Share This
December 2005 Cover Art

Search Finance & Development

Advanced Search
About F&D


Back Issues

Write Us

Copyright Information

Free Email Notification

Receive emails when we post new items of interest to you.

Subscribe or Modify your profile

F and D logo
A quarterly magazine of the IMF
December 2005, Volume 42, Number 4

Putting Latin America Back on the Map
Arturo Valenzuela

Consolidation of democratic institutions is a vital part of Latin America's recovery

The U.S. National Intelligence Council, in its "Mapping the Global Future"—a widely cited study on global trends shaping the world of 2020—concludes that the 21st century will be the Asian Century, with the rise of India and China as world powers. The report, which drew on the advice of over 1,000 experts on three continents, barely makes mention of Latin America. Outside of Canada and the United States, and occasional references to Brazil as a rising economic power, the countries of the Western Hemisphere south of the Rio Grande appear once again to have been sidelined by the dramatic changes of an increasingly globalized world. In addition, many observers argue that Latin American democracies are weak and unresponsive and that economic reforms have failed to generate substantial growth or reduce glaring income inequalities—the highest of any continent.

In my view, this portrait of the state of Latin America is overly pessimistic and downplays significant progress in the past quarter of a century. Until the 1980s, most countries in the region were governed by repressive authoritarian regimes that were incapable of implementing the far-reaching economic and political reforms they promised when seizing power at a time of political polarization and open conflict. Central America was in the throes of civil wars, while Colombia was racked by the growing power of international drug cartels that operated with impunity while drawing armed insurgents into the business. Unresolved border disputes threatened international peace, and standards of living declined in the wake of the international debt crisis.

The poor performance of authoritarian regimes and the end of the Cold War help explain the dramatic shift toward civilian elected governments. From 1930 until 1980, 40 percent of all governmental changes in Latin America were by military coups. That number dropped by half in the 1980s and disappeared after 1991, when the last classic military coup took place in Haiti. Historic democracies such as Chile and Uruguay returned to civilian rule, and countries with weak or no democratic traditions—such as Bolivia, Paraguay, and most of the countries of Central America—experienced for the first time successive transfers of power that followed constitutional precepts. Mexico, which had established a long-lasting one-party state, became a competitive multiparty democracy.

The mistake that many observers made was to assume that the establishment of democracy meant the swift consolidation of democratic institutions and procedures. As the North American and European experience has shown, the process of democratic consolidation is a long and difficult one that requires the strengthening of the formal institutions of governance and the rule of law, as well as the development of representative organizations such as political parties, which constitute an essential bridge between citizens and policymaking bodies.

Fragile democracies

The weakness of democracy in Latin America is evidenced by the fact that since the current phase of democratic governance began in the early 1980s, 14 elected presidents have not been able to finish their constitutional terms of office. Although the circumstances of their departures vary—including impeachment for corruption, the shortening of terms in office in the wake of electoral fraud, and social unrest accompanying the implementation of austerity policies—all of the heads of state were weakened by flagging support and the lack of majorities in parliament, making it impossible for them to govern. The personalization of government in presidential systems make chief executives particularly vulnerable. Citizens look to the president to solve the country's problems, and when he fails to deliver, his removal from office is seen as an imperative. And yet, even in fragile democracies, such as Bolivia, presidential resignations have not so far led to a full breakdown of constitutional order, permitting political actors to manage the crises of democracy within a democratic environment, an essential part of the learning curve that actually strengthens pluralism.

Democratic consolidation requires that the challenges of building state capacity, accountability, representation, and governance are addressed. State capacity refers to the need to strengthen the institutions of governance themselves, both in their ability to deliver state services and in their capacity to enforce rules and regulations and maintain public order. Accountability implies the full implementation of the rule of law with transparent standards that apply to all regardless of status. Representation involves the fundamental fairness and efficacy of electoral systems and the strength of political parties as instruments for conveying citizen preferences. Governance refers to the ability of a nation's formal powers embodied in the executive and legislative branches to translate diverse partisan preferences into effective policy options, either through majority rule or the establishment of viable coalitions.

Generally, the problems of democratic consolidation have been most acute in Paraguay, the Andean region, and Haiti, where nine of the 14 presidents did not finish their terms of office. Venezuela, which, together with Colombia and Costa Rica, avoided authoritarian rule in the 1960s and 1970s, is the only country where there has been a significant reversal in democratic consolidation. By contrast, Mexico, the Southern Cone (including Brazil), and the nations of Central America and the Caribbean have done surprisingly well. Argentina—where two presidents left office before the end of their terms in the throes of serious economic crises—appears to have turned the corner. Any analysis of Latin America's progress must underscore this sharp differentiation, where Chile's performance has been exceptional.

Growth not matching expectations

The shift to democratic governance was accompanied by far-reaching macroeconomic stabilization and structural adjustment policies and an opening of protected economies to international trade. These reforms helped break the perverse cycle of "stagflation," contributing to improvements in fiscal stability that have not been jeopardized despite the talk of a return to populism in the region. But economic performance has not met earlier expectations, as economic growth has stalled or produced uneven results that—with exceptions such as Chile—have not made a significant dent on poverty rates. This was due in part to external shocks, such as the effect of the Asian financial crisis and the collapse of the Argentine economy after the breakdown of its currency board regime.

But just as the assumption that the establishment of democracy itself would inexorably lead to democratic consolidation, the assumption that market opening reforms would automatically lead to rising standards of living has also proved partial and inadequate. The reforms associated with the Washington Consensus are necessary conditions for the improving economic performance, but not sufficient ones. The experience of Latin America over the past two decades suggests that improvements in state capacity, accountability, representation, and governance—or, more generally, the quality of institutions and the policymaking process—are important factors in achieving economic and social goals.

Or to put it another way, it was not the economic reforms of the Pinochet regime (the so-called first generation reforms) alone that explain Chile's ability to grow its economy while cutting poverty levels in half. Rather, it was the strength of its established political institutions—particularly high levels of transparency and acceptance of the rule of law, coupled with the ability of strong and disciplined parties able to forge enduring governing coalitions that generated and implemented public policies—that enabled the country to break the mold.

Thus, it is not that prosperity permitted democracy to flourish. Rather, it is the reverse—the quality of representative institutions, the rule of law, and democratic governance are important factors in creating the conditions for sustainable and equitable long-term growth. Latin America needs to address the severe challenges of poverty and inequality while becoming more competitive in a globalized economy. The strengthening and consolidation of democratic institutions and the rule of law is a vital part of that process.


National Intelligence Council, 2004, "Mapping the Global Future: Report of the National Intelligence Council's 2020 Project" (Washington).

Arturo Valenzuela is Professor of Government and Director of the Center for Latin American Studies at Georgetown University. He was Special Assistant to the President and Senior Director for Inter-American Affairs at the U.S. National Security Council during 1999–2000.