jueves, 15 de noviembre de 2007

A warning for reformers

The Latinobarómetro Poll
A warning for reformers

Nov 15th 2007
From The Economist print edition

Latin Americans expect more from the state and less from the market

DESPITE four years of solid economic growth and, in many countries, low inflation, Latin Americans continue to grumble about their democracies. In some countries in the region—though not in Brazil and Mexico, the two giants—they are becoming disillusioned with the market economy. But rather than socialism, they want a fairer distribution of income and a state that gives greater social protection. These are some of the conclusions suggested by the latest Latinobarómetro poll taken in 18 countries across the region and published exclusively by The Economist. Because the poll has been taken regularly since 1995, it tracks changes in public attitudes in the region.

The picture that emerges from this year's poll is somewhat contradictory. After a boost last year—probably the result of a dozen presidential elections in the region—support for democracy has fallen back slightly: only around half of respondents are convinced democrats (see table 1 and chart 2). In only five countries has support for democracy risen since last year: in Costa Rica and Panama, where popular social-democratic leaders are in office, and in Bolivia, Ecuador and Nicaragua, whose left-wing presidents, respectively Evo Morales, Rafael Correa and Daniel Ortega, represent constituencies who have previously felt excluded from power.

Apart from in two small Central American countries (El Salvador and Honduras), the biggest falls in support for democracy occurred in Argentina and Chile. That is odd, since both countries' economies are growing fast. In Argentina, some democrats may have become disillusioned by dynastic rule: a presidential election last month saw an easy victory for Cristina Fernández, the wife of the outgoing president, Néstor Kirchner. In Chile, Michelle Bachelet may have failed to meet the expectations of social change that she aroused when elected in 2006.

Fewer than a fifth of respondents favour authoritarian government. Support for authoritarianism has fallen in both Mexico and Brazil to 17%, down respectively from peaks of 35% (in 2001) and 25% (in 2000). In two poor countries, Guatemala and Paraguay, a small majority now favours authoritarianism—nowhere was that the case last year.

Paraguayans and Peruvians are the least satisfied with how their democracy works in practice (see chart 3). Overall, only 37% of respondents across all 18 countries pronounced themselves satisfied with their democracies, a similar figure to last year. But that is up from 25% in 2001.

Latin Americans are becoming similarly equivocal towards the market economy: this year's poll shows sharp falls of those responding affirmatively when asked whether this is the best economic model for their country (see chart 4).

Marta Lagos, the director of Latinobarómetro, says this reflects not just the persistence of poverty but also the impact of the “leftist discourse” of the likes of Hugo Chávez, Venezuela's president, against the United States and against the free-market formulae of the Washington Consensus. She adds that the poll does not show a demand for a fundamental change in the economic system but rather a desire for a more protective state.

Slightly over half of respondents across the region still favour the market economy. Private business is trusted slightly more than government. And support for privatisation continues to recover—though not in Argentina, where Mr Kirchner has preached in favour of nationalisation with a fervour similar to that of Mr Chávez (see chart 5). But many Latin Americans no longer seem to think that the market alone will bring them a fair share of the fruits of economic growth. Only 41% of respondents across the region think that governments guarantee equality of opportunity.
That is the main message for democratic reformers from the poll. Economic growth and democracy have improved the lives of many Latin Americans. But that in turn seems to have raised their expectations rather than making them more satisfied with the state of their nations. “After four years of growth people want to see that their slice of the cake is bigger,” says Ms Lagos.

Thanks to its bounteous oil revenues and Hugo Chávez's rapport with many of his country's poor, Venezuela stands out in the poll. Some 56% of respondents there said that the distribution of wealth in the country was fair, way above the regional average of 24%. Despite this, 63% of Venezuelan respondents said they had difficulties paying their bills each month, well above the regional average of 49%.

The poll finds that Mr Chávez is no more popular in Latin Americas as a whole than George Bush. He is considerably less popular than Brazil's Luiz Inácio Lula da Silva or Spain's king, Juan Carlos, and its prime minister, José Luis Rodríguez Zapatero (with both of whom Mr Chávez crossed words at a recent Ibero-American summit).

The poll shows that governments are steadily becoming more popular and many political institutions a bit less distrusted (see chart 6). One sign of better economic times is that fear of unemployment is falling steadily. For the first time, crime seems about to displace unemployment at the top of the list of problems in the region (see chart 7). If that trend continues, it could eventually see the region's political pendulum start to swing back towards the right after several years in which the left has been in the ascendant.

Latinobarómetro is a non-profit organisation based in Santiago, Chile, which has carried out regular surveys of opinions, attitudes and values in Latin America since 1995. The poll was taken by local opinion-research companies in 18 countries and involved 20,212 face-to-face interviews between September 7th and October 8th 2007. The average margin of error was 3%. Central America in chart 4 refers to an unweighted average of results from Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. Further details from www.latinobarometro.org.

viernes, 26 de octubre de 2007

Let them eat Kafka

Oct 25th 2007 | SANTIAGO
From The Economist print edition

The president enlists the literary critics

ASK Chileans what they are reading and the answer will probably be Isabel Allende's “La Suma de los Días”, a memoir by their country's best-known living writer. If, that is, they read anything at all: in a recent survey, 45% said they never read books and 34% did so only occasionally.

Michelle Bachelet, Chile's president, wants to change that. To do so, she has come up with a scheme to give 400,000 of the poorest families a maletín literario or box of up to nine books each. After much pencil-chewing, a jury of literati this month selected a list of 49 works, from which officials will then choose those books they think appropriate for each family (each will get an encyclopaedia and/or a dictionary).

The list comprises fiction and poetry for both adults and children. It ranges from Chile's Ms Allende and Pablo Neruda to J.D. Salinger's “The Catcher in the Rye” and Franz Kafka's “Metamorphosis”. This is unexceptionable fare. But is the book box the best way to achieve Ms Bachelet's laudable aim?

It could help. While some older Chileans lack functional literacy or were alienated by a rigid school syllabus, younger ones may be deterred from buying books by their price. This averages $14, higher than the Latin American average and the equivalent of two weeks of bus fares to and from work in Santiago. If books were cheaper, more Chileans would read them: pirated copies sell on pavements, while a lending library that operates on the Santiago metro has been a big success. With massive orders, the government could force big discounts from publishers.

But critics see the book box as a populist gesture. “It's like dropping bank notes out of the sky,” complains Verónica Abud of La Fuente, a charity that promotes reading. “Who says that a plumber in a poor district of Santiago will actually want to read Kafka?” For less than the estimated $11m cost of the book box, La Fuente has set up 60 libraries in schools and neighbourhoods. Since only 7% of Chileans belong to a library, there is scope for plenty more.

Commerce between friends and foes

From The Economist print edition

The United States may finally ratify a trade deal with Peru. But pan-American trade diplomacy remains a mess

IN HIS first term as Peru's president, in the 1980s, Alan García was a firm believer in protectionism, banning the import of foreign cars and even of Chilean wine. But since coming to office again last year he has embraced free trade with a passion bordering on mania. “More trade and more investment [means] less migration, less poverty and less environmental destruction,” he told a meeting in Lima last month convened by the World Trade Organisation (WTO). “You might resign yourself to just having a free-trade agreement with the United States, but for me it's not enough,” he told his audience, ordering his harried trade minister to secure similar deals with a score of other countries.

That Mr García was so pumped up was perhaps because at long last Peru's trade deal with the United States, negotiated 18 months ago, looks close to ratification by a hitherto reluctant American Congress. On September 27th the administration sent a bill to Congress after a majority of the House Ways and Means Committee and the Senate Finance Committee indicated they would back it. Though upsets are still possible, supporters reckon the bill will be approved within weeks. But for free-traders, that is cause for only the faintest cheer.

The benefits to Peru seem clear. Mr García, who when a candidate was sceptical of the deal, now says that it could add an additional percentage point to economic growth (which reached 8% last year). That is mainly because it provides investors with greater security. Peru's industrialists' association reckons that it could prompt an extra $9 billion in industrial investment in 2008 and 2009 alone.

Opponents worry that farmers, especially of maize, cotton and wheat, will struggle to compete with their subsidised counterparts in the United States. They also fret that American companies will try to take out patents on Amazonian plants.

Free-traders have other worries. A decade ago, the United States and 33 countries in Latin America and the Caribbean hoped to negotiate an all-embracing Free Trade Area of the Americas (FTAA). But the mood has changed. The Democrats, who won control of the American Congress last November, are mistrustful of trade agreements, reflecting widespread fears that globalisation has made jobs more insecure in the United States. Mercosur, the trade block led by Brazil, backed away from an FTAA in favour of the Doha round of WTO talks, but these have stalled too. All this comes as some governments in Latin America, led by Venezuela's Hugo Chávez, are turning their backs on open trade.

Others have negotiated bilateral free-trade agreements (FTAs) with the United States. But George Bush's administration has struggled to persuade Congress to ratify them: even before the Democrats took control, the Central American Free Trade Agreement (known as CAFTA-DR) passed by just two votes; as well as Peru, deals with Panama and Colombia (and South Korea) still await approval.

So Latin American politicians, such as Mr García, who see trade as an engine of growth, find themselves caught between American indifference and a resurgent, anti-trade left at home. When they negotiate bilateral FTAs, they are in a much weaker position than they would have been when gathered together in an FTAA.

Even so, the Democrats have insisted on changing the agreements. In May they struck a deal with the administration under which the FTAs would have to include clauses to strengthen labour rights and the environment (see article), while slightly loosening intellectual-property protection (giving more flexibility for generic medicines). The Democrats say this was the only way to restore bipartisan consensus on trade. Some economists note that since countries such as Peru already subscribe to many of these standards, in theory at least, their formal incorporation is no big deal.

Even so, only a minority of Democrats are likely to vote for any of the FTAs. Peter Hakim of the Inter-American Dialogue, a think-tank in Washington DC, reckons that at most about 70 of the 232 Democrats in the House of Representatives might vote for the Peru FTA. The agreement with Panama was supposed to be next in line. But the Bush administration has balked over the recent choice to head Panama's parliament of a politician whom it accuses of killing an American in 1992.

The FTA with Colombia faces even bigger obstacles. The Democratic leadership in the House has refused to back it, arguing that Colombia's government needs to do more to prevent the killing of trade unionists and to punish officials linked to right-wing paramilitaries. That was a slap in the face for Álvaro Uribe, Colombia's president, who has been Mr Bush's most loyal ally in Latin America. Colombian officials argue that their efforts to strengthen the rule of law in the face of violence from drug traffickers, guerrillas and former paramilitaries will be undermined by failure to approve an FTA.

This is a powerful point and an objection to the whole structure of trade agreements that is now evolving in Latin America. If the agreements with Peru and Panama are approved, the effect would be to divert trade and investment from Colombia. A recent study by EAFIT, a university in Medellín, and the University of Antioquia found that if the Colombia FTA is not approved and the others are, Colombia's GDP would be 2.2% smaller and 400,000 jobs would be lost.

Some Democrats, at least, recognise that this would be a perverse outcome. Mr Hakim reckons there is a chance the Colombia agreement could be ratified next year—but only if Mr Uribe's government takes further steps to protect trade unionists, and these are seen to be working.

The United States' hard-nosed approach to trade is winning few friends in Latin America. That may become apparent in Costa Rica, which is holding a referendum on October 7th on whether to ratify CAFTA-DR. Polls suggest the result will be close, but opponents appear to have momentum. They recently assembled more than 100,000 protestors in San José, the capital. Although Oscar Arias, the president, insists the accord is vital to his country's future, his government may have overplayed its hand. Last month one of his vice-presidents resigned after the leaking of a memo in which he advocated scare tactics such as painting opponents as allies of Mr Chávez. Some are—but others merely think CAFTA-DR a bad deal, especially in its intellectual-property clauses.

If the American Congress does ratify the pending FTAs, turning its back on CAFTA-DR could cause Costa Rica to lose jobs—a fate that may also await Bolivia and Ecuador. This whole mess underlines that bilateral deals are a third-best option after the Doha Round or the FTAA. But for those Latin American countries that are ambitious to expand their share of the biggest market for manufactured exports, they are the only game in town.

viernes, 12 de octubre de 2007

AIDS: Time to grow up

From The Economist print edition (see article)

“Abstinence only” education does not slow the spread of AIDS

THERE can be no surer way of averting a sexually transmitted infection such as AIDS than avoiding sex. That much is obvious. And it is also convenient for religious lobbyists who believe that premarital sex is a sin. But is it realistic? Those lobbyists argue that a popular alternative—known in the jargon as “abstinence-plus”—which recommends chastity but also explains how to use condoms, is likely to make things worse by encouraging earlier intercourse. “Abstinence-only” teaching, they reckon, should be more effective.

That, of course, is a possibility. But it is a testable possibility. And Kristen Underhill and her colleagues at the University of Oxford have, over the past few months, been testing it. Their conclusion is that it is wrong. Abstinence-only does not work. Abstinence-plus probably does.

Last month Dr Underhill published a review of 13 trials involving 16,000 young people in America. The trials compared the sexual behaviour of those given an abstinence-only education with that of those who were provided with no information at all or with whatever their schools normally taught. Pregnancies were as numerous in both groups. Sexually transmitted diseases were as widespread. The number of sexual partners was equally high and unprotected sex just as common.

Having thus discredited abstinence-only teaching, Dr Underhill and her colleagues decided to evaluate the slightly more complicated message of “abstinence-plus” using 39 trials that involved 38,000-odd young people from the United States, Canada and the Bahamas. Their results are published in the current issue of Public Library of Science Medicine.

This tuition—compared, as before, with whatever biology classes and playgrounds provide—reduced the number of pregnancies in three out of seven trials (the remaining four recorded no difference). Four out of 13 trials found that abstinence-plus-educated teenagers had fewer sexual partners, while the remainder showed no change. Fourteen studies reported that it increased condom use; 12 others reported no difference. Furthermore, in the vast majority of cases, abstinence-plus participants knew more about AIDS and HIV (the virus that causes the disease) than their peers did. And the tuition often reduced the frequency of anal sex (which brings a greater chance of passing on HIV than the vaginal option). In contrast to the fears of the protagonists of abstinence-only education, not one of the trials found that teenagers behaved in a riskier fashion in either the long or the short term after receiving abstinence-plus instruction.

Unfortunately (and surprisingly) only two of the studies addressed the question of disease transmission directly, and the numbers involved were too small to find a statistically significant difference between groups. Nevertheless, Dr Underhill's pair of reviews should make informative reading for policymakers. America's government earmarks money for abstinence-only teaching, which is matched by individual states. It should review that policy—which is clearly no better than the alternatives, and is probably worse. Its generosity to needy foreigners is similarly prescriptive. Of the $15 billion promised over five years by PEPFAR, President George Bush's personal anti-AIDS initiative, $1 billion is reserved for groups that intend to fight AIDS without mentioning condoms. Though Dr Underhill's results apply only to North America, they do suggest a need to investigate what happens elsewhere, in case PEPFAR's policy, too, needs to be reviewed.
A dose of prevention

Teaching people about what they might wear during intercourse is an important way of reducing the chance of them catching HIV. But teaching them, in addition, about what drugs they could take to reduce that risk may be added to the syllabus in the future. A vaccine is still a long way off, but four clinical trials—in Peru and Ecuador, Thailand, Botswana and also America—are assessing how well daily anti-retroviral pills, which are normally prescribed to control established HIV infections, prevent the virus infecting healthy people who do dangerous things. The results of these trials will be plugged into epidemiological computer models to assess the likely effect of various drug-distribution policies.

One model intended to do exactly that has already been built, by Ume Abbas and John Mellors of the University of Pittsburgh. It is designed to mimic a mature HIV epidemic in sub-Saharan Africa—which it did rather well when the researchers tested its output against data from Zambia, a country in which the epidemic has remained stable for a decade.

Writing in PLoS Medicine's sister journal, PLoS ONE, Dr Abbas and Dr Mellors describe what happened when they added prophylactic anti-retroviral drugs to the model. They experimented with different measures of drug efficacy and with different groups of people taking the pills.

Assuming that anti-retrovirals work 90% of the time and are taken by three-quarters of sexually active people, their model suggests that new HIV infections in sub-Saharan Africa would be cut by 74% over 10 years. Unfortunately, the idea of providing and delivering so many drugs to so many people is logistically implausible. And even if it could be done, it would cost about $6,000 per HIV infection averted—a lot of money in Africa.

However, giving the drug to the 16% of Africans who behave most riskily would be easier and could lead to a 29% reduction over a decade at only a tenth of that cost. A harsh calculation, but a realistic one—unlike expecting teenagers to give up sex because you tell them to.

domingo, 30 de septiembre de 2007

Fugitive returned

Sep 27th 2007 | LIMA
From The Economist print edition

A landmark extradition sees Alberto Fujimori facing justice

FOR much of his decade as president between 1990 and 2000, Peruvians saw Alberto Fujimori as a saviour. He conquered the hyperinflation bequeathed by his predecessor, Alan García, and restored growth. With Vladimiro Montesinos, his shadowy intelligence chief, he crushed the Maoist terrorists of the Shining Path and locked up their leader, Abimael Guzmán. Now the saviour has joined Messrs Montesinos and Guzmán behind bars.

There was always a dark side to Mr Fujimori. Though twice freely elected, he shut down his country's Congress in 1992 and used other strong-arm methods. He fled to Japan in 2000 after trying fraudulently to win a third, unconstitutional term. In November 2005 he flew to Chile, in an apparent bid to slip back into Peru and rally his supporters for last year's presidential election. There he was arrested at the Peruvian government's request.

In a decision hailed by human-rights campaigners, Chile's Supreme Court ruled on September 21st that Mr Fujimori should be extradited to Peru to face seven sets of charges. These include complicity in the actions of the Colina Group, an army death squad that killed 25 civilians in two separate incidents (one of them involved the slaughter of those attending a barbecue which the intelligence service believed was to raise funds for Shining Path). Most of the charges relate to corruption: the most sinister feature of Mr Fujimori's rule was the unlimited power granted to Mr Montesinos to bribe and extort on a scale that prosecutors say topped $1 billion.
>Mr Fujimori claims not to have known the doings of his spy chief. But Mr Montesinos, who has already been found guilty on several charges and is serving a 20-year jail sentence, will be a key figure in his trials. Mr Montesinos and several members of the army are still being tried for the actions of the Colina group.

The Fujimori case had the potential to strain Peru's relations with Chile, which while much improved are easily inflamed by hurt from defeat in 19th-century wars. But Chile's Supreme Court stuck to the letter of the country's law. In approving extradition while rejecting six of the charges, it mainly based itself on Chile's own penal code rather than on international norms.

Nevertheless, some lawyers see the verdict as a wider turning point. The court followed the ruling of Britain's House of Lords in the case of Chile's former dictator, Augusto Pinochet, in dismissing defence arguments that Mr Fujimori, as a former head of state, enjoyed immunity from criminal prosecution.

José Miguel Vivanco of Human Rights Watch, a New York-based group, points out that the Fujimori case marks the first time that a court has extradited a former head of state for trial in his own country, rather than by an international tribunal. In doing so, Chile's Supreme Court, one of the more formalistic and conservative in Latin America, has up-ended the region's long tradition of granting political asylum to former rulers. Under that tradition, Panama shelters several disgraced presidents, including Haiti's Raoul Cédras.

Another former Haitian dictator, Jean-Claude Duvalier, this week asked forgiveness of his country. Mr Duvalier, in exile in France since 1986, is believed to want to return home after running out of money. But the country's president, René Préval, said his government would press ahead with efforts to recover money he believed was stolen during Mr Duvalier's rule.

Mr Fujimori's case will be a test for Peru's judges and for Mr García who, in an irony of history, is again its president. The judiciary was undermined when Mr Fujimori appointed pliant judges in the 1990s. It has since taken steps towards greater professionalism. The defendant enjoys certain privileges: as a former head of state, he will be tried by the Supreme Court, and under international law he can be tried only for those matters on which the Chilean judges approved his extradition.

In 1992 Mr García himself sought asylum in Colombia, fearing corruption charges from Mr Fujimori (they were eventually dropped). Since winning last year's election, having campaigned as a free-marketeer, he has relied for a legislative majority on the backing of Mr Fujimori's supporters. They are now led by Mr Fujimori's daughter, Keiko, who won 603,000 votes in Lima, three times more than any other congressional candidate.

That alliance is now under strain. Mr Fujimori is being held at a police base, rather than under house arrest as he hoped. Mr García says his former adversary's fate should be decided strictly according to the law. Ms Fujimori, who is likely to run for the presidency in 2011, calls her father the victim of a vendetta.

In trying to return to Peru, Mr Fujimori seemed to hope that he would again be greeted as a saviour. But Peru has moved on: in polls, a majority say they would never vote for him. Ms Fujimori has some of her father's political talents, and Peru's politics is notoriously unpredictable. But rather than the return to the presidential palace he dreamed of, it may be Mr Fujimori's fate to join Mr Montesinos and Mr Guzmán in the high-security jail he himself ordered built in a naval fortress.

sábado, 22 de septiembre de 2007

Jam today, not mañana

Sep 20th 2007 | SANTIAGO
From The Economist print edition

Stronger democracies have brought demands for a share-out of economic growth. Two reports, the first from Chile, the next from Peru (see article)

DESPITE a transition to democracy and rapid economic growth, Chileans have grumbled a lot over the past 20 years—but only quietly. Many felt let down by the terms on which General Augusto Pinochet yielded power in 1990, which let him stay on as head of the army for eight years; but their complaints were muted by relief at the return of democracy. Many were also disappointed that the centre-left coalition, called the Concertación, which has governed since 1990, maintained the dictatorship's free-market policies; but that disappointment was tempered by the prosperity and improved services that these policies delivered.

The muted complaints have suddenly become louder. Last year, encouraged by the promise of Michelle Bachelet, Chile's president since March 2006, to lead a more “participatory” sort of democracy, secondary-school children took to the streets to demand better education in the biggest protests since the 1980s. With the price of copper, the main export, at record levels and the economy growing at 6% this year, workers are protesting too.

Until recently, strikes were relatively rare in Chile. Last year, however, miners at Escondida, the world's biggest copper mine, won a hefty increase after a month-long strike. This year has seen stoppages in the forestry industry and a 36-day strike by sub-contracted workers at Codelco, the state-owned copper producer.

“Workers see a country that is growing and companies that are doing well and they're tired of waiting,” explains Arturo Martínez, president of the Central Unitaria de Trabajadores (CUT), the main trade-union confederation. The unions point to Chile's unequal income distribution. A government survey last year found that almost 1m workers, or 15% of the total, were earning less than the legal minimum take-home pay of just over $200 a month.

With unemployment dropping sharply, wage demands are unsurprising. They are also being fanned by the Communist Party. It is aggrieved by the government's failure to act on a campaign promise to reform an electoral system, left in place by the dictatorship, which makes it almost impossible for small parties (such as itself) to win seats in Congress.

Trade-union leaders say the country is on the brink of social conflagration. Certainly, recent strikes have been unusually violent, as was a national day of protest called by the CUT, the Communist Party and others on August 29th. This gained the support of some Concertación politicians, who have taken to railing against their own government's “neoliberalism”. They object to a strict fiscal policy under which much of the windfall gain from the copper price is being saved for the future. (This will enable the government to spend its way out of any future recession.)

Rather than a big ideological shift, the discontent reflects a change in labour relations. Workers are more aware of their rights and want them respected, says a senior manager at Codelco. One matter of contention is sub-contracting. This has helped to keep exports competitive, but in some industries it has been used as a means of obtaining a low-wage workforce on short-term contracts.

A new law seeks to prevent the misuse of sub-contracting. Last month the government set up a committee to consider broader changes in labour laws. “We're not condemned to look at poverty and inequality and merely wait for growth and the trickle-down of wealth to take care of them,” said Ms Bachelet recently. The government also wants to set up special courts to settle worker grievances and to strengthen unemployment insurance.

Economic, political and social stability since 1990 has been crucial in attracting the investment, both local and foreign, that has secured rapid economic growth. As a result, Chile is a much richer country: income per head is almost $9,000, up from $2,400 in 1990. At this stage in its development, further capital investment and better education should raise productivity and thus wages, in a virtuous circle.

There is plenty of scope for improving productivity. The management of forests and plantations is five times more labour-intensive than it is in Scandinavia, for example. But improving education takes time. And as an alternative to capital investment, Chilean firms can import cheap labour from poorer neighbours, such as Peru and Bolivia, points out Rosanna Costa of Libertad y Desarrollo, a conservative think-tank. That is happening in low-paid jobs in construction and agriculture.

Chileans are throwing off the mental shackles imposed by the dictatorship. The process was accelerated by Pinochet's death last December. But political freedom has bred impatience for a fairer share-out of the fruits of growth. Ms Bachelet has proved less adept than her predecessors at serving up the Concertación's successful recipe of economic liberalism combined with redistributive social policies.

Even so, Chile seems unlikely to veer towards populism. Greater prosperity has brought mortgages and credit-card debts. These are “the new chains of the workers,” complains Mr Martínez. They are also a sign that most Chileans now have a stake in stability.

Revolt in the Andes

Sep 20th 2007 | LIMA
From The Economist print edition

A vote of sorts against big mines

MANY of the world's top mining companies have made big investments in Peru and are now ramping up output just when world prices for minerals are at record highs. The government has handed out concessions for exploration covering 12m hectares (45,000 square miles), which it hopes will trigger further investment of $11 billion over the next four years. The industry is booming, as is the economy. But in the Andean highlands that contain the mineral deposits, some Peruvians are turning against the mining companies.

The latest battle is at Rio Blanco, a remote spot close to the border with Ecuador where the Andes meet the Amazon, forming a misty cloud forest. Monterrico Metals, a London-based start-up recently sold to China's Zijin Consortium, plans to develop a huge copper mine there, costing $1.4 billion. Urged on by a loose coalition of environmentalists, Catholic priests and foreign NGOs, local mayors have campaigned against the project. On September 16th they held an unofficial referendum in the three affected districts. Of the 17,971 votes cast (a turnout of almost 60%, said the organisers), all but 984 voted against the mine.

Opponents say the mine would pollute rivers that are vital for farmers in fertile valleys lower down and accuse the company of ignoring local opinion. More broadly, they argue that mining has failed to develop the highlands. President Alan García's government denounced the referendum as unrepresentative and claimed its organisers were “communists”.

At Rio Blanco genuine fears and grievances have been mixed with much misinformation and political manipulation, a familiar pattern in Peru. The local mayors say they now want talks on the project. Richard Ralph, Monterrico's chairman, welcomes this as a chance “to dispel some of the myths about a mine that hasn't even been built”. He says that the project will use clean, modern mining technology and very little water, which it will not pollute. The company has promised the few thousand villagers who live close to the mine a community-development fund of $80m over the next three decades.

Monterrico hopes that work on the mine can still start next year, after an environmental-impact study is completed. Other mining companies in Peru will be watching closely. In recent years the industry has tried to clean up its image. But it labours under a legacy of poor environmental practice (some of it when the big mines were state-owned in the 1970s and 1980s). Conflicts between farmers and miners over water use are particularly common.

Modern mines may be much cleaner but they are capital-intensive and generate relatively few jobs. Some economists argue that mines could do more to boost surrounding areas by using local suppliers: one study found that in northern Chile each mining job generates seven others, while the figure in Peru may be lower.

In response to the protests, mining companies are spending more on community development. Half of their income taxes are also returned as local royalties. But local governments often make a bad job of spending this money. And in Apurímac, one of Peru's poorest regions, the national government has rejected all the projects proposed by local communities that would draw on a $40m fund set up by Xstrata, a Swiss firm developing a copper deposit at Las Bambas.

“Mining companies are making huge sums of money right now, but...the average person living near a mine does not see any benefits,” complains Victor Madariaga, who heads the chambers of commerce in southern Peru. In Cajamarca, the site of Yanacocha, a big gold mine, six out of ten residents are still poor (though that figure is lower than a decade ago and includes areas far away from the mine).

Others argue that by focusing on mining's impact on the local economy, the critics miss the point. Mining provides much of Peru's foreign exchange and tax revenues. Some Peruvians argue that more of the windfall from high prices should be taxed: mining's total tax bill was around $2.9 billion last year on net profits of some $7.3 billion, according to the mining society. Taxes have been edging up: the previous government imposed a royalty of up to 3% on new projects; Mr García negotiated a further “voluntary contribution” of 3% of the industry's after-tax profits (raising some $175m this year).

With or without mining, parts of the Andes will remain poor. But with it, Peru's economy can continue to grow fast. For that, the government will have to do more to engineer a modus vivendi. It is looking at reining in labour sub-contracting in the industry. But it has yet to take what is perhaps the most important step: remove environmental regulation of the industry from the mining ministry and vest it in a specialist environmental agency. The future of mining in Peru depends on the government acting as an effective referee. The days when mines could ride roughshod over the locals are well and truly over.

domingo, 2 de septiembre de 2007

Neoliberalism: Santiago Calling

It is time to turn neoliberalism up a notch, not down. And the government should stay out

Last week in my beloved hometown, Santiago de Chile, a street protest was staged against the neoliberal model. Check out the report under the bombastic title Chileans take to streets in anger at regime.

The regime is a term used chiefly to describe oppressive and unelected governments. Chile, on the contrary, is ruled by a woman who won by a devastating majority in fair and free elections. However, the state of things has turned nasty thanks to Ms Bachelet's own strategy: she opened the floodgates criticising the neoliberal model. Now some Chileas demand her promises to be delivered. Obviously, president Bachelet knows very well that the economic system works fine. Poverty has decreased. The gap between rich and poor persists due to poor education and uncontrollable fertility rates at the lowest end of the social ladder. Some sections of the opinionated class insist we need a change of the economic course. I cannot help but thinking it’s the society, stupid.

The paradox here is that Chilean president is a lefty-cum-neoliberal, but the result is neither social liberties nor sound free-market policies. The public has been told too often and for too long that the problem is the economy, legacy of the dictatorship and the excuse was that democratic governments were unable to change it out of fear of the reaction by the conservative forces. However, the left now is majority in both chambers of Congress. The president is a left-winger. The electorate is on her side. There are no elections coming up so no need for populism. She is doing nothing simply because on her campaign she lied to everyone, and people are now showing their dissatisfaction. In other words, the electorate woke up to reality.

There is no alternative
In fact, the government should perfect the free-market model and not give in to populism. In Latin America, we have had enough of populism and neo-populism. Neoliberalism is not the root of all evil. Hardly two decades of sound market principles have been applied in Chile, and now poverty is about to be abolished. What do the union workers want then? They simply long for old-school socialism, a system exhausted and proved not only immoral but brutally wrong. People want the state to intervene, but that is actually dangerous. The economy should keep growing to make more people, especially the poor, join the job market. That is why the populist minimum wage should be scrapped altogether: let the market mechanisms work its magic. Trade Unions' main concern is the low wages (£200 per month). I do not understand why then this coalition approved an increase toVAT two years ago, and insist on protectionists barriers to imports of such importance as grains and milk. Prices for diary products and bread have sky-rocketed. The poor have been hit the hardest, and no wonder they complain when their wee salaries are used to subsidise the landownser. An increase in salaries may affect them as a result of higher internal consumption and inflation.

Another problem is Chileans low productivity. Workers tend to be lazy and the job market is not flexible enough. And the icing on the cake is the shambolic transport system in Santiago, and only the government can be blamed for it. Workers find themselves commuting endless hours. There was a faulty transport system before, but it did the job of getting people to their work places, and it was based on freedom to set up new bus routes giving the chance to small entrepreneurs to offer their services. The left coallition decided to change over to a centrally planned system, and in a pompous tone ex President Lagos announced only Stockholm would rival Santiago. It turned out a bloody mess and the Bachelet administration only intensified the problem. Indictments are already underway. Transport has been a major components in Bachelet's underperforming government. People seem to target the economy rather than the ruler of the country. People are wrong.

The gap between rich and poor is less a concern than the gap between society and the economy, the latter is way ahead of the former. Chileans remain deeply Catholic, hence their weak work ethics. Independece Day in Chile means two Bank Holidays in mid-september, and now one more has been added: a week of productivity will be lost this month. They wonder why the economy is not doing any better? Because they do not work enough, perhaps?

On the demographics of Chile, Roman Catholic idiosyncratic vices explain a lot. Sexual oppression leading to teenage pregnancy in the less educated has an impact in the high crime rates, and scores of workers on minimum wage have too many children. If you think that £200 is too low, fair enough. I agree, even. But why would you have three or four children then? The powerful Roman Catholic church opposes all sorts of contraceptive methods and cheers when people breed like rabbits. Let alone legalisation of abortion, which is a taboo in Chile, and anyone suggesting switching back-street abortions to safe hospitals can expect to be labeled, at best, a criminal. (In that case I am a hell of a criminal: legalise abortion now!)

Suffice to say that the protests were fuelled by a Chilean bishop who demanded a 60% hike in the minimum wage and made an appeal to pay an ethic salary, whatever that is. Now with god standing by them, do not expect workers to give up easily.

History repeats itself
We went through this once. See And if it means civil war, so be it, from Time magazine, 10 of setpember 1973 (also here in my Spanish site). At that time, workers took over companies and the whole country was brought down to its knees. The outcome was more that three thousands deaths in 17 years of dictatorship. It is in the government's interest to curb the unions... now!

It is true, this is not as bad as in the 70s. Chile now is stable, inflation under control, food supplies are there, only a bit expensive, but there is no need to queue for hours to buy them. I have to insist and remark that poverty is decreasing. The protests also gathered a few thousands, less than expected, and they only made headlines because of the riots.

The reality is that this government lied, like all their predecessors. Things are not great, but Chileans have never had it so good. How to build up a more meritocratic society is the real challenge. Let’s hope that next time, the left-wing candidate will not run on a free-market bashing ticket. Workers should get over it, and put this down as a lesson: next time, just do not vote for them again.

I recommend the opinion article published in The Guardian How the neoliberals stitched up the wealth of nations for themselves and and the letters about it on Santiago sends a message to the City.

lunes, 27 de agosto de 2007

Latin American Axis of Evil

George W Bush's infamous axis of evil is quite a paradox. Certainly, Irak, Iran and North Korea are not beacons of democracy and individual freedom. In that sense, Bush was right. The fundamental contradiction is that American heavy-handed foreign policy has exacerbated the problem, being Bush himself an active part of an axis of evil. We could regard the Bush Administration, the Religious Right, the Republican Party and Fox News (we report, you decide) as a pivotal devilish and corrosive force.

During the cold-war years, Latin Americans experienced the constant political intervention by the URSS and the US, flaring up conflicts and armed struggles in every single country. It is not fair to put all the blame on the US alone. Soviet communism was equally pervasive. But the cold war is over. Former fledgling democratic projects have stregthened. State-owned companies are being privatised and, more importantly, the electorate seem to understand why it is better to pay for a service rather than expect fiscal support (and Central Banks stopped issuing crisps bank notes displaying astronomical figures). In other words, Latin Americans learned that there is no such thing as a free lunch.

Even more interesting, most left-wingers are coming to terms with the benefits of free market. The results are evident, as reported in Adiós to poverty, hola to consumption by The Economist Newspaper. The graphic below is eloquent.

For once, governments are keeping the lid on inflation and are less worried about job creation. Fiscally-conservative and free-market policies are finally paying off. I cannot help but saying 'I told you so'. Back in the mid-80s, Chileans complained over privatisaton of telephone services. A couple of years later, every one could have one: it was not a prerogative of the rich anymore. Same with electricity, and most public services. At the time, a few of us thought it was the right thing to do. But we were thought to be fascsists at worse, and not having social conscience at best. Perhaps the latter is true. Social conscience, and everything social, has a bad ring to it, and for a very simple reason: on behalf of the people all sorts of atrocities are committed, and even justified. It is a lot harder to excuse bad policies in the name of individual freedom than for the people (see article on Chile).

Less than two decades later, we find that the left is in charge, but ruling under a new economic framework. I cannot help but remark that more often than not, these new breed of free-market leftists are only paying lip service to the market economy. Michelle Bachelet, Chile's president, epitomises this anomaly. One of yesterday's free-marketeers main achievement, the Chielan private pensions system (AFP), now —according to the government— needs to be transferred back to the state. The source of Chile's main income, cooper-mining, is seen by most as a very efficient state-owned company... what an oxymoronic statment. Not even General Pinochet himself wanted to privatise it. After all, a genuine free economy is dreaded by the right and also the left.

Today, most voters seem to get the virtuosity of free-market mechanisms. But only few are willing to apply them. But others have come up with idiotic ideas such as 21st-century socialism. This is not only the new awkward squad, insetad they are Latin America's Axis of Evil.

The Devil Inside: Chávez, Castro, Morales... and counting
We have all heard of the antics of Venezuelan president Hugo Chavez (remember that great spiritual clown Pat Robertson who called to assassinate Chavez?). Sadly, there is yet a lot to hear from him. He is not only a friend at personal and government level with the rulers of Iran, Russia, Libya and even North Korea. Oil companies are again back in the hands of bureaucrats. Extravagant speeches are every day broadcast through the governemnt-controlled media. He has tweaked the country's constution to appointing himself a president for life. And all this is done not only in the name of the Bolivarian Revolution (whatever that is), but on behalf of the people. I wonder if you can ever shut down a TV station on behalf of individual freedom.

Chávez is not alone. In Bolivia, Evo Morales is the president of Latin America's poorest country, which means that it is a really really poor country. Instead of opening up its underperforming economy for the much needed foreign direct investment, he insists on state-controlled developments for the country's huge hydrocarbons reservoirs. The results is bolivians sitting on the world's largest natural gas reserves unable to translate all that into wealth, whilst their Chileans neighbours do not have energy supplies to meet the needs of its fast-growing economy. Bolivia's aversion to foreign capital is fuelled by the socialist speech of president Morales, another self-styled defender of the people.

The third member of the Latin Axis of Evil is Cuba. The vicious man who has been in charge of the Cuba over the last four decades took office, also, on behalf of the people in order to stop the island being the brothel of America. Ironically, today's Cuban women do not charge money in exchange for sexual services. Now they need soap, shampoo and shoes. Let's not forget that Morales and Chávez are admirers of the Cuban model. Apparently, they have found the way to upgrade the old-school socialism to answer the challenges of the new centuries.

Someone has got to stop this madness. The continent is waking up to a new reality and we have a lot of catching up to do. Schools need to be fixed, and the best way is by adopting the school vouchers. Rotten and useless ministries of education are part of the problem, not the solution. We must shut them down. Universities need academic excellence: they also have to be fully privatised. Let people educate themselves, and they will learn to choose better rulers.

We'll Get By With a Little Help from our American Friends
The free-market principles were introduced to the continent via Chile, where a number of American-educated economists applied the teachings of liberal-economics policies taught mainly at the University of Chicago. There were massive blunders, but the errors were outwighed by the positive results. Latin America now needs more free exchange of ideas, capitals and free movement of people. More free-market agreements and more technological transfer. More hispanic professionals should be offered the chance of development in the US, and universities have to deepen their exhange programmes. It benefits all parties involved. And the result will be the defeat of populism.

Destitute no more


Aug 16th 2007 SANTIAGO
From The Economist print edition

A country that pioneered reform comes close to abolishing poverty

ON ONE of the coldest days in an unusually cold southern-hemisphere winter, Sara Reyes's house is warm. Ms Reyes is sewing the clothes that for the past 18 months have allowed her to support her two children and a nephew, and sometimes to employ a sister and two neighbours. Previously jobless, she obtained her first sewing machine—she now has three—from Chile Solidario, a government programme launched in 2002 to tackle extreme poverty.

Her neighbourhood was once one of the biggest and poorest shanty towns in Santiago, Chile's capital. Over the past ten years, the roads have been paved and piped water installed. Most people now have fridges and telephones and some have cars. “Defeating material poverty is a mission well on the way to being fulfilled in Chile,” says Benito Baranda of Hogar de Cristo, a charity. Its shelters now cater less for the destitute than for people with drug or psychiatric problems. Around 500,000 people still suffer extreme poverty, but that number is down by a third since 2003.

Poverty has fallen further, faster, in Chile than anywhere else in Latin America (see chart). Sustained economic growth and job creation since the mid-1980s are the main explanation, though it helps that poorer Chileans are having fewer children than in the past. In recent years public policies, such as Chile Solidario, have played a bigger role. In the 1990s poverty dropped by half a percentage point for each point of economic growth, but now it falls by one-and-a-half points, according to Clarisa Hardy, the planning minister.

Chile Solidario aims to help the poorest support themselves, by ensuring they take up various social benefits and keep their children healthy and at school, and by offering training and a grant to set up a small business. It is too soon to tell whether it will be a long-term success: the first of 250,000 very poor families enrolled in the scheme are only just graduating from it. Even so, Chile has a chance of all but abolishing poverty in the next few years.

Some Chileans argue that the national poverty line, of $90 a month, is set too low. In Santiago this buys just four bus fares a day. Income distribution in Chile is becoming slightly less unequal. The richest tenth of the population still take 38.6% of national income, though this is slightly less than they take in the United States. Using the relative yardstick favoured in many European countries, 27% of Chileans would be poor, according to Juan Carlos Feres of the UN Economic Commission for Latin America and the Caribbean.

The fact that alternative ways of measuring poverty are now being discussed is a sign of how far Chile has come in the past two decades. It is also an indication of the tasks that still lie ahead in creating a middle-class society.

Adiós to poverty, hola to consumption

Latin America's middle class

From The Economist print edition

Faster growth, low inflation, expanding credit and liberal trade are helping to create a new middle class

MONTANHÃO takes its name from what it used to be not long ago: a rubbish dump. On the southern extremity of São Bernardo do Campo, a suburb of São Paulo, Montanhão's houses of brick and breeze-block straggle over abrupt hills next to a reservoir. With more than 110,000 people, it is one of the few districts in Brazil's biggest city where the population is still growing fast. It is also one of the poorest. But it is not nearly as poor as it was only a decade ago.

Its winding main street bustles with building-materials depots, gift and clothes shops, restaurants and several small supermarkets. One, called Dia, is part of a discount chain owned by France's Carrefour. Its closest competitor is Mercado Gonçalves, whose owner, Afonso Gonçalves, is a former street-vendor and factory electrician. Since 1997 his little shop has expanded more than fourfold to 480 square metres (5,200 square feet). It sells more than 10,000 separate items, from Nescafé and Colgate toothpaste to fresh meat, freshly baked bread and, locked in a glass case, imported whisky. According to Mr Gonçalves, “A lot of people here are very poor, but a lot are becoming middle class.”

Life in places like Montanhão is still tough. Raw sewage runs in a stream not far from the supermarket. Up on the hillsides, amid a host of evangelical Protestant churches, a few houses are still made of wood. Crime is a big problem. Dora Jozina de Arruda, a young woman who runs a small kiosk on the main street selling sweets and grinding keys, says that she has been robbed twice and wants to move to a quieter neighbourhood. Some residents have clubbed together to pay private security guards to keep drug-traffickers away.

But signs of progress are all around. New tower-blocks, of the kind ubiquitous in the smarter parts of São Paulo, now jut up from among the houses of what still resembles a favela, or shantytown. Public services are improving fast: nearly everyone has electricity, piped water and sewerage. Smart new school buses run by the municipal government ply up and down the hillsides. And the mood of optimism is palpable. “Each year has been better than the last,” says Mrs Jozina de Arruda. Between the profit from the kiosk and her husband's wages as a security guard at a bank, they earn $900-1,200 a month.

They are members of a new middle class that is emerging almost overnight across Brazil and much of Latin America. Tens of millions of such people are the main beneficiaries of the region's hard-won economic stability and recent economic growth. Having left poverty behind, their incipient prosperity is driving the rapid growth of a mass consumer market in a region long notorious for the searing contrast between a small privileged elite and a poor majority. Their advent also promises to transform the region's politics.

From the market, not the state
While poverty is measurable, the word “middle-class” is subjective. The kind of people who call themselves middle-class in Latin America tend to be at the top of the scale: prosperous professionals with several servants, children at private schools and holidays in Europe or Miami. From the 1940s to the 1970s, state-led industrialisation and the growth of public employment saw the rise in some Latin American countries of a middle class of managers, bureaucrats and a labour aristocracy of skilled workers. But the policies that pushed them up proved unsustainable; they were abandoned after the 1982 debt crisis, which triggered a decade of mediocre growth and high inflation (see chart 1). Since then, partly because protected industries were subjected to privatisation and import competition, this group has struggled. Marcio Pochmann, an economist at the University of Campinas, reckons that in Brazil 7m people dropped out of the middle class after 1980 (although 3m moved into the upper class).

The middle class that is emerging now is very different. It is more accurately described as a lower-middle class. Fernando Henrique Cardoso, a former president of Brazil who is also a sociologist, points out that this class is related more to the market than the state. Many of its members have small businesses, like Mr Gonçalves. Others act as consultants to larger concerns. José Roberto Mendonça de Barros, an economist in São Paulo, points to a plethora of small service companies which advise large Brazilian farms on computing and biotechnology. The difference is summed up by the changes in São Bernardo do Campo. A generation ago it was the heart of Brazil's car industry, where Luiz Inácio Lula da Silva, the country's president, once led the metalworkers union in strikes. Today the car factories have shrunk or moved away, and São Bernardo lives mainly from services.

In Mexico, argues Jorge Castañeda, a political scientist, some of the new middle class come from the informal economy, others from new industries or service businesses. The class is less concentrated in Mexico City and is rougher-edged, culturally and socially, as well as darker-skinned, shorter and more Mexican-looking than its predecessor, he says.

These trends are furthest advanced in Chile (see article). But they are most dramatic in Brazil and Mexico, which between them account for more than half of Latin America's 560m people. In Brazil between 2000 and 2005 the number of households with an annual income of $5,900 to $22,000 grew by half, from 14.5m to 22.3m, while those receiving less than $3,000 a year fell sharply to just 1.3m (see chart 2). In Mexico, according to Alejandro Hope of GEA, a consultancy in Mexico City, the number of families with a monthly income of between $600 and $1,600 has increased from 5.7m in 1996 to 10.7m in 2006.

Something similar is starting to happen in Colombia and Peru. In Argentina the decline of what had been a predominantly middle-class country until the 1970s reached its nadir in the economic collapse of 2001-02, when a majority of Argentines fell below the poverty line. But a rapid economic recovery has been mirrored in a revival of the middle class. Ernesto Kritz, a labour economist in Buenos Aires, reckons that around 40% of Argentine families, up from 20% in 2003, have the monthly income of $1,000 that he sees as necessary for a middle-class lifestyle.

In Latin America as a whole, according to calculations by Banco Santander, a Spanish bank, some 15m households ceased to be poor between 2002 and 2006. If the trend continues, by 2010 a small majority in the region will have joined the middle class, with annual incomes above $12,090 in purchasing-power-parity terms (see chart 3). In Mexico some 15m out of 27m households could have middle-class incomes by 2012, reckons Mr Hope.

The sociology of growth
Several factors lie behind these trends. The first is that, since 2004, the region's economies have grown at an annual average rate of 5%. That is not spectacular, but it is not bad (the population is growing at only around 1.4% a year). And the growth is having a bigger social impact than in the past.

In the early 1990s Latin America saw a burst of growth driven by an inflow of capital and accompanied by overvalued exchange rates. This combination tended to boost the relative price of non-tradable services, and the incomes of those in the informal economy. This period is different, says Guillermo Perry, the World Bank's chief economist for Latin America. Exports are booming, partly because of high prices for Latin America's raw materials. But the export growth also follows a round of devaluations and two decades of market-opening economic reform.

This time the growth is generating more jobs in the formal sector. In Mexico the economy grew by 4.8% last year and created 900,000 new jobs—in line with the growth of the labour force. In Brazil, too, the proportion of the labour force employed informally is starting to shrink.

Another new element is innovative social policies. In both Mexico and Brazil, one family in five now receives a small monthly stipend from the government, provided they keep their children in school and take them for health checks. Lastly, in some countries remittances from Latin Americans who have migrated help their poorer families back home.

The result is that in both Brazil and Mexico the incomes of the poorest half of the population are growing faster than the average. In both countries poverty is falling steadily, and income distribution is becoming less unequal. In Mexico, although growth has been only moderate, poverty, defined as income insufficient to feed a family, fell from 37% to 14% over the decade to 2006.

The figures collated by the UN Economic Commission for Latin America and the Caribbean may understate the regional fall in poverty, since they rely on respondents answering truthfully when asked about their income. Consumption may be a better guide. The other crucial factor that is changing Latin America is low inflation, achieved because most governments have abjured deficit spending and because trade liberalisation has made many goods cheaper. Low inflation benefits the poor more than the rich, who can find ways to protect the value of their incomes. And as interest rates have fallen credit has returned. Credit is still much scarcer than in developed countries, but it is growing fast: in Brazil, for example, the stock of credit has risen to 32% of GDP from 21% in 2002.

It typically starts with consumer loans for cars and durable goods, and moves on to mortgages. In Mexico the value of new mortgages has been growing by around 35% a year. That in turn has stimulated a boom in the building of new housing projects for lower-middle-class families.

Cars, jeans and pampered pets
Sales of new cars, computers and consumer electronics in both Brazil and Mexico are at record levels. Much of the extra demand has come from the new middle class. A study in 2005 of low-income families in four former favelas in São Paulo by the Fernand Braudel Institute, a think-tank in the city, found that all the households surveyed had refrigerators and colour televisions (often more than one), nearly half had mobile phones, 30% had DVD players and 29% owned a car.

Tracy Francis of the São Paulo office of McKinsey, a management consultancy, points out that social classes D to B2 (those with annual incomes from $3,000-22,000) were responsible for 69% of total consumption in Brazil in 2005, up from 51% ten years earlier. The average woman in these social classes has 13 pairs of jeans in her wardrobe, she claims.

They spend on pets, too. “Nowadays people treat their dogs and cats as if they were upper-middle-class: they feed them pet food and take them to the vet,” says Mr Gonçalves. They are also taking to the air for the first time. One cause of the recent problems in Brazil's airline industry has been its rapid growth. In Mexico, Mr Castañeda cites a survey by a new low-cost airline last year which found that 47% of its passengers had never flown before.

All these positive trends are recent and remain fragile. Mr Mendonça de Barros notes that in Brazil, until very recently, a university graduate could expect to earn less than 2,000 reais a month in his first job—roughly the same wage as a bus driver. Many of those who have clawed their way out of poverty could be knocked back down again if there were a repeat of the financial collapses the region suffered in the 1980s and 1990s.

The new middle classes have more schooling than their parents; some have gone to mushrooming private universities. But they are less educated than the old middle class that benefited from elitist public universities—and that makes moving into the upper-middle class hard.

Nevertheless, the direction of change is clear. “We are going faster towards a middle-class society than we could have imagined 20 years ago,” says Mr Cardoso. “My bet is that you're crossing the threshold.”

If so, this carries big implications for politics in the region. Mr Hope finds a close correlation in Mexico between home ownership and support for the ruling centre-right National Action Party. The old middle class believed in state protection. The new middle class is more self-reliant. Above all, it has benefited from economic stability. Since it has much to lose from political adventurism, it could become a force for political stability as well.

sábado, 25 de agosto de 2007


Dear reader,

Welcome to my blog. A civilised society should pursue the welfare of each one of its members, and the most efficient way to do so is by providing the maximum individual freedom for everyone, so that we can all do and choose what is best for us. Building up a free society means individual freedom should never be vulnerated. Ever.

In Latin America this is a far cry from reality. In this continent the name of the game is populism, socialism, clericalism. Someone has to stand up and say No More.

That is why I have set up this blog. Let the fight begin. From Latin America to the world: ¡viva el liberalismo!