apparent contradictions in the fragile Peruvian democracу?, Acque & Terre, no. 1.1995) we tried to illustrate the real reasons for his clear-cut victory at the time over Pérez de Cuellar, a candidate backed by international public opinion, who suffered a landslide defeat in the presidential elections at the hands of Fujimori, disliked by many (outside Peru).

That victory was mainly due mainly to; 1) the success of Sendero Luminoso, whose guerrilla action and terrorism has had disastrous consequences for the country, undermining the very foundations of Peruvian society; 2) the absolute lack of confidence in the members of the traditional parties who had taken the country to the verge of bankruptcy; 3) the good economic results following the Fujichoque (Fujimori’s shock therapy) immediately after his election in 1990, skilful accompanied by populist-style social policy – something Fujimori excels in. And although this policy does nothing about the causes of poverty afflicting a good half of the Peruvian population, it has great impact in terms of image on the most needy classes.

This cocktail had made El chino (as Fujimori is popularly known in Peru, despite his Japanese origins) an invincible candidate for many years. Positivelyviewed by most of the Peruvian population, despite the diffidence of international observers and the members of traditional parties, who have been kept on the sidelines in the Fujimorі decade, these results have been accompanied by spurious practices, which have gradually worsened over the years.

Firstly, after having been elected in the second round of elections in 1990 thanks to the backing of all the opposition candidates, whose objective was to defeat the majority candidate ofthe first round, the writer Vargas Llosa -Fujimori couldnot rely on significant parliamentary backing at the time of his election. His movement the improvised Cambio 90 created to back him in the elections, only obtained a few seats (in Peru the parliamentary elections are held at the same time as the first round of the presidential elections).

Fujimori thus had to seek backing for his government. This backing was to come from the army: a choice which must be seen in light of the situation in the 1990s, when Peru was in the grips of afully-fledged internal war against Sendero Luminoso. The upshot was that the military ended up occupying leading positions in the life of the country.

Fujimori asked parliament for special powers to combat terrorism, He failed to obtain them and so dissolved parliament with the help of the armed forces. This was the Fujigolpe or coup of April 1992. The opposition parties did not take part in the subsequent elections for the constituent assembly. The dictator president was thus free to see that a constitution was approved with greater presidential powers. The new constitution was then ratified by a popular referendum in October 1993.

Meantime, Sendero Luminoso had been struck down. Then with the capture of the lider máximo, Ahlmael Guzmán (September 1992), the terrorist group collapsed and in no time lost most of its strength. Life went back to normal in Peru.

The downside of the end of the Senderista emergency was much greater power for the armed forces. Having played a leading role in defeating terrorism and allied with an authoritarian president, they became the real columns in Fujimori’s political edifice.

A key figure is this situation was Fujimori’s right-hand man, Vladimir Montesinos the presidential adviser and head of the increasingly powerful internal intelligence service (SIN). A dense network of people and economic interests was built up in a two-way system between Montesinos and the president. All twenty-two leading army officials in Peru (eight generals and fourteen brigadiers) had been classmates of Montesinos, all having graduated from the Chorrillos MilitaryAcademy inJanuary 1966. To achieve this situation, clearly all the other officers unwilling to swear blind loyalty to the president were purged. Thus the military can now be totally identified with the president, and all other careers in the armed
forces are completely blocked. This topbrass mafiawas due to retire en masse at the
end of 2000, but legislative changes are already prepared to extend their mandate for
another five years (not surprisingly, the same five years as Fujimori’s third term of
office).

In parallel to this process of subjecting the military top brass, Fujimori has gradually extended the SIN’s range of action, which under the wily guidance of Montesinos has developed a great capacity for disinformation and the systematic destruction of Fujimori’s rivals.

The other key point in Fujimori’s power is his absolute control over the mass media, again obtained by resorting to unorthodox methods, such as expropriation on the basis of any pretext. One emblematic case is that of Baruch Ivcher, the owner of Canal 2 Frequencia Latina, a television channel not particularly critical of Fujimori, but which became public enemy number one following programmes exposing SIN and Montesinos. Ivcher, an Israeli become a naturalised Peruvian, was expropriated and stripped of Peruvian citizenship.

As a consequence of such methods there is absolutely no possibility of dissent on Peruvian television. The six channels in the country did not accept any kind of electoral propaganda from the opposition, which was forced to turn to cable Tv with its very limited audience.

Although a similar situation has not yet been reached in the printed press, the television bias is enough to justify the claims of absolutely unfair practices in the Peruvian electoral campaign.

The 1992 constitution gives the president enormous powers. The power attributed to the single chamber in parliament is very limited, and the figure of the prime minister is subordinate to that ofthe president, the true master of the situation. In 1995 elections Fujimori won a comfortable parliamentary majority, which gave him even more room for manoeuvre in his second term in office.

But the situation in the country was aggravated when Fujimori decided to stand for election yet again. The initial response of the constitutional tribunal was to reject the idea. But to get over this difficulty, Fujimori sacked the three judges and replaced them with his own men. The new response of the tribunal was to accept his candidature, and so his re-relección became very real prospect.

Some of the opposition candidates had the right cards to do well: Alberto Andrade, mayor of Lima and Luís Castañeda Lossio, who had built up an excellent reputation while chairman ofthe Peruvian Institute of Social Security (IPss). But the opposition’s failure to come together and back a single candidate in addition to the systematic disinformation campaign in the press reduced their chances to a minimum.

In the last few months of the campaign, however, an outsider without any establishment backing came to the fore: Alejandro Toledo. Campaigning in the Peruvian deep south with hardly no coverage from the mass media, he surprisingly attracted most of those discontented with Fujimori.

An economist with several degrees (doctorate from Stanford and professorship at Harvard) Toledo made a considerable impact on the electorate. His Andean traits and direct comprehensible messages caught the imagination of Peruvian society no longer willing to support at any cost the hard fist of the military bosses and desperate for lasting deep changes in living standards.

The ‘T of trabajo‘ (‘work’) was Toledo’s slogan. He described himself as ‘a living example of how a man can be transformed by education’.

Faced with the growing popularity of Toledo, many observers began to doubt whether Fujimori would accept the possibility of defeat. The unanimous view was that he would try at all costs to win in the first round in orderto avoid all the opposition votes going to Toledo in the second round.

The Organisation of the American States (OAS) electoral monitoring mission as well as the Carter Foundation, Transparencia and other international institutions all claimed there were serious irregularities in the first round of the elections held on 9 April: there were 1,200,00 more ballot slips than voters, and serious anomalies were found in polling stations were international or opposition observers were present, the Toledo list (Perù Posible) disappeared from many ballot slips, and so on.

The saga of the electoral count in the first round lasted several days. In the end the official results gave Fujimori 49.79 percent of votes and Toledo 40.31 per cent. This mean there had to be a second round.

The impression from the contradictory information from Lima immediately after April 9th was that of a rigged count, effected by electoral institutions dependent on the president, who right up to the last moment had been hoping for a first-round victory. International pressure and the blatant anomalies highlighted by the observers and the opposition made it impossible however for him to claim victory in the first round.

Ahead of the second round, the OAS mission asked that the electoral institutions quickly rectify the anomalies, and also guarantee television coverage for the opposition candidates.

A few days before the vote, Toledo asked for a postponement of twenty days of the second round, due to be held on May 20th, so that the necessary measures could be adopted to ensure electoral transparency. The OAS agreed to this request, but it was turned down by the Peruvian authorities. Toledo thus then declared he was withdrawing from the second round, and asked his electorateto abstain or spoil their votes.

Given the unsatisfactory nature of the measures adopted by the JNE and ONPE, the two institutions with the task of organising the elections, which at the last moment changed the programme used for the count instead of correcting the existing mistakes on the programme used in the first round, the OAs mission also decided to withdraw, on the grounds it was unable to approve the electoral process.

Nonetheless, the vote was duly held on May 28th, with Toldedo’s name on the ballot despite the fact he had asked for it to be with removed: his wish was now that the electorate should abstain.

In this turbulent situation – elections with no opposition and with no international observers – Fujimori won 51.2 per cent of the valid votes, Toledo 17.68, while 29.93 per cent were void, and were thus the response to Toldedo’s request. It must be borne in mind that voting is obligatory in Peru with very heavy sanctions for defaulters, and this prevented any massive boycott, although abstentions were surprisingly high at 19 per cent.

Fujimori was thus re-elected again at the end of a process characterised by irregularities. The real situation, however, was effectively stalemate, paving the way to greatpolitical instability in Peru.

Toledo denounced the electoral results. He claims that his withdrawal was obligatory because the electoral fraud (there is no lack of evidence) would in any case have meant victory for Fujimori, and therefore taking part in the second round would have legitimated that fraud. It is difficult to claim, however, that Fujimori is not a legitimate president. Undoubtedly irregular, the election process must be judged negatively, but Fujimori has form on his side.Who can deprive him of authority now? United States pressure on the OAS, with the aim of imposing sanctions on Peru, was cooled at the ministerial meeting of Windsor (4th June) by opposition from many Latin American countries (especially Mexico, Brazil and Venezuela), who were against adopting drastic measures. Ultimately many Latin American governments view the Us use of the principle ofrespect for democracy as a way of interfering in domestic issues. The same governments have already expressed several reservations over the NATO action in Kosovo and Yugoslavia, pursued outside the United Nations system, and thus are reluctant to accept the principle of humanitarian intervention.

At the same time the Peruvian example causes concern among countries in the region because it is not an isolated case, but part of a very difficult stage in the developmentof democracy in Latin America.

A trade-off between the two positions – interference in the name of democracy and respect for the national political dimension – is problematic, as moreover, we are aware in Europe (the Austrian ambassador to OAS has claimed that the European Union should look on the decision made by the OAS in the Peruvian case as an example to be upheld).

Although predictably Fujimori, who certainly is not famous for his scruples, will dig into his positions, the equally unpredictable Peruvian situation opens up scenarios that were unthinkable a few months back. Fujimori no longer has a parliamentary majority (only 52 deputies out of total 120) and the opposition finally seems to be rallying round Toledo. Fujimori will no longer be able to govern in the style he is accustomed to, and there are now deepening cracks in his power base. There are also rumbles of discontent in the armed forces, and even in the absence of explicit sanctions, Fujimori’s Peru seems bound to suffer from growing international isolation.

Will this situation bring Fujimori down before the end of his term of office? It’s difficult to say. At present the opposition, sidelined for ten years, is back in the game with considerable scope for action: its success and the related weakening of Fujimori will ultimately depend on the president’s decisions, rather than international pressure.

In the past the Peruvian opposition has often guilty of underestimating Fujimori’s enterprise and resources, and so has bungled its moves on several occasions: in the second round in 1990, during the 1992 autogolpe or ‘self-coup’, its choice of candidate in 1995, the belated unity in 2000, and even Toledo’s withdrawal from the second round on May 28th.

Going back to the conclusions of the 1995 article mentioned above, we may sum up by saying that in Latin America democracy must once more reckon with the specific political and social features characterising the region.

However, compared to five years ago, Fujimori has definitely overstepped the mark in his authoritarianism, and recent events clearly mark a backward slide for Peruvian democracy.

While in the Southern Cone (Argentina, Brazil, Uruguay and Chile) there is now what may be considered stable democracy, with the exception of Paraguay, a country with a level of development nearer its An- dean neighbours than its fellow MERCOSUR members, there are several ominous signs for democracу.

In our opinion, this does not imply a relapse for democracy in Latin America. The results of economic modernisation and political democratisation begun in the 1980s are tangible and irreversible.

But when economic results do not come fast enough for a significant part of the population and society encounters great difficulty in organising and making its voice felt, and thus is unable to form a counterweight to the power of the political classes or ‘de facto power’, then authoritarian temptations will emerge again. In this sense, the Andean countries are still at risk.

The basic scenario is thatof a greatchallenge facing Latin America in the twenty-first century. The great enemy to be defeated is the social gap separating the elites from the rest of the population. Only when this challenge hasbeen won, will democracy no longer be in danger.

Argentina: from Carlos Menem to Fernando de la Rua

Fernando de la Rua’s victory in the Argentine presidential elections of October 24th marks the end of ten vears of ‘Menemism’. But what are the reasons for this major political change in Argentina and what overall assessment can be made of Carlos Menem’s two terms in office?

First a look at the facts and figures: Fernando de la Rua of the Unión Civica Radical (UCr), one of the two historic parties in Argentina, and the presidential candidate for the so-called Alianza made up of the UCR and FREPASO (Frente Pais Solidario) obtained 48.5 per cent of votes, and was so elected at the first round (the Argentine constitution requires a minimal percentage of 45 per cent of the votes and an advantage of at least 10 per cent over the second-placed candidate). The government candidate, Eduardo Duhalde, of the Partido Justicialista (Pj) obtained 38.09 per cent, while the former Minister of Ecоnomics in the Menem administration and father of the peso-dollar convertibility plan, Domingo Cavallo, who later split with Menem, represented the Presidencia de Acción por la República (PAR) received 10 per cent.

Thus the prospect of a second round was not so far off, at least from the numerical point of view. But all the observers agreed in describing the result as a sweeping victory for de la Rua, as had already been widely predicted by the opinion polls.

In the legislative elections held at the same time as the presidential vote, the Alliance fared even betterthan expected; its total numberof seats has now risen to 125,compared to 101 for the Pj and 12 for PAR (129 seats are required for the majority). De la Rua cannot, therefore, rely on an absolute majority in Congress and willoften have to negotiate with the opposition to win approval for his bills.

The situation has been aggravated by the fact that the Senate, which will not be reelected until 2001, has a Partido justicialista majority and that fourteen of the twenty-three Argentine provinces (including Buenos Aires, Cordoba and Santa Fe) are in the opposition’s hands.

Thus, although de la Rua had an outright victory, this does not necessarily mean a radical political change, given that the opposition still has a significant share of power, and in the coming four years rather than to the defeated Duhalde will still look to Menem, who is very keen to come back on the scene in 2003, when the constitution will allow him to do so.

In an article published in this review commenting the election of Carlos Menem in 1995 (Acque & Terre no. 3, 1995), we concluded by saying that over and above his undoubted merits and a number of contradictions connected with the Peron inheritance, Menem’s second term of office should strengthen ‘Menemism’ as a political movement with its own specific features.

At the end of his second term of office, we must say that Menemism, has certainly emerged as such, becoming increasingly free of the Peron-like Justicialist approach, even though he has shown several shortcomings in terms of continuity.

Menem has consolidated his position as the most important Justicialist leader since Peron. But the policy lines characterising his action as President are far from the Peronist legacy. In fact what has remained is only a merefacade – although we must concede that the historical context is completely different.

Menem’s main policy guidelines from 1989 to 1999

The main idea in Menem’s policy was to overturn the traditional approach to Argentine economics. Ten years of major structural reforms have opened up the economic system, traditionally centred on the domestic market.

The key elements in the strategy were the deregulation of the domestic market, liberalisation of foreign trade and the privatisation of almost all state-owned companies.

Although these reformswere also carried out to a lesser or greater degree throughout Latin America in the 1990s, the Argentine case is undoubtedly the most radical in terms of intensity and speed of reform.

The importance of the state in the Argentine economy has been a widely reduced by the structural changes. Particularly significant reforms were made in terms of privatising pension funds. In this sense Menem is diametrically opposed to Peron, even though he conserved the facade of Peronism by encouraging the idea of concentrating social action on the most needy sections of the population (the political expression of this aspect Menemism was his support for the candidacy of Palito Ortega in the PJ primaries against Duhalde).

Linked to the deregulation and liberalisation process was the opening up of the Argentine economy to foreign capital and especially the strategic choice at regional level to step up integration with Brazil in the framework of MERCOSUR. Although the initial steps on the road to integration were taken by President Alfonsin and his Brazilian colleague Sarney, and indeed even Peron had proposed the so-called ABC (Argentina, Brazil and Chile), it was Menem who gave the integration process real momentum.

Other foreign policy decisions also highlighted the change in direction in Argentine diplomacy: its withdrawal from the movement of non-aligned countries (which still exists, although no one knows the object of the non-alignment!), the strategic drawing nearer to the United States in terms of defence (such as Menem’s proposal for an associate membership of the country with NATO), and the increasingly frequent use of Argentine contingents in multinational peace forces under the auspices of the UN. Another feature of Menem’s policy was a strong presidential presence in Argentine political life, in which executive power clearly dominated over legislative power. It will be difficult for de la Rua to follow the same path.

While Menem’s re-election in 1995 was mainly due to the success of the economic stability plan (the currency-board system still anchors the value of the real to the dollar, thus freezing inflation), some of the less positive features of Menem’s model of economic modernisation emerged during his second term of office. Although greatly aрpreciated by public opinion, monetary stability has excessively limited the flexibility of the economy (see the loss of competitiveness of Argentine products on foreign markets and the excessive increase in the cost of living for lower- to middle-class families on the domestic front). Aggravated by the continuing Brazilian financial crisis, this set of factors has led to a significant increase in unemployment (now 14.5 per cent), accompanied by social problems such as a rise in crime and poverty.

Menem’s second term of office was characterised by growing signs of corruption in the president’s entourage during the privatisation processes. In general, Menem’s image did not benefit from the atmosphere of glamour, easy earnings and luxury that were such a feature of circles close to the president over the last few years.

In this sense the electorate showed a greater liking for Fernando de la Rua, whose personality is diametrically opposed to that of Mеnem (one of his electoral broadcasts began with the phrase ‘they say I am boring…”), who conveyed an image of austerity to the publicopinion, arguably a necessary antidote to Menem’s flamboyance.

A long-standing militant in the UCr, de la Rua built up a solid reputation as the Mayor of Buenos Aires, and last year he won the Alianza primaries ahead of opposition from a very charismatic rival, the FREPASO candidate Graciela Fernandez Meijide, the great victor of the legislative elections in October 1997. Founded in 1997 by Ucr radicals and some defectors from FREPASO, the Alliance supported Octavio Bordon in the 1995 elections, and at the time seemed the only feasible way to defeatthe Partido Justicialista.

The Alliance would have seen its position weakened considerably if there had been any lengthy uncertainty over the identity of the candidate for the presidential elections (Fernandez Meijide emerged as the most likely candidate at the time when the Alliance was founded). But the primaries were organised very early on and, once de la Rua had been chosen as candidate, the two wings of the movement managed to get on together in promoting the electoral campaign with no bungling, thus paradoxically showing a more united front than was аctually the case compared to the government, torn in the early months of the election campaign by the rivalry between Menem and Duhalde.

A Justicialist governor from the province of Buenos Aires, Duhalde suffered greatly from the lukewarm support given to his candidacy by Menem. In fact Menem had hoped right until the end that he would obtain a constitutional change, as he managed to do in 1995, allowing him to stand for a third consecutive term of office.

But this proposal deeply divided Argentine public opinion and was not even unanimously accepted in his own party. Although in the end the Supreme Court rejected the possibility of interpreting the constitution to meet Menem’s claims, the tug-of-war over the question lasted right up to a few months before the elections, thus further weakening the position of Duhalde, who even after his selection was given little support by the president.

Duhalde was further penalised by the worsening economic crisis (negative growth rate of 3 per cent forecast for 1999, and the unemployment rate at 14.5 per cent), the emergence of various scandals and a wave of crime in the province of Buenos Aires.

The worsening economic recession, mainly due to the loss of competitiveness of Argentine exports, led to the country accruing a significant trade surplus with Brazil in the 1990s, and the wavering prospects of his candidacy led Duhalde to embrace a certain populism (such as the injudicious announcement of a possible moratorium on foreign debt), which although in line with the ideological legacy of Peron had a counter-productive effect on most of the electorate.

Ultimately, de la Rua appeared as a representative of both continuity and change compared to the years of Menemism. Although formally a government candidate, Duhalde then tried to play the card of a break with Menem, both on political and personal grounds.

Moreover, Menem had reiterated his intentions for thefuture: on October 25th the billboards of Buenos Aires were plastered with posters announcing his candidacy for the 2003 elections. In this sense, Duhalde’s defeat has favoured Menem’s plans. He will hope for a relative failure of de la Rua in order to defeat him at the next elections (although if the failure was too disastrous, it might call into question the decisions made in ten years of Menemism).

The key challenges facing de la Rua

The first thing de la Rua will have to do is meeting the expectations created in terms of consolidating the economic model he has inherited. He is in agreement with the basic choices made by Menem, but at the same time will have to go to great lengths to overcome the limits in this model.Argentine public opinion expects effective measures in the struggle against unemployment and growing social problems. But the adoption of such policies will be limited by the need to curb fiscal debt, which has grown considerably over the last decade.

The solution to this dilemma can only come from boosting the economy, after its negative growth in 1999. The first measures announced by de la Rua concern legislative initiatives in favour of small- to medium-sized firms. The recent Brazilian crisis has highlighted the low competitiveness of many Argentine industrial sectors, which have sat back on the basis of the favourable exchange rate with Brazil without exploiting the favourable economic situation to introduce structural reforms aimed at increasing competitiveness. Once Argentine products were no longer economic on the Brazilian market because of the overvaluation of the real, the problems came out into the open, and Argentina saw its trade balance worsen considerably.

Thus an active policy of industrial modernisation to re-launch Argentinean competitiveness has become a must, and will continue to be a priority for the new government. Moreover, the currency-board system also penalised the Argentine economy. In this field, de la Rua will have to tackle a serious dilemma, although for the time being he has stated his willingness to continue with the fixed parity with the dollar. But a scenario with the medium-term devaluation of the peso cannot be ruled out.

Not surprisingly Argentina is in favour of extending the dollar to the whole of Latin America area, which would automatically allow it to recover competitiveness with no internal traumas.

Another priority for the new government will be the struggle against corruption and a more precise definition of the role of controlling authorities in a highly privatised economic system.

The re-launching of MERCOSUR is also of a fundamental importance and de la Rua is particularly keen on this idea. Argentina cannot afford any slacking in the integration process, given that the regional market is its main foreign outlet for exports. It is no accident that de la Rua visited Cardoso only two days after the elections and made positive overtures to the other MERCOSUR members. He called for a deepening of the integration process, especially as regards macroeconomic coordination, as the solution to the problems being experienced by the regional bloc.

Moreover, the negative turn in the multilateral trade talks in the World Trade Organisation means there can be no illusions about anysignificant short-term increase in exports of farm products, one of the key issues both for Argentina and Brazil as the leading members of the Cairns Group.

In any case a certain degree of economic recovery is expected in 2000, and this factor should help the new government to manage a far from easy situation at political level, given its lack of an absolute majority in Congress, the opposition majority in the Senate, and the high number of provinces currently being administered by the Justicialist governors.

The unity of the Alliance will thus be very important in this sense in its first government experience. The cabinet announced by de la Rua on November 24th is made up of eight radicals and two Frepaso members (including Fernandez Meijide as Minister of Social Affairs). Most of the ministers have an economic background, which should contribute to conveying an image of solidity and continuity.

In announcing his government de la Rua stated that the three main priorities of the new government were the struggle against three ‘deficits’: fiscal, social and moral.

In conclusion, we may say that the political situation following the elections is characterised by a number of novelties in terms of the Argentine political tradition. For the first time the government must rely on the partial support of the opposition and, moreover, the traditional two-partysystem has now been eroded by the emergence of a third force, albeit with strong links with radicalism.

In the recent Uruguay elections, the narrow victory of the Jorge Batlle, the Colorado Party
candidate over the emerging Tabare Vasquez from the Frente Amplio, the ‘broad front’ of
left-wing forces, reflects a basically similar phenomenon. Despite ideological differences, given that the Uruguayan Frente has nothing in common with the Argentine Alianza, significantly for the first time there was a break with the traditional two-party system –Blancos against Colorados – which has characterised Uruguayan politics since independence. The Frente has a relative majority both in the Chamber of Deputies (40 out of 95 seats) and in the Senate (12 out of 29),and this factor will introduce considerable innovations to political life in the country.

These two situations seem to confirm a now irreversible consolidation of democracy in the countries in the Southern Cone, linked to the inevitable process of social modernisation now underway in all countries in the region.

Chile: the election of Ricardo Lagos and the Pinochet case

The victory of the socialist Ricardo Lagos in the second round of the Chilean presidential elections (16 January 2000) provides the starting point for an analysis of the current political situation in the country.

Latin American affairs have often not attracted much attention in Italy, but Chile and its political situation have always aroused more interest compared to other more influential and larger countries in the region. Brazilian and Argentinian politics are certainly less well-known, despite the greater specific weightof these countries.

In my opinion the reasons for this Italian interest in Chile are due to the following factors. Despite the geographical distance, the political categories in Chile have always been familiar to Italian observers. Before the dictatorship, the three main political parties were the Christian Democrats, the Socialist Party, and the Communist Party. The situation was thus different from all other Latin American countries, and the evolution of the political system and its alliances, especially in the 1960’s and 1970’s, made Chile into a kind of laboratory – in the eyes of Italian pоlitical parties – serving as a kind of reference pointfor the specific situation in Italy.

Indeed, it is unthinkable that the Italian left, whether socialist or communist, would not have looked sympathetically on the election of president Salvador Allende in 1970. For the first time since Leon Blum in France, and thus for the first time after the advent of ‘real communism’, a social-communist coalition won power democratically (although to be truly accurate in 1938 Aguirre Cerda had already been elected at the head of a radical-socialist-communist coalition): despite being in remote Latin American, the Chilean example was interpreted as a good omen for that part of the Italian left whose main aim was to send the Christian Democrats packing.

But the Italian Christian Democrats also had a privileged relation with Chile. In 1964 Eduardo Frei was the first Latin American Christian Democrat leader to become president. In the South American sub-continent only Venezuela and Chile have traditional Christian Democratic parties of some importance, so the sympathy between the Italian Christian Democrats (Dc) – otherwise little inclined to look to Latin America – and their counterparts in Chile was more than justified.

The experience of the Unidad Popular (Popular Unity), the coalition which governed Chile from 1970 to 1973 was followed enthusiastically by the Italian left. Moreover, it saw the Chilean example as a concrete challenge to Us imperialism. There was an obvious parallel with Italy’s situation as a frontier country between the two major blocs, in which the so-called ‘K factor’ had always prevented a political alliance between socialists and communists in the government.

Similarly, in the years of Eurocommunism, Chile was inevitably an important referencе point.

The traumatic military coup of 11 September 1973 was thus a bad setback for everyone. The brutality and repression that followed contributed to keeping Chile in the forefront of concerns for public opinion.

Allende became a myth for the left worldwide. Although some malevolent interpretations by the extreme left at the time, accиsing Chilean Christian Democrats of connivance with the military, had more to do with using the Chile crisis for domestic Italian purposes rather than any real knowledge of the situation.

The evolution of the Pinochet regime clearly proved that even though the 1973 coup had been against Popular Unity, the military regirme clearly had no intention of handing over to civilians, not even that the conservatives.

Like the parties in Popular Unity, the Christian Democrats thus remained on the sidelines of political life until 1989, when together they formed the ‘no’ front for the referendum called by Pinochet in an attempt to perpetuate his rule.

The ‘no’ front was later to become the Concertación coalition, which has governed Chile since 1990, first under the leadership of the Christian Democrats Patricio Aylwin and Eduardo Frei (junior) and now under the presidency of Ricardo Lagos, the first socialist to occupy the Moneda since Allende’s tragic end.

While both Aylwin and Frei had straight first-round victories and Lagos was a clear favourite a year ago, over the last year in the opinion polls his advantage was gradually whittled away in favour of the right-wing candidate Joaquín Lavín.

This slump was partly influenced by the Pinochet case, which put the Concertación front in a predicament: the Chilean government made up of the democratic opposition to the Pinochet dictatorship was forced to act in favour of a return home for the former dictator, while the right wing was making up ground anyway because of the economic crisis – all of this in an electoral year.

After a number of blunders, such as the clumsy attempt by Santiago to give Pinochet unlikely a posteriori diplomatic immunity in order to demand his release, the Chilean government adopted a position based on the distinction between the figure of General Pinochet as a person and the defence of the national sovereignty of the country and the attendant prerogatives.

At the first round of the presidential elections (12 December 1999) Ricardo Lagos obtained a very slight victory over Joaquín Lavín: 47.95 per cent of votes as opposed to 47.51 per cent for his rival, a margin of only 31,000 votes. This led to a hectic month of campaigning ahead of the second round on January 16th. Both candidates concentrated their efforts in those areas of the country where they had fared worst.

In the end, Lagos’s majority over Lavín at the second round was larger than expected: 51.3 per cent as opposed to 48.7 per cent,а majority of 188,000 votes. Lagos enjoyed the crucial massive support of Communist voters, three per cent of the electorate, who had supported Galdys Marín in the first round. Lavín, on the other hand, had already won almost all the votes he was going to get in the first round, and could only count on an extra one per cent from the supporters of Arturo Frei, the Pinochet candidate from the Unión de Centro Centro Progresista (UccР –Progressive Centre-Centre Union).

A sixty-one-year-old advocate and economist, Ricardo Lagos had been appointed ambassador to Moscow by Allende, but his appointment was revoked following the military coup. Having been exiled first in Argentina and then in the United States, he only returned to Chile in 1978, pledging to work for closer relations between the Socialists and the Christian Democrats.

On 7 September 1986, following an attempt on Pinochet’s life, Lagos was arrested by the investigative police. This actually turned out to be a stroke of luck, since four people on the same list of suspects, but arrested by the CNI (the political police of the regifne) were killed that same night.

In the dictatorship years, Lagos emerged as one of the most respected opposition leaders. But his rise to fame was sanctioned in April 1988, when in a peak television programme he openly accused Pinochet of wishing to stay in power through the reforms proposed by the institutional referendum, which were in fact then duly rejected in October 1989.

In 1987 he had founded the Partido por la Democracia (PPD – Party for Democracy), a kind of a bridge between the Ps, ofwhich Lagos has always been a card-carrying member, and the Dc.

After the victory of the ‘no’ front in the October 1989 referendum and the election of Patricio Aylwin in the subsequent presidential elections, Lagos became Minister of Education in the first Concertación government. He was then Minister of public works with Frei until 19 August 1998, when he resigned to embark on his own electoral campaign.

Lagos must definitely be considered as an exponent of the Third Way. His brand of socialism is very modern, and remote therefore – for obvious reasons connected to the changing times – from Allende’s Popular Unity. But we must bear in mind that Chile has been deeply scarred by its recent history and characterised by extreme radicalideological positions. This partly explains the defection of around twenty per cent of the Christian Democrat electorate to Lavín. For many people in Chile the word socialist is synonymous with chaos, subversion of
social values, and bankruptcy (that in fact is how the right assesses the Allende years).

The presence of the left in the Concertación coalition was from the outset partly compensated by the Christian Democratic leadership, which had allowed Aylwin and Frei to appeal to the moderate electors. Lagos had actually been defeated by Frei in the Concertación primaries in 1993. Frei then went on to an easy victory at the firstround over Arturo Alessandri, the rightwing candidate, winning with 54.8 per cent of votes.

In this year’s primaries, Lagos easily beat the Christian Democrat candidate Andrés Zaldívar with 71.3 per cent ofvotes. But a lot changed in the meantime. In addition to Pinochet’s arrest in London, which made the climate of Chilean politics even more extreme and dominated the political debate until mid-1999, the Brazilian financial crisis created a recession throughout the region; social unrest increased and the lastly Lavín hit on a very successful electoral
campaign.

The Chilean economy is one of the most liberal in the world: the Chile-style liberalisation pursued by the dictatorship technocrats followed the dictates of the Chicago school, and indeed it was a pioneering model. The centre-left governments did nothing to change this policy, and this was one of the reasons for their continuing success. The results had been spectacular: growth rates in 1995, 1996 and 1997 were 10.6 per cent, 7.4 per cent and 7.6 per cent, respectively. By 1998 the rate had fallen to 3.4 per cent, while the contagious effects of the international financial crisis led to a meagre 0.5 per cent in 1999. Is this the end then of the much praised Chilean model? The answer is no. But a completely free economy is too dependent on the international situation, since it cannot rely on a large domestic market.

The Brazilian and, more importantly, Argentinian recession (the neighbouring countries across the Andes had negative growth rates of 3.5 per cent) thus had drastic repercussions on Chile. Nor were the links between Chile and the Asian economies (Chile is the leading Latin American
country in terms of trade across the Pacific) to any avail, since the international crisis actually began in Asia.

This was a major headache for the government front and for Lagos, since the threat to prosperity is the great taboo for the Chile right, willing to forgive Pinochet anything because of the wave of well-being generatedby his ultra-liberal reforms.

As long as the centre-left could show solvency in economic affairs, it had no problem in obtaining a solid majority. But as soon as the economic results began to fail, everything became much more difficult.

The slowing down of economic growth went hand in hand with worsening social problems. Unemployment rose from 6.8 per cent in mid-1998 to 11.4 per cent in 1999. Various socialprotests have also beleaguered Chile over the last year. Doctors, students and port workers have pursued claims with big demonstrations, some degenerating into violence (the Chilean police is traditionally very ‘firm’).

The indigenous Mapuche also pursued claims over the control of territory and the use of forest resources. Energy problems occurred on several occasions, thus casting doubt on the efficiency of the economic model.

The long economic honeymoon, which had avoided any worsening of unresolved political tensions, thus came to an end from 1998 to 1999.

In this context, Joaquín Lavín managed to draw up a winning strategy. The fact he was not elected must not detract from his success in obtaining a historic result, much better than the 43 per cent of the ‘yes’ in the 1989 referendum, which seemed to be an insuperable threshold for the traditional Chilean right. Lavín definitely came out of the 1999 elections as moral victor.

The forty-six-year old Lavín was backed by his own party, the Unión Democrata Independiente (UDI- Independent Democratic Union) and the Renovación Nacional (RN- National Renewal), parties from the Pinochet regime.

The UDI – Lavín is a joint founder – is an extreme right-wing party whose policies are liberal in economics and ultra-conservative in social affairs. We must remember that Chile has a social legislation out of line with most Western countries (for example, divorce and abortion are both prohibited).

Lavín has an impeccable background from the point of view of the Chilean right. He studied at the Catholic University of Chile, the cradle for the so-called gremialismо movement, the ideological reference point for the Chilean right, and then specialised at Chicago University, the cradle for the liberal model implemented in the country.

The key to Lavín’s successful electoral campaign was that he managed to progressively shift towards the centre, gradually moving away from the figure of Pinochet, but without breaking completely with the legacy of the regime.

Lavín also adopted a very concrete approach to his campaign, based on his great popularity as mayor of Las Condes, the wealthiest suburb of Santiago. He built up an image of a technocrat not embroiled in party struggles, which had been such a feature of the Concertación in recent times.

This set of factors almost carried Lavín Chilean to the presidency and laid the basis for a deep renewal in Chilean political life in the coming years.

The Pinochet case, which had captured public opinion in the year following his arrest, gradually died down. His story had practically no influence in the run into the elections, focused on economic and social issues. This in itself is a very significant fact for Chile, characterised since 1973 by a radical Manichaeanism in political life.

Lavín’s excellent performance, the rise of Lagos and the end of Pinochet open up new prospects for Chilean politics.

The Chilean right now has the chance to completea process of normalisation and modernisation in the next few years. This means gradually abandoning the almost blind trust in the Pinochet legacy. Consequently, the left should stick with Lagos in pursuing an increasingly Third Way model. But above all Chilean politics should finally become a forum for peaceful dialogue in the context of substantial social stability, thus losing the uncompromising bleak tones which had characterised them for so long.

This great work in progress should complete the political transition and modify the ‘armour-plated’ constitution inherited from Pinochet, and this indeed is Lagos’s main priority.

In the current political context, the majority cannot make these changes alone. It will require the support of the more moderate currents of the right wing. The situation in parliament sees Concertación with 78 seats out of a total 120 in the lower house, and with 20 senators out of 48 in the Senate, a minority due to the presence of 10 ‘institutional senators’, all close followers of Pinochet.

The left, therefore, does not have the critical mass to reform the constitution, if the two traditional blocs fail to compromise. And it is difficult to see the legislative elections next spring changing the situation greatly.

Moreover, there are also constitutional mechanisms preventing the harmonious development of Chilean democracy, such as the supreme decision-making power on questions of national interest, attributed to an organ composed of half military and half civilians, which rules by absolute majority, so far never actually achieved. This rigidity in institutional life has so far blocked any attempt to judge war criminals from the dictatorship (usually military men).

A less turbulent political life will thus contribute to setting upa moderate debate on the constitutional future of Chile. In this context, the great unknown factor is represented by the forthcoming return of the life senator Augusto Pinochet.

It is unlikely that his probable incrimination, now forced on the judicial authorities by international developments, will actually see the former dictator sitting in the dock. Public opinion is very divided on this issue, but what now appears to be certain is that Pinochet’s influence on Chilean political life has definitely waned.

When Augusto Pinochet returns to Chile, he will be a very different man from the arrogant leader who left in October 1998, notonlyon the grounds ofhis health, but more importantly because of his loss of prestige both at home and abroad.

Although having always met with unanimous international condemnation at political level – to which he simply replied claiming he was only accountable to God and Chile – Pinochet is now also liable to be condemned at juridical level. Thus while two years ago it was unthinkable that he would be tried in Chile, today it is quite probable.

The Chilean right, of which hewas a hero for decades, now feels ill at ease with his legacy and has begun to abandon him. In short, Pinochet has been defeated in London, even though he has been allowed to return home. We conclude with some remarks of a juridical nature about the Pinochet case.

Rivers of ink have flown on this topic and there has been a very heated debate in public opinion and between experts of international law.

Many have been disappointed at the prospect of Pinochet’s return to Chile, but what should be stressed are the incredible developments of this case in terms of its implications for international law.

When Garzón asked for Pinochet to be arrested and extradited, the real chances that this would happen were objectively slight. At the time of his arrest, Pinochet had the following points in his favour:

• – The crimes he was accused of were only the competence of Chilean justice;
  – He enjoyed absolute immunity since he was head of state when the crimes he was accused of were committed;
  – He also enjoyed diplomatic immunity as a life senator.

What is the situation for international law two years later?
After the third point-by far the weakest – fell, thanks to the Pinochet case the doctrine of international law now accepts the following:

• – Any crimes considered to be particularly serious crimes against humanity (Nuremberg doctrine) cannot be prescribed over time – this is a great novelty – and can be prosecuted by any national jurisdiction in the absence of an ad hoc or permanent international court and in the case of inaction by the country concerned;
  – A head of state no longer enjoys absolute immunity for certain very serious crimes and especially in the period after his term in office.

The evolution of the Pinochet case has given greater juridical strength to international conventions, such as the Convention against Torture, also signed by Chile, but too often ignored in practice because of the inability to envisage coercive implementation measures or sanctions to punish the violations.

All of these factors are positive developments in international law caused by the Pinochet case,of which they are the essence. That’s why we feel we may claim that over and above the personal destiny of the man, the Pinochet case has made an extraordinarily important impact on strengthening the doctrine of international law. We believe this to be a great step forward.

Constitutional reform in Venezuela: a return to authoritarianism in Latin America?

The election of Hugo Chávez to the presidency of the Venezuelan Republic in December 1998, and the stormy events in his first year of office, culminating on 15th December last with the approval by a popular referendum of the new constitution, have generally been interpreted by international observers as alarming signs of a return to populism and militarism in Latin American political life.

In general the ongoing process in Venezuela is considered a step backwards compared to the consolidation of democratic values generally developing in Latin America (with the exception of Peru). There is a fear that Chávez may become a point of reference for other would-be caudillos, thus triggering off a spiral of authoritarianism in the region.

Although populism has never completely disappeared from the Latin American political scene, there can be no doubt that in recent years financial orthodoxy and economic modernisation have taken the wind out of its sails almost everywhere. As far as militarism is concerned, the role of the armies in domestic politics has been drastically reduced in the last fifteen years and it is difficult to foresee a return of the military to active political life.

The fact that Chávez was a leading member of the military coup in the 1990s against President Carlos Andrés Pérez, who resigned over corruption, is often cited as disconcerting proof of Chávez’ lack of a democratic pedigree.

But on the other hand, Chávez tends to be underestimated: he is, after all, the elected president with the largest majority ever in the history of the Venezuelan Republic and for the time being he enjoys remarkable popularity. So for some his original sin thus seems to be indelible.

In this article we will try to establish whether these severe judgements are accurate, or whether Chávez is not something more than a simple return to the past. What we can say from the outset is something which often emerges in our analysis of Latin America: it is misleading to assess Latin American policy and society according to the categories used for Europe and the United States, without bearing in mind the specific nature of Latin American democracy.

For example, why should we doubt the grounds, which led the majority of Venezuelans to vote for Chávez and to resolutely support – or at least not hinder, in the case of abstainers – his process of constitutional reform? The Venezuelans have a respectable democratic tradition and have voted freely since 1958, so why should they have lost their head now? Possibly because the electorate in other regions would have behaved differently?

Another argument often invoked to undermine Chávez’ legitimacy is the high abstention rate, recorded both in the elections for the constituent assembly and the recent referendum on the new constitution. Only one Venezuelan out of two bothered to vote in these two ballots. But aren’t the president of the United States or the Congressmen elected with a similarly low turnout? Why should what is a demonstration of democratic maturity for some become a demonstration of immaturity for South Americans?

There can be no doubt that the new constitution is too cumbersome and rife with populist tones such as the introduction of the ‘rightto happiness’ or the idea that ‘old men and women’ are resources of Venezuela (and there are plenty other examples).

Moreover, the new constitution considerable strengthens the role of the president, who can now be re-elected for a second term of office (but this is also the case in Peru, Argentina and Brazil). But can a political system based on European and North American models, in which civil society plays a key role, be plausible in the Latin America context, characterised by the presence of a few inner circles constantly in power? Since managing power in Latin America is a question for a select few and civil society is unable to exercise that key role in shaping politics, typical of our political systems, is it not quite understandable that change may be expressed through charismatic figures apparently inspired by good intentions?

In this sense Chávez’ success could be considered not so much as a negative reference point but as a positive example for the rest of the continent. But if the man himself disappoints the Venezuelans who supported him so enthusiastically, his experiment will be a repeat of an oft-seenold movie.

But let’s briefly summarised the facts. When with the fall of the dictator Pérez Jiménez (January 1958) due to the combined pressure of various social forces (political parties, unions, entrepreneurial organisations, and sections of the army), a highly consensual political system was created and named the punto fijo (‘fixed point’) after the pact agreed by the sides on 31st October 1958.

The constitution approved in 1969 guarantees individual liberties and establishes presidential, two-tier federal system. Important rights were also granted to the unions, based on a protectionist industrial policy founded on the distribution of state subsidies and an ambitious social policy.

The Venezuelan political system was based on a two-party system – the parties being the
Acción Democrática (Social Democrats) and the Comité de Organización Política Electoral Independiente (COPEI – Christian Democrats) – which until the 1990s was a model of political stability in Latin American. The healthy economic situation and a high degree of consensus and social peace forestalled the conditions for the entry of the military into political life,which had so deeply affected the rest of Latin America in the 1960s and ’70s.

The economic basis of this stability was oil. Venezuela is one of the main oil producers
in the world and a leading player in OPEC, of which it is the principal non-Arab member.

The flow of petrodollars, which rose even further from 1973 on, and handouts by the Venezuelan state guaranteed growth and social peace.

But the rise in income from the petrol shocks turned out to be harmful for the country. It led to excessive external debts, which instead of financing industrial investments produced an excessive growth in the public sector and basic products were subsidised instead of combating poverty at the roots.

The crisis came to a head in the 1980s and even more acutely in the 1990s. Venezuela failed to use its massive petrol incomes to diversify its economy and combat serious social problems.

When the price of raw materials, and especially oil, began to fall, a spiral of debt was triggered off and there wereere no longer any margins for a public-funded economic pоlicy or for a social policy based on subsidies. The economic policy decisions made by Venezuela in the years of abundance can probably be taken as the best example of how not to pursue economic development, but we should not forget that the general climate in the 1970s pushed developing countries and especially oil producers into debt.

Although they did not adopt the Reaganomics of the 1980s, which would have ruined them, Venezuela completely lacked any medium- to long-term vision.

With the gradual reduction in resources available, Venezuela’s political system began to crumble, although in 1988 the two main parties still picked up ninety-three per cent of votes.

The Caracazo of 1989 marked the tragic end to social peace in Venezuela. The starving masses living in the IA valley, which stretches from the international airport to Caracas, left their ranchitos and laid siege to the capital: Venezuela had entered an impasse.

The return to power of the two presidents from the years of abundance – first Carlos Andréz Pérez and then Rafael Caldera, who was elected in 1993 at the head of a mixed electoral alliance made up of various parties, thus effectively putting an the end to the two-party system – was proof of the Venezuelan political class’s inability to introduce changes to the by then obsolete system.

Caldera had been the first COPEI President in the period 1969-74 and his reputation of honesty proved convincing, after his predecessor Pérez (CAP) had been forced out of office because of corruption. But naturally the second time round Caldera was unable to repeat his success with those distributive economic policies, which had been a feature of his first term in office.

Although full of good intentions, Caldera was crushed by the effects of the end of the convertibility of the bolivar, which led to a massive flight of capital and the consequent banking crisis leading to the nationalisation of halfof the financial system.

The worsening economic situation was accompanied by increasing evidence of corruption spread through all strata of Venezuelan society (according to Transparency International, Venezuela is one of the mostcorrupt countries in the world).

At this point it may be of interest to cite some significant figures: in the period 1990-98, 120 billion petrodollars flowed into the country, but today six per cent of the population lives in dire poverty and a forty per cent do not have enough food to meet the nutritional standards established by FAO.

The pyramid of distribution of resources sees 14 per cent of the population controlling 75 per cent of national wealth. The other 86 per cent of the population must make do with the remaining 25 per cent.

These striking figures are surely a challenge to the concept of democracy, seen not so much from the formal definition (respect for the rules of the game) but in the wider substantial definition (the effects on the smooth functioning of society and the economy to the benefit of the largest number of people possible).

Should we really be surprised then by this great desire for change by Venezuelans, focused on the figure of Chávez?

Hugo Chávez, an army colonel, had taken part in the military coup in 1992. Having been condemned and pardoned after two years in prison, he founded the Fifth Republic Movement (MvR), which proposed adopting a new constitution to replace the 1961 or moribunda (according to Chávez’ slogan) constitution.

His political rise, based on undoubtedly populist tones, which struck home with the exasperated population, goes hand in hand with the inevitable decline of the traditional parties. In November 1998 together they only polled thirty-six per cent of votes, which still did not give Chávez’ Patriotic Front a parliamentary majority. But in the presidential elections the following month AD and COPEI withdrew their own candidates at the last moment and formed a coalition to back the independent front-runner Enrique Salas Römer.

Chávez’ sweeping victory (fifty-six per cent of votes) led him to forge ahead with his reformist plans. He called a referendum proposing the creation of a National Constituent Assembly (NCA), which was accepted with a ninety per cent vote in favour (albeit with an abstention rate of sixty-two per cent).

In the following elections to form the NCA (25 July 1999) the candidates associated with the Patriotic Front won a landslide victory because of the negative attitude of the traditional parties still reeling from the shock of Chávez’ election: 122 of the 128 deputies elected are associated with Chávez, while there are only six independent deputies.

The NCA began its often chaotic proceedings, broadcast live on television, and after three months produced a ‘Bolivar Constitution’. This is no simple copy of the original proposal made by Chávez, but rather a mixed bag of 350 articles (much less than the 1,000 or so original proposals).

The proposal for the Fifth Constitution was the subjectof a referendum approved on a 15 December 1999 with 71.24 per cent of votes in favour (54.58 per cent abstained).

The new constitution came into force immediately and the next important dates are the presidential elections in March 2000 which will surely see Chávez triumph again. We must stress that abstention rate was very high in all stages of the constitutional process after Chávez’ election. But is this sufficient grounds for doubting its democratic validity? I feel it would be very rash to do so. What are the main features in the new constitution? Here we do not have enough room to go into a detailed analysis of all the articles in the constitution, which offer a very interesting study for anyone interested in comparative politics. We will simply make one or twoessential remarks.

The constitution certainly gives more powers to the president. The presidential term of office is extended from five to six years and includes the possibility of re-election. The figure of a vice-president with the prerogatives of Prime Minister has been created and parliament now has a single-chamber system.

Venezuela has even changed its official name to the Bolivarian Republic of Venezuela and two new powers have been created (aасtually already proposed in his day Simón Bolívar), the ‘moral’ and the ‘electoral’ power. Moral power embraces all the existing bodies (Fiscalía General and Contraloria General de la República) with other newly created bodies (Consejo Moral Republicano, an anti-corruption organisation, and an Ombudsman).

The chapter on socio-economic rights has been extended considerably. For example, it now includes universal social security and it will not be easy to reconcile such principles with the disastrous financial situation of the state.

The article on the right to receive timely, true and impartial information’will also raise concern because it could lead to the introduction of censure as will enabling the president to directly appoint military chiefs, thus creating a special relation between the army and president (many of Chávez’collaborators are old companions in arms).

Venezuela is obviously going through an important transition phase. Chávez was legitimately elected and enjoys the majority support of public opinion. On the wave of enthusiasm he has dedicated his first term in office to the political agenda, giving priority to constitutional changes. But the probable cause of the Venezuelan problems was not so much the ‘moribund’ fourth constitution as the incredible sequence of strategic errors committed in the two-party system, as well as rampant corruption. But Chávez had to make a strong political impact and he chose this constitutional way, which was approved by the population.

Support for Chávez will almost certainly wane if there are no significant improvements in the economic situation. And it is also likely that the traditional parties will manage to reorganise and break the front of almost total unanimity Chávez enjoyed in 1999. But clearly the president still has a good deal of room for manoeuvre in the coming years.

As regards economics, the populism of his declarations has been followed by much more moderate and orthodox decisions in practice. Although the economy was not a priority in 1999, similar catastrophic scenarios are unlikely and there are nowthe conditions for a turnaround in priorities,with an emphasis on economics rather than politics.

Venezuelan action in OPEC has led to a rise in the price of oil, which has injected new life into the Venezuelan economy. The main challenge in the coming years is to diversify beyond oil, a challenge which no one in Venezuela has ever had the courage to tackle. As we pointed out there are also a number of disturbing signs in the new constitution. But demonising Chávez a priori is neither legitimate nor fair. The supposed and improbable Columbia- Cuba-Venezuela FARC axis is part ofthose imaginary scenarios useful for the political purposes of anyone justifying a new wave of intervention in Latin America (see the pressure from the fight against drug traffic in Colombia and Peru, coinciding – by the way – with the handing back of the Panama Canal).

Chávez may well fail or not fulfil his promises. But the developments in Venezuela must be followed critically and objectively, leaving aside superficial analyses, often based on prejudices, which are only a hindrance in the study of political systems.

In a recent article (Acque & Terre no. 6, 1998) we described the situation in Brazil to the background of the international financial crisis. Although stressing the structural weaknesses – still present – in the Brazilian economy and society, our analysis concluded that the enormous progress made by Brazil in the 1990s (a more open market, financial stabilisation, modernisation of the productive system, and regional integration in the framework of MERCOSUR) had created a basically positive overall situation both in terms of the economic development of the country and its growing international role.

We now have to ask to what extent these conclusions have been invalidated by the turbulent events after 13 January 1999, when the greatly feared devaluation of the real actually took place. Under the weight of market speculation Brazil was dragged into a downward spiral that looked set to undermine in only a few weeks the economic stabilisation process of the previous four and a half years (the Real Plan).
In this article we will briefly analyse the evolution of the Brazilian financial crisis (the so-called ‘samba effect’) as the starting point for an examination of the repercussions on MERCOSUR, the economic integration block comprising Argentina, Brazil, Paraguay and Uruguay, now going through its first really deep crisis after years of success.

But why chose this perspective? MERCOSUR iS notonly a regional block with its own specific weight (the fourth in the world in terms of population and trade volume after NAFTA, the European Union and ASEAN). It also represents a particularly successful example of an economic integration process involving emerging countries. Its potential in terms of trade partnerships and capacity to attract investments was so great that in the 1990s, all the big international players turned to this market.
Both the European Union and the United States have set up or are setting up negotiations with the aim of signing intra-regional trade agreements with MERCOSUR. In the case of the European Union a possible agreement with Mercosur would be the first example of an accord between two regional blocks, while all of the countries in the American hemisphere are beginning negotiations for the Free Trade Area of the Americas (FTAA), in which MERCOSUr has taken on a key role.
The rapid success of MERCOSUR also strongly influenced trade and economic balances in
Latin America (see ‘Latin America: from the Pact to the Andean Community, Acque &
Terre no. 2, 1997).

If we consider the overall situation of international trade on the eve of the Millennium Round of the World Trade Organisation (Wro) and the more general consequences of globalisation and the integration of financial markets, highlighted on several occasions by the Brazilian crisis itself, we may conclude that the fate of MERCOSUR is not simply a regional problem but a question of global interest for international trade.
Why did the Brazilian financial crisis occur? The close binding of the real to the dollar, with devaluation controlled by Brazil’s Central Bank at an annual rate of 7.5 per cent, held during Cardoso’s first term of office. The effects were very positive both in terms of keeping inflation down (a kind of endemic disease in Brazil. where it has always been used to finance constantly expanding public spending) and in terms of Brazil’s growing international credibility.
On this basis, the four years before the crisis were characterised by a considerable strengthening of purchasing power for the middle-classes and significant growth rates in the GDP.

But towards the end of Cardoso’s first term of office, his economic policy began to be criticised, mainly by industrialists, because of the tight jacket on and the economy due
to the pegging of the real to the dollar. In particular, after the Asian and Russian crisis, it had become increasingly difficult to defend the real, sending interest rates soaring to very high levels (an almost fifty per cent rise).
In defending its monetary model at all costs, Brazil burnt up more than half its reserves in 1998. Despite the injection of confidence and capital provided by the coordinated IMF aid programme of October 1998, delays in approving pension and tax reforms by congress, and the moratorium announced by the state of Minas Gerais, triggered off a wave of speculation in
January 1999, making it impossible to further defend the real.
The first attempt at reform (the introduction of a wide fluctuation band, from 1.22 to 1.32 reais per dollar) lasted no more than twenty-four hours. Market pressure forced the Central Bank to abandon its defence of the real. In only a few weeks the Brazilian currency plunged towards values considered far too extreme by all analysts, and by the end of February the exchange rate was 2.2 real per dollar (a devaluation of eighty per cent in six weeks compared to the overall devaluation of thirty per cent in the four previous years).

The crisis shock waves also hit the bosses of the Central Bank. The orthodox monetarist Gustavo Franco,who had opposed any slackening in monetary policy, was replaced on 13 January by his deputy Francisco Lopes.
He, in turn, held out no more than eighteen days against the samba effect and was replaced in early February by Arminio Fraga, a man close to George Soros. This appointment led to a great deal of controversy in the Brazilian political classes, loath to accept an exponent of ‘international speculation’ at the helm of the country’s monetary policy.
But initial allegations of possible irregularities committed by Fraga to the benefit of Soros in the period between the appointment and taking office turned out to be unfounded and the first two months of Fraga’s management proved to be extremely positive. The effect desired by Cardoso in appointing an expert of international financial markets to gain credibility was achieved and the real made up ground much quicker than had been expected.

By late April the wave of speculation had been halted, and the real is now back up to values between 1.6 to 1.7 dollars – a figure already unanimously indicated by the experts as being realistic.
This rapid stabilisation, which counterbalanced the speculative peaks in January and February, means that much more optimistic macroeconomic forecasts can be made compared to the fears of a deep recession in the first few weeks after the crisis. Although 1999 will end in recession (-1 per cent), the plunge towards negative values around 4-5 per cent seems to have been averted.
As regards the other great unknown, inflation, which rocketed in the first weeks, hinting at a catastrophic scenario of 30 to 40 per cent for 1999, it has now calmed down, thanks to some successful government measures and a responsible response from traders and, more importantly consumers, who changed their purchasing habits and so refused to follow the escalation of the crisis. Today the most reasonable forecasts suggest that inflation will be nearer 10 than 15 per cent by the end of the year.

Another factor which has contributed to improving the situation is political in nature. Cardoso has managed to strike a deal with the state governors, who without going as far as the moratorium announced by Itamar Franco (Minas Gerais), stressed the need for easier conditions in paying back state debts to the central administration because of the crisis. A general extension of the moratorium would have had dramatic consequences on the international credibility of Brazil. Cardoso granted the states some alternative concessions without either forgiving debts or allowing payments by instalment. The only rebel state is still Minas Gerais, but more for political reasons (Franco’s rivalry with Cardoso and his presidential aspirations) than forfinancial reasons (the situation in Minas Gerais is much less dramatic than in some other states).
That partial recovery from devaluation has, however, aggravated the problem of public debt, making it impossible to reach the objectives established in October with the IMF. A revision of this agreement was signed on 8 March, on the basis of new economic forecasts, which are partly coming good in the framework of a moderately positive scenario.
The agreement is no longer anchored to maintaining the exchange rate but to controlling inflation. In this context, interest rates have begun to fall (the agreement is for a 28.8 per cent rate by the end of the year).

This is the Brazilian financial situation in late April, but what have the repercussions of the crisis been for MERCOSUR?
The first Argentinean reactions were of concern: the spiralling devaluation of the real from January to March led to Argentinean businessmen fearing a major loss of competitiveness for their products compared to Brazilian goods, given that the Argentinean peso is linked to the dollar through the currency board system. We must point out that when MERCOSUR was created, Argentina had always had positive trade balances with Brazil. The business lobby thus
put pressure on the government to obtain compensatory measures.
On the other hand, President Menem had proposed settling MERCOSUR’s monetary problems for good by adopting the dollar as a single currency, following the Argentinean example. In the past Menem had already discussed the possibility of MERCOSUR monetary union following the example of EMU.

But this change in direction towards the dollar meets with little support in Brazil, a country very reluctant to lose any sovereignty. The authorities are well aware how unpopular the adoption of the dollar would be with public opinion, mostly already sceptical about the IMF agreement, seen as a case of external interference. The Brazilian authorities thus announced that adopting a regional single currency would ‘take decades’ At the height of the crisis the MERCOSUR presidents gathered on several occasions to make a show of MERCOSUR strength. The meetings included the bilateral MenemCardoso summit in São José de Campos on 17 February and the meetings between Cardoso and Sanguinetti of Uruguay and Cubas Grau of Paraguay, they too evidently concerned about the consequences of the Brazilian crisis on their economies and keen to keep the block together. These meetings built up solidarity between the countries in the group, and stalled any protective measures by Brazil’s partners. They also confirmed the principle of joint decisionmaking and introduced the concept of macroeconomic coordination within MERCOSUR.
The decision concerning macroeconomic coordination was particularly significant, since Mercosur had always previously been viewed only as a commercial agreement, without any clear prospects concerning deeper integration. The first simultaneously exogenous and endogenous shock demonstrated to the countries in the block the need to gradually move towards macroеcоnomic and monetary integration in order to create a true regional economic area. In this sense, the European experience was often cited by MERCOSUR as a significant reference point.

After the bilateral meetings, the MERCOSUR presidents met for the first Eu-MERCOsur Enterprise Forum in Rio di Janeiro (late February). Two months after the presidential statements, however, there was growing tension between the two main MERCOSUR partners,
Brazil and Argentina. Despite the measures adopted to alleviate the effects of the crisis (the withdrawal by Brazil of subsidies for exports within the MERCOSUR and the Argentinean withdrawal of measures announced for the automatic paying back of negative balances in bilateral trade credits) the introduction of protective measures by Argentina (phyto-sanitary and anti-dumping measures and partial clawback of VAT on exports) created tension in relations between the two governments on trade matters. It must be stressed that in December Argentina had already complained about discriminatory measures introduced by Brazil. Now there is a possibility of Brazilian action against Argentina in the Wro, which would be a negative signal for the health of MERCOSUR.

Other serious differences of opinion concern negotiating strategies of MERCOSUR with other Latin America countries. Although Brazil viewed dimly the renewal of the bilateral agreement between Argentina and Mexico (late 1998), on the grounds that only MERCOSUR as a block should make this kind of agreement, Brazil itself has now decided to abandon negotiations for creating a freetrade area between MERCOSUR and the Andean Community to make its own unilateral preferential agreements with the countries concerned.
In fact Brazil is much more deeply affected than Argentina by this technically very complex negotiation due to the existence of a detailed network of pre-existing bilateral accords between the countries in the framework of the Latin American Integration Association (ALADI). Brazil is interested in strengthening its trade, especially with Venezuela. The newly elected President Chavez has already visited Brasilia twice and has asked for Venezuela to be allowed
to join MERCOSUR.

Lastly, the climate inside the block is worsening, and some Argentinean ministerial statements have casts shadows on the future viability of MERCOSUR. Bearing in mind the European example, however, we must stress that the integration project is a blueprint for the long term, often subject to transitory crises and problems. In this sense the presidential statements tend towards the deepening of integration as a way of responding to the crisis. This attitude still seems to prevail over that of rupture.
As we have stressed, the proposed deepening of integration would extend the range of MERCOSUR action to macroeconomic coordination. Thought is now gradually been given to two themes which until recently were taboo, at least in the two major MERCOSUR countries: the creation of supranational mechanisms for settling controversies and the definition of an institutional structure for MERCOSUR to integrate the intergovernmental dimension.
Although the Brazilian financial crisis rocked MERCOSUR, the Paraguay political crisis has given some positive signals about the block’s democratic solidity.

We cannot go into the details of the recent political events in Paraguay here, although they are extremely interesting, at times verging on the picaresque. The upheavals in Paraguay were the outcome of the imperfect transition from the Stroessner dictatorship to the current democracy, in which pоwer has remained in the hands of Stroessner’s old party (the Partido Colorado).
Divisions and hatred between the various factions of ‘Coloradism’ have given rise to prolonged instability, already undermined in 1996 by General Oviedo’s failed coup to oust President Wasmossy.
On that occasion MERCOSUR already demonstrated its democratic strength (the MERCOSUR
members informed Paraguay that a coup in Asunción would lead to the country being expelled from the group), and a similar stance was made following the assassination of vice-president Argaña. In fact Brazilian and Argentinean diplomatic efforts were of great help in averting an escalation of violence between factions linked to president Cubas Grau and Oviedo and to the followers of the Argaña. The MERCOSUR factor played an important role in thwarting a coup, following the threatened impeachment of Cubas Grau and the intervention of Paraguay’s
neighbours smoothed the way to the resignation of Cubas Grau, which put an end to
the crisis.
The Paraguay crisis has proved that democratisation in the region is irreversible and highlighted the strategic importance of belonging to MERCOSUR.

MERCOSUR is thus experiencing a crisis of maturity. Its early years saw extraordinary results in terms of stepping up trade, a highly significant factor in a region where it had hitherto been very limited. The success of MERCOSUr has also made a crucial contribution to increasing the international credibility of member countries.
The current difficulties due to the economic crisis are useful in raising questions about which path the block should follow: various signals suggest that the deepening of integration could be the response to the crisis.

MERCOSUR has become the focus for South American economic integration: MERCOSUR extended to all South American countries (the so-called AMERCOSUR) is no longer a utopia, although it will certainly be a long and difficult process.
This South American dimension is part of the FTAA negotiations, in which MERCOSUR has assumed the role of Latin American leader to offset the influence of the United States.
Moreover, MERCOSUR is very keen to strengthen its links with the European Union through the creation of a free-trade area between the two regional blocks (the European Union is already MERCOSUR’s biggest trade partner): асcess for MERCOSUR agricultural products on the European market is the key to the question, but the negotiation formula has not yet been defined.
The coming years should thus see a gradual consolidation of MERCOSUR as the tool for economic integration in Latin America and its growing trade diplomacy with the major world trade blocks (European Union and NAFTA).

The financial crisis so sorely afflicting Asia and Russia has had extremely serious repercussions on all the so-called emerging countries. This has also been the case for Latin American countries, especially Brazil, Argentina, Chile, Mexico and Venezuela.

The first Asian crisis of 1997 had already driven Brazil to introduce protective measures in order to minimise the impact of international economic turbulence (such as raising the MERCOSUR Common external tariff). This did not prevent a slow down in Brazilian economic growth, already being felt in the first half of this year.

The much deeper crisis of 1998, and especially the collapse of the Russian economy and the plunging rouble spun markets into a panic. It led to widespread lack of confidence in emerging countries, causing a flight of short-term invested capital from all their financial markets, which in recent years had produced remarkable returns.

In reality more than withdrawing investments, there was generally a reluctance to renew them in emerging markets when bonds had expired. Once profits had been made, the capital was not re-invested in emerging markets but in countries considered to be more stable (Europe and the Us). To this background, in August and September there was a widespread coriviction that after Russia, Brazil would also suffer a collapse of its stock exchange and currency, with the even more serious consequence that Brazil would have dragged the whole Latin American economy down with it: Argentina, although less deep in debt than razil thanks to its healthier public finances, is bound to its neighbour through the intense trade links in MERCOSUR; Chile is another major MERCOSUR partner; Venezuela is equally important for Brazil and also beset by considerable specific problems due to its over-dependence on oil prices. The whole of the NAFTA block was considered to be at risk, especially because of the large credits the Us banks had with Brazil.

Moreover, although alarming, this analysis did confirm a now established fact: Brazil had become the leader of the whole Latin American economy. Thanks to having opened up its traditionally protected closed economy, this enormous country which alone accounts for half of the Latin American GDP, population and surface area, had established lasting relations with its neighbours. It had acquired the specific weight in terms of continental leadership which its traditional isolationism had always prevented.

The opening up process brusquely begun under President Collor, was still limited by hyperinflation. This problem was then solved with the Real Plan devised by Minister Cardoso under the presidency of Itamar Franco. The success of the plan led to the consecration of current President Fernando Henrique Cardoso. It paved the way to a faster opening up of the market and the modernisation of the economic structures of Brazil on a more solid and balanced basis. The new situation of financial stability brought a return of foreign capital and gave great impetus to privatisation. Moreover, the rapid success of MERCOSUR completed the opening-up process, breaking the consoli- dated tradition whereby attempts at economic integration in the Southern Cone and Latin America in general had always been doomed to failure.

But in this framework of very positive trends making Brazil a leading player on the international scene in the 1990s, there was a weak point: the over-dependence on shortterm capital, by definition speculative and therefore unstable. The need for external finances due to the large current-account deficit caused by the cost of opening up the markets, aggravated by the low levels of domestic saving and a high public deficit (8 per cent of the GDP in late 1998), making the country extremely vulnerable in the саse of financial turbulence, like that due to the present crisis. Thus, for example, while reserves peaked at 71 billion dollars in March 1998, by November they were down to 47 million, when the emergency plan worked out with the International Monetary Fund was launched. Huge reserves were burned up to defend against a run on the real, considered an indispensable part of Cardoso’s policy. In an attempt to stem the flight of capital, the Central Bank raised the basic interest rates in September to 49.75 per cent. Although recently the highest rate was reduced to around 40 per cent, considering that the inflation rate is no higher than 4 per cent, it is clear that the real cost of money in Brazil is incredibly high, thus heavily penalising industry.

In the middle of this financial crisis, on 5 October 1998, elections were held for the presidency, congress, part of the senate, and for twenty-seven governorships and their respective state congresses.

As had been widely predicted, President Fernando Henrique Cardoso was re-elected at the first round with 53.06 per cent of the total votes (35.9 million). The left-wing candidate, Ignacio Lula da Silva had already been defeated by Cardoso four years earlier and by Collor eight years earlier. This time, however, he did enjoy some persona! success, with an improved result (31.81 per cent of the votes) compared to 1994 and he won the support of most people opposed to the current economic model. At the same time the results show that the alternatives proposed by the Brazilian left (defence of the public sector, and a return to a more closed economy through the introduction of protective measures) had no future in the eyes of Brazilian public opinion, convinced by the need for modernisation implemented under Cardoso. The electorate was thus willing to grant the president a second term of office, despite the prospect of having to put up with the sacrifices that willbe required over the next two years as part of the drive to financial recovery.

A cursory glance at the electoral results
suggests that Cardoso can rely on a comfortable majority giving him a free hand to continue with his programmes: the coalition government is made up of six parties (the Partido da Frente Liberal, PFL; the Partido da Social Democracia Brasileira, PSDB; the Partido do Movimiento Democratico Brasileiro, PMDB; the Partido Progressista Brasileiro, PPB; the Partido Trabalhista Brasileiro, PтB; and the Partido Social Democrático, PsD) and can count on 381 of the 513 seats in Congress and 68 of the total 81 senators. But the overall picture is much more complex.

Firstly such a mixed bag of a coalition bringing together liberal, social democratic and nationalist parties is obviously subject to internal strife. This is only overcome thanks to the constant efforts by the government group leaders in congress and the senate, often through compromise and votes for favours diluting the legislative proposals. The government has also suffered the loss of two key figures: Luis Eduardo Magalhaes (PLF), son of the president of the Senate and an able group leader of the congress government in the previous legislation, and Lucio Motta (PSDB), right-arm man of Cardoso and minister of communications. Both men died prematurely, leaving a gap which will be difficult to fill.

Moreover, members of parliament are rather fickle when it comes to following the group leaders and party line. During the previous term of office several dozen members of congress changed parties without losing their seats. This is symptomatic of the confusion in the Brazilian congress and how difficult it is to keep the majority on the road in such conditions.

Another fundamental factor in Brazilian politics are the twenty-seven governors. They are crucial for the success of government policies. On one hand, they can strongly influence the deputies and senators in their state, irrespective of political colour, and on the other, the 1988 constitution devolved to state or local level the control over fifty per cent percent of public spending. Clearly in this situation the governors have a good deal of room for manoeuvre and austerity policies which are not supported by the periphery have little chance of success. As regards the state elections, Cardoso’s PSDB will govern seven states from 1999 (previously it held six). But in fact the party has lost important states like Minas Gerais, where the former president Franco Itamar was elected. Apparently he is bent on adopting a critical attitude to the government and aims to head the group of governors oppоsed to continuing with the current economic policy. In the key state for the Brazilian economy of Sao Paulo, Mario Covas from the president’s party was elected with a left of centre majority, including Lula’s Pr. Given that Covas is also supported by the FIESP, the potentially protectionist Business Confederation of San Paolo, then it can by no means be taken for granted that the San Paolo government will give full backing to the reforms. The opposition won the day in two key states: Rio de Janeiro (Anthony Garotinho, PDT) and Rio Grande do Sul (Olívio Dutra, Pт).

All of these factors suggest that the coali-tion government due to rule Brazil over the next four years is anything but solid, despite the numerical appearances.

It must be added that the 1988 Brazilian constitution drafted at the end of a twenty year military regime is very detailed and strong on legal guarantees. Laws normally included in ordinary legislation were given the status of constitutional laws. Thus a threshold of three-fifths of the votes must be reached in congress before approving reforms.

In his second term of office, Cardoso will set about introducing very wide ranging reforms mainly concerning taxes, the pension system and politics. Success with these reforms will decree the lasting consolidation of Brazil as a world leader able to exploit its immense economic and human potential. Failure to modernise would have very serious repercussions in the context of the global economy.

We have already mention the economic fragility due to an over-dependence on speculative capital. Last summer there were talks on the possibility of international intervention led by the IMF to save Brazil from the rapid spread of the Russian-Asian crisis to Latin America. This idea was being shaped at a particularly tricky moment: short of funds, the IMF was under fire from various quarters for its ineffectiveness in Russia and Asia, raising doubts as to the appropriateness of new action. Moreover, Brazil was in the middle of an electoral campaign which made it difficult to take a stance in favour of the emergency plan (Latin American public opinion has always shown a certain mistrust towards the Bretton Woods financial organisations, seen as the Trojan horse of Us foreign policy).

In actual fact the government began to negotiate the plan before the elections and only announced it after being successful.

The agreement on economic and financial programme between Brazil and the IMF was then finally announced on 13 November 1998: the programme can count on funding of 41.5 billion dollars (IMF- 18 billion, World Bank and Interamerican Bank – 4.5 billion each, and the industrialised countries 14.5 billion, of which 7.6 billion from the Eu and 5 billion from the Usa).

These funds have been made available to counter any flight of short-term capital, but at higher interest rates than current market levels in order to encourage Brazil to make use as soon as possible of the international capital markets.

Initially included in the programme, private banks are not involved, but should support it through continuing or newcredit for Brazil. The financial package is enormously significant not only because of the size of funds made available, but more importantly for the message to the markets: the large industrialised countries and big international financial institutions have placed their trust in Brazil and its current leadership, after positively assessing the considerable strides forward over recent years and the current reforms.

In this sense we share the notion that when there is a major international financial crisis all countries should not be indiscriminately bundled together. The situation in the emerging Latin American countries is not at all comparable to the situation in Asian countries and even less so to that in Russia. Compared to the institutional and political crisis in Asia and the collapse in Russia, we must view the positive evolution of the process of opening up and modernisation pursued by the emerging countries of Latin America. They did not deserve to be punished for the weaknesses of others. The ‘bad pupils’ of the 1980s have been transformed into good students of the 1990s and must be protected.

Brazil is one of the best examples and the international public authorities have recognised this fact.

The funds in the IMF package are linked to the completion of a definite reform programme. Firstly, Brazil is committed to reducing its public deficit from the current 8 per cent of the GDP to 3 per cent by 2001. This will require an enormous effort over the next two tax years (as the Euro countries know full well).

The government intends to pursue a restrictive fiscal policy without lowering the exchange rate (this measure, although suggested by many analysts, would have negative effects on the public deficit because of the high degree of indexing on the dollar by short-term bonds), without limiting the withdrawal of capital and without debt forgiveness.

The catastrophic state of the public finances is the outcome of years of lax administration. The negative effects, however, were masked by hyperinflation which concealed the perverse effects due to a chronic imbalance of the public finances.

Thus, for example, the pension system was extraordinarily generous with the more well-off sections of the population, allowing them to combine pensions at a relatively young age (53) with no need to stop working and only levying limited contributions. At the same time the state was unable to assist the needier classes and had to drastically cut spending on education and health (public hospitals and schools have deteriorated greatly over the last few decades and Brazil has a illiteracy rate totally out of keeping with its overall develoрment). The result of this situation was a pensions deficit of over 50 billion dollars in 1998. In the public sector alone, the deficitwas around 22 billion dollars compared to an revenue from contributions of 2.5 billion.

Reforming the pension system is thus a top priority for the Cardoso government, which already tackled this issue along with many other problems in its first term of office. Revising this absurd system and rebalancing the public finances are indispensable conditions for completing the reforms. But Congress may be very reluctant to approve them, given the extent of privileges guaranteed at present.

On 28 October 1998 the government announced a tough fiscal package. In an already difficult context (a predicted zero growth in GDP for 1999), its objective is to cut 1999 budget spending by around 11 billion dollars. We will not discuss the details of these measures drastically reducing the pension system and re-organising indirect taxation (the introduction of VAr) to increase overall revenue. We must stress one point, however: eighty per cent of the spending in the annual budget law cannot be reduced, because it is guaranteed constitutionally or decided at decentralised level. Thus the state governments – some spend more than ninety per cent of their resources in wages – must collaborate with the central government’s austerity plan. But only a constitutional reform can introduce the structural changes required.

What conclusions can we draw about the near future for Brazil?

The country has made enormous progress in the 1990s: a more open economy, financial stabilisation, the strong impulse to regional integration through MERCOSUR, and the modernisation of the country on a more balanced basis compared to the past are all factors giving Brazil a renewed international credibility in line with its ambitions.

The achievements of this new approach are clear to all. Despite its problems, Brazil is viewed as the most credible international partner (see the IMF package) and it has taken up the role of Continental leader in the economic field thanks to the fastdeveloping MERCOSUR. Now the fulcrum of Latin American economic integration, MERCOSUR is the key to opening up the subcontinent (see, for example, the talks with NAFTA and the European Union). Brazil has also assumed a leading role of political responsibility as evidenced recently in the solution to the Peru-Ecuador dispute. It is thus the logical South American candidate for a place as a permanent member on the UN Security Council.

Whereas another emerging Latin American country like Venezuela has chosen not to look reality in the face by opting for the populist solution of Chavez, and the illusions of the past (oil dependency) without taking into account modern global economic trends and the need to introduce a serious process of modernisation, Brazil re-elected Cardoso with his long-sighted strategic choices on the road towards a probably irreversible process.

But Cardoso’s second term of office must complete this process by defeating the parasitic tendencies still widespread in the political world and the classes linked in various ways to the state gravy train, now an unsustainable burden for the new Brazil. In this sense once the necessary tax and pension reforms have been completed, the circle must be closed by a political reform to reorganise the current imbalances. Having completed these reforms, the Brazil of the 21st century can confidently begin the decisive battle to eliminate social shortcomings which are not compatible with its international status. At that point in the near future education, health and social development will be the main priorities.

Given the background of sweeping transformations in Latin America, the Mexican case is emblematic of the reach but also the limits of the ongoing changes.

Modern Mexico has a complex original history. It is the outcome of various major factors each with a specific weight: the glorious past of the pre-Columbian civilisations, Spanish colonisation, the early-twentieth-century revolution with its myths and taboos and its difficult
relations with its powerful northern neighbour.

All of these factors are present in the specific make-up of the country and condition the ongoing deep changes to both economic and political systems.

Of course this process is not only found in Mexico. With varying degrees of success, all Latin American countries are tackling modernisation processes begun in the 1990s, following the deep crisis of the 1980s. This dramatic crisis at least brought a turning point as regards the exhausted development model based on the state as the only driving force for development and a culture with protectionism and subsidy as the ground rules for the economy and society.

Mexico arguably had the most radical version of this model: a quasi single party system lasting more than 60 years. The party lived in symbiosis with the state and exercised vertical control over the unions (virtually a single union), and all aspects of social, economic and cultural life. Now evidently dated and historically obsolete, this model was the focus of interest for observers and experts who noted how it managed to channel the social pressures generated at the base when vertical control was exercised by the one-party state over society. In practice for decades there was no alternative to the existing model in Mexico, because it successfully satisfied the essential needs of society without resorting to particularly coercive methods.

The PRI (Partido Revolucionario Institucional) build up its ideology from a revolutionary legacy with all its progressive (or presumably such) dogmas: secularisation, nationalism, statism, agrarianism, and trade unionism. The PRI called for permanent revolution on the basis of these key concepts, or rather it ‘institutionalised the revolution’, as the party name suggests in what are rather contradictory terms for Europeans.

In the 1980s the external debt crisis forced restraints on public finances and a consequent gradual revision of the Mexican political model. At the same time the growing globalisation highlighted the need for lasting economic efficiency to bring to an end the socialist system and usher in the ‘single liberal model’.

To this background a group of young Us-educated technocrats, permeated with the new dominant ideology, took over the driving seat in the PRI. Their objective was the modernisation of the country. Thus the lukewarm reforms under the presidency of Miguel de Madrid (1982-1988) were followed by the presidency of Carlos Salinas de Gortari (1988-1994), the leader of this reformist movement.

The Salinas presidency dealt devastating blows to all the pillars of the revolution: secularisation (through the recognition of the Catholic Church and the signing of a concordat with the Vatican); agrarianism (the end of the distribution of land for the peasants); trade unionism (the umbilical cord between state and the CTM, the only major union, was cut, the emergence of conflicts over productivity and workers rights); statism (reforms of the state apparatus); nationalism (the end of the love-hate relationship with the United States by joining NAFTA).

Salinas, however, was unable or reluctant to complete modernisation by also reforming the party. This shortcoming, combined with the incredible corruption of the president and his clan, his possible involvement in the ‘great mysteries’ of his presidency (the deaths of Posadas, Colosio and Ruiz Massieu) led to the downfall and exile of the man who had had the courage to make vital decisions for the future of his country. The signs of a decay in the Pri political model had already emerged in the controversial election of Salinas in 1988, contrasted by the personal success of Cuauthémoc Cárdenas, the leader of the PRD (Partido de la Revolución Democrática). In the following years, the PAN (Partido de Acción Nacional) and the PRD obtained significant breakthroughs in various state political elections. Then the 1994 presidential elections seemed to consolidate the monopoly of the PRI, although they did spell out the end of the quasi singleparty state. The most recent elections of 6 July, dealt the final blow.

At stake in the elections were 500 seats in the Chamber of Deputies and 32 of the 128 seats in the Senate, as well as 6 governor’s posts (in the states of Campeche, Colima, Nuevo León, Querétaro, San Luís Protosí and Sonora), and the highly significant election of the mayor of the Federal District of Mexico City. The latter vote was particularly emblematic of the ongoing changes in Mexico. A city of enormous dimensions containing ten per cent of the population and the centre of the political, economic and cultural life of the country, Mexico City had never previously had a directly elected mayor. An automatic member of the government, the mayor used to be appointed directly by the president – just one of the anomalies in the Mexican political system.

The direct election of the Mexico City mayor had become one of the favourite issues with the opposition. They finally managed to get the election held for the first time in conjunction with the legislative elections of July 1997.

The electoral campaign already had enormous political significance, since for the first time in its history, the PRI was in danger of having its parliamentary majority dramatically cut. But the campaign became even more significant when the main opposition leader, Cuauhtémoc Cárdenas decided to stand for mayor of the Federal District. He had already run the president close in the 1988 presidential elections and at that time won a majority in the capital.

The polls predicted a defeat for the PRI, but the actual outcome was something of a rout. In the legislative elections the PRI received 37.64 per cent of the vote (239 seats), thus losing its absolute majority in the lower chamber for the first time. The PAN received 26.15 percent (122 seats) and the PRD 24.79 per cent (124 seats). The two minority parties Partido del Trabajo and the Partito Verde Ecologista de México – won the remaining 15 seats.

In the Senate elections there was a similar voting pattern but because of the partial nature of the elections the PRI held on to its absolute majority.

As concerns the election of the mayor of Mexico City, the PRI suffered a considerable setback. Cárdenas was elected with 47.79 per cent of the votes, while the government candidate, Alfredo del Mazo, only received 25.56 per cent and the PAN candidate, Carlos Castillo Peraza, 15.93 per cent. The PRD also won the absolute majority of seats in the Federal District legislative assembly (38 out of 66). This is a remarkably significant result, if we bear in mind the factors outlined at the beginning of the article. Cárdenas’ political future had seemed uncertain after the heavy electoral defeat in 1994. But he managed to strengthen his position as opposition leader and in the coming years he will be able to take on the PRi in his new role as mayor of the Federal District. This kind of cohabitation is a complete novelty for Mexico, used to political monopoly. Cárdenas’ task will not be easy given the range of problems in the mega-metropolis (crime, social issues, pollution, housing shortage, etc.) and the city’s financial dependence on central power, which can thus curb his room for manoeuvre. But if Cárrdenas is even only moderately successful in his new job, he will be in an ideal position to become the first president in the post-Pri era after the elections planned for the year 2000.

As regards the election of governors, the Pri won in four out of six states, but lost in the two most significant states Querétaro and Nuevo León – where the PAN was victorious.

This means that in addition to having more than half of the parliamentary seats, the former opposition also governs the regions with more than half of the total Mexican population.

This set of results marks the end of the PRi single-party politics and the system it was based on.Only in the coming years will it be possible to see the new balances in the Mexican political system, but it is now a fact that the turnaround after sixty years of absolute PRI rule would
seem to be irreversible.

This does not necessarily mean that the PRI will inevitably lose its hold on power. A three-party system has now emerged, but the scenario of a pact between the PAN, with its liberal ideology, and the PRD, a party still appealing to the revolutionary past, does not seem destined to last.

The role of the previously virtually irrelevant parliament, now acquires a new significance in the political context. The two chambers become a forum for political debate and conflict, while until the last elections, they where only a mouthpiece for the decisions taken by the president and the party.

The opposition managed to leave aside its ideological differences in order to elect the first non-PRi prime minister. In September, President Zedillo made the traditional speech to the nation before parliament. For the first time the presidential speech was not made to a chamber of Pri yes-men, and the reply from the prime minister was critical, instead of the obsequious responses of the past. Although this would seem normal practice in countries used to democracy, in Mexico it took on the dramatic tones of a psychodrama in the days running up to the first parliamentary session. The dinosaurs of the PRI couldn’t bring themselves to contemplate a critical reply to the president’s speech.

Another vital factor in this context of change has been the reforms introduced to the system of monitoring the vote, which was once both cause and effect in the result. For the first time in decades the electoral results were not called into question by other political forces. This was due to the severing of the relationship between the government and the IFE (Federal Electoral Institute), the body appointed to monitor and count the vote.

What then are the foreseeable political scenarios?

The PRi must adapt to being just another party and concentrate on a renewal, by breaking definitively with the past and defining once and for all its reference values to replace its old ideological pillars.

There is a good chance there will be individual defections and perhaps even breakaway groups. President Zedillo may play a key part, if he decides not to sit back and glory in the symbolic honorary role of former Mexican presidents, but throws himself into renewing the party which he symbolises.

Another scenario has been hinted at by what happened in the last PRI national congress in September 1996. The congress voted to replace the ‘social liberalism’adopted in 1992 with ‘revolutionary nationalism’ as the main inspiration of the party. The congress also decided that candidates for the presidency, governors and senators could only be selected from people who had been elected. This measure suggested a revenge by the old party apparatus on the ‘young lions’ of the PRI (in keeping with this rule, neither Salinas nor Zedillo could have been candidates).

If this tendency carries the day, the PRI might well shun modernisation and take refuge in the traditional model inspired by populism, thus running the risk of becoming a party dominated by ‘old Mexico’, increasingly room far removed from the more developed regions of the country (the PAN-controlled North and the PRD-controlled DF).

But in all this speculation it must not be forgotten that the Pri is still the leading Mexican party, even though it has lost its absolute majority.

The PRD emerged from the elections as the second party, when in previous years it had been in danger of collapsing due o the continuous breakaways and internal struggles. Cárdenas symbolises the crossing of the desert, since he strengthened his position as a possible alternative to the PRI after a time when his political future was in doubt.

The PRD’s problem is that its support comes from two contrasting areas: on one hand, the radical electorate, the left in Mexican terms (i.e. associated with the revolutionary legacy) and, on the other, the moderates who have only recently turned to the PRD to punish the mistakes of the PRI. But PRI could woo these floating votes back, if it proved capable of completing modernisation, and if the radical elements came to dominate the PRD.

The other major problem for the PRD is its weakness outside the capital and the central states.

In fact the fate of the PRI and the PRD are joined by the same double thread. Both parties have a radical populist wing and a more liberal wing. In the new pluralist scene this situation can’t be sustained in the long-term without damaging the strength of the party. Significantly, over sixty per cent of votes still go to parties whose main ideological reference is the early-twentieth-century revolution. This paradox reveals the strength of symbols in Mexican politics and society.

Seemingly destined to become the second party in the country, the PAN is the expression of the business-oriented players and a liberal ideology. Its main power base is the entrepreneurial classes in the northern states. But its rise has slowed down and it is now paying the price for the economic forms enacted by the Pri technocrats, which stripped the economic programme of its meaning. Moreover, the PAN has been unable to make inroads outside the northern states, its traditional stronghold.

There are thus many unknown factors in the political future of Mexico. What seems unlikely is a return to the past in terms of economic reforms. Although the fashionable party, the PRD, is critical of liberalism, it does not seem to have an alternative economic recipe.

Among the inevitable choices were the abandoning of the central state model and the way forward implicit in NAFTA membership. Over and above ideological tags, these moves are an objective rejection of the revolutionary legacy.

In this context a number of other crucial factors emerge for the future of the country:

• – the need to work out a new social model enabling greater sections of the population to benefit from the reforms, so far only limited to a few strata of society.
  – A crack-down on political corruption and drug traffic. Mexico is being transformed from a transit country for drug traffic into a world producer of cocaine and heroin. The consequences for public order and the morality of the social and political system have been traumatic in a country no longer with any reference points from the previous system of power.
  – The revival of the previously unfruitful dialogue with the guerrilla movements. These movements came into being in Mexico just when similar movements were disappearing in the rest of Latin America. The dialogue with the EZLN (the Zapatists) has not yielded concrete results and the Popular Revolutionary Army (the Ejército Popular Revolucionario – EPR) is a force to contend with in the state of Guerrero. The basic problem is the need to involve the less developed areas in the modernisation taking place in the rest of the country. The latest tragic episodes in Chiapas give a measure of the complexity of the problem.
  – On the international scene, Mexico has the chance to counterbalance its clearly pro-North American stance by building relations in other directions: the ongoing talks with the European Union and the dialogue with MERCOSUR seem to open up encouraging prospects in this sense.

In conclusion, Mexico is facing a complex transformation process full of risks and possible crises. The Mexican case is particularly emblematic in the Latin American context. It is a country of transit between Latin America and the United States with a surprising combination of both First- and Third World elements and the problems of both North and South.

Seen by some as a model of political stability, by others as ‘democratic tyranny’, a model of the benefactor-state or an inefficient corrupt state, Mexico has always been an important paradigm for other Latin American countries.

This aspect will certainly not diminish in the near future. Mexico will continue to attract the attention of experts and observers interested in the development of Latin American societies.