Americas Quarterly - Spring 2009

list of drags on growth. For instance, almost as large as that of Japan and
it is now common to argue that com- the United States and far above other
modity dependence—still high in Latin American nations, all evidence
many Latin American countries— of high market development. Chile
hurts growth. Others couldmention still suffers from too much depen-
crime, which is both extensive in the dence on commodity exports, but it
region and inexorably tied to one has established afunctioning rainy-
type of commodity dependence— dayfund—unusualforresource-rich
illicit drugs. No doubt, commodity economies—that might save it from
dependence and crime are causing the resource curse.
havoc. But I would still argue that Uruguay, in turn, is becoming the
these are consequences of uneven new Chile. Despite being governed
states and fragmented markets. by the left, Uruguay was one of the
Latin America’s reform agenda few countries in the region to actu-
must therefore tackle uneven states ally increase economic liberties be-
and markets simultaneously. The tween 2001 and 2008, according to
problem is that, except in a few coun- the Heritage Foundation. And like
tries, the political constituencyneces- Chile, it is not neglecting the state
sarytosustainthis dual-trackreform sector. Rather, it is relying on pub-
agenda hardly exists. On the one lic-private partnerships to develop
hand, proponents of market forces its core sectors—infrastructure,
are shrinking. According to Latino- turn cynical and disengaged, and tourism, information technologies,
barómetro, a polling organization, still others will turn anti-establish- pulp production, and farming. Pub-
in the last 13 years respondents in fa- ment and disruptive. All democra- lic pension funds are even allowed
vor of placing telephone companies cies produce these three political to invest in private markets. These
in state hands—a measure of statist responses—civicness, cynicism and partnerships have turned Uruguay
preferences—increased from 52 per- anger—but Latin America’s “less into a magnet for foreign direct in-
cent to 71 percent. On the other hand, growth” environment guarantees vestment, whose stock has increased
statist forces, which governed in that the latter two will be dispro- from an insignificant 8. 6 percent of
most Latin American countries in the portionately large. GDP in 1999 to 22. 1 by 2007 (the Latin
2000s, seem to care less about state Can democratic systems cope with American average changed from 23. 7
efficiency (which hardly increased in such a large dose of political disaffec- to 28. 5 percent in the same period).
the 2000s) than mere state spending tion? Political scientists do not know, The result is a productivity revolu-
(which increased in all Latin Ameri- or agree on, the answer. But there is tion. Uruguay already beats Argen-
can countries except t wo). increasing appreciation that com- tina in beef export volumes, despite
In short, the constituency for mar- petitive and institutionalized polit- being 6 percent of Argentina’s size.
ket development is minoritarian, and ical parties are pivotal. Competitive The problem with Chile and Uru-
the constituency for statism exhib- party systems tend to deradicalize guay is size: their economies are too
its confused priorities. Unless this politics, whereas collapsing party small to matter politically. Both
political panorama changes, a dual- systems make it easier for extremist countries are the Irelands of the
track reform agenda is unlikely. The forces to capture the state. Americas: charming, prosperous,
region will remain condemned to It seems, therefore, that escaping competitive, stable, but economi-
grow less. this “less growth” future will hinge cally too small to play big-power pol-
on developing not just states and itics. They might be star performers,
Coping Politically
markets simultaneously but also but they are small stars.
competitive parties.

How will Latin American citi- The only Latin American nations zens respond politically to a that fit the bill are Chile and perhaps Welcome to “less growth” future? We al- Uruguay. Chile’s achievements in the ‘Hood ready know the answer: exactly as the quality of education and in pov-they have been responding for the erty reduction are unrivaled, all evi- venthiscomparisonwith Ireland _past ₃₀ _years. _Some _citizens _will _{dence ofhighstate development. Its} _might _be _too _generous. _{Chile continue} _to _become _engaged _and _level _of _stock _market _{capitalization} E_especially _is _not _surroundedinformed voters, but many will as a proportion of GNP in 2007 was by equally charming, prosperous,