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Global Latin America

Into The Twenty-First Century

UNIVERSITY OF CALIFORNIA PRESS

Looking at the Past and the Future without Fear

AN INTERVIEW WITH RICARDO LAGOS

Matthew Gutmann

How has Latin America had a significant impact around the world, economically, politically, culturally?

Ricardo Lagos: The most important contributions of Latin America to the world have not necessarily been in the social sciences but instead in literature, in painting, in music, perhaps even in the kitchen. From Mexican tacos distributed throughout the United States to the most sophisticated, contemporary Peruvian cuisine, right? What I mean is that, as Carlos Fuentes liked to say and Mario Vargas Llosa says, too, the intellectual and cultural worlds have played a larger role in making Latin America what it is than its politicians have.

However, I would say that, despite this, Latin America has undergone a learning process. And we have learned, first, that many of the theories taught abroad have to pass through the sieve of our own reality. Beginning with John Maynard Keynes's General Theory of Employment, Interest and Money (1936) — Keynes called his theory "general," although it was only general for countries like those in which Keynes lived and not for the rest of the world. Second, in many cases when these theories pass through the sieve of our own reality they become, instead of a general theory, one that is particular to the developed world. It has been hard for us to understand this because, in many instances, we want to mechanically apply ideas from the social sciences. If one tries to mechanically apply Max Weber, we find that Weber was thinking about a German reality that is very different from our own.

Then what can the rest of the world learn from the process that Latin America has gone through in understanding and applying external theories?

From the economic perspective, two interesting phenomena occurred.

First, the phenomenon of the transition from dictatorships to democracies, although even in democracy we have learned that if there aren't sensible macroeconomic policies in place, then the economy will give us a hard time. I have always said that the most important thing about Alfonsín [Raúl Alfonsín, president of Argentina, 1983-89] — who was undoubtedly one of the most respected democrats because he was able reestablish democracy in Argentina — is that his government suffered from poor economic management, which obliged him to end his presidency six months early. The result was that we began to take macroeconomics much more seriously. And if you think about it carefully, although the Washington Consensus was in fashion at the time, we also learned that the Washington Consensus only mentioned us in relation to the "trickle down" effect and the need for public policies. It was one thing to implement solid macroeconomic policies, but it was also important to understand that the Washington Consensus was not useful in helping us improve the social situation of our people.

That said, it is also important to note that because we had the Tequila Crisis, the currency depreciation crisis in Brazil, the currency depreciation crisis in Argentina after Carlos Menem [president, 1989-99] — each of these crises caused a regional crisis — and we had so many crises that we learned the importance of having an effective financial system. Perhaps this explains why our financial systems were able to resist the 2008 financial crisis. I don't know if this means that we were able to teach the world something, it's just to say that we had learned from previous crises how to execute the necessary tasks in the new one.

And today we can say that we didn't cause this crisis. We can declare ourselves innocent of this, the biggest of all the crises. Also, as a result of previous crises — and this is an advertisement — we learned how to implement countercyclical policies. We learned that if we Latin Americans have to depend on soya prices, petrol prices, copper prices, and other commodities whose prices fluctuate greatly, there was also another possibility. The possibility to have the so-called structural surplus budget. By this I mean that the fiscal budget should use structural determinants of income, like taxes, as a fraction of potential GDP [gross domestic product] established by an independent technical committee. These policies mean that when commodity prices are low, we spend as though the cost were the long-term cost, which is much higher. However, when the price is very high we spend less because the long-term price is lower.

In Chile, we applied these policies in 2000, 2001, and 2002, when the price of copper was only 60 cents per pound but we used the price of 89 cents. When this same pound of copper reached a price of $3.00, we could spend as though it cost $1.19, both established by the Committee. And why am I telling you this? Because when the 2008 crisis came along, the Chilean government had savings of about 40, 50 percent of our yearly GDP, and we could therefore implement countercyclical policies and spend more. We spent 4 percent of GDP supporting the neediest sectors, simply withdrawing from our savings; we didn't have to ask for financial support from anywhere else.

And these savings were not the result of the Chicago Boys either?

Right, because it wasn't the Chicago Boys who implemented them. So, we have to talk about the Chicago Boys, who dominated the scene especially during the dictatorship [1973–90] when it was relatively easy to justify their policies. When you explain their policies, when you decide to open your economy as we did in Chile, for example, and you go from 170,000 textile workers to 30,000, well that has an enormous impact from the perspective of employment, and one that happens in less than a year, in the 1980s. So, I would say that our policies were part Washington Consensus and part of the reestablishment of democracy, which is when we realized that many aspects of the Washington Consensus were just common sense. However, there were assumptions that were not common sense and did not work.

For example, even if the trickle-down effect existed, it was in the very long term and was therefore not compatible with our immediate problems. Now, what we did learn was how to create well-targeted social policies, although in those years the International Monetary Fund and the World Bank did not like these words. In 1990, as minister of education, I realized that in the majority of schools along the coast there were only girls or very few boys above the age of fourteen, because the boys went to work with their fathers in the boats. However, in other parts of Chile, such as the Valle Central, I encountered schools where there were only boys because all the girls over fifteen went with their mothers to harvest fruit.

There wasn't anywhere for them to work. So, based on these experiences, I said, "Why don't we create a program for people who are extremely poor? We will offer a grant that will allow parents to support themselves a bit better so that children won't have to go fishing with their fathers or harvesting with their mothers." This experience — "grant" is a big word for such a small amount of money, but it was enough to incentivize parents to keep their children in school. Later, in 1993, Cardoso [Fernando Henrique Cardoso, president of Brazil, 1995–2003] named Paulo Renato de Souza as his minister of education, and Paulo Renato asked me, "What can I learn from Chile?" And I told him about this experience. That was the origin of Brazil's Bolsa Escola program. Bolsa Escola then spread to other countries.

Another example is when we decided that to address the issue of extreme poverty we would create a program called Chile Solidario, where we would work with the poor to teach them their rights. Through this experience we discovered that it is one thing to say that we are going to create laws to protect the rights of the poor and quite another that the poor understand that there are laws that work in their favor.

Has this been a model outside of Latin America as well?

Chile Solidario? I would say yes, through the World Bank, which decided to disseminate the model. It is funny: the World Bank told me they wanted to celebrate, in quotation marks, the ten-year anniversary of Chile Solidario at a large forum that did take place at the World Bank. Simply because they understood that it had been a really worthwhile program. Now, why had it been worthwhile? When you are president and you issue an invitation to the presidential palace, everyone comes. And there were people from the Right, from the Left, and I said, "Gentlemen, we know who the poor are in Chile, we know where they live, so what do we do to end poverty?" Some said, "Send them a check," others said, "Send them social workers," and it was a big debate. In the end, I decided that sending a check would be insulting to people's dignity; it wasn't just about clientelism, it was about people's dignity, so we chose the social workers. We chose a different way of working.

The result: a social worker would visit each family and tell them, "I'm here to teach you what rights you have as a result of your social situation." As a woman once told me, "I never knew that, as a result of my poverty, I had certain rights. I didn't dare go to the municipality and say, "Help me, I'm poor." So, I think that one could say that from the economic and social perspectives, we have learned a lot.

Of course, there was also the financial crisis and the G7 that Chirac [Jacques Chirac, French president, 1995–2007] timidly wanted to turn into the G14, so he would invite the BRICs, Brazil, India, and China. Well, it became the G20 after the 2008 crisis. I still find it picturesque that it was President [George W.] Bush who first called the G20 together in Washington, D.C. I don't think that there was anything further from his mind before the crisis than the notion of having a G20 rule the world. But the depths of the crisis necessitated a much wider world.

What about the role of Argentina, Brazil, and Mexico representing the other Latin American countries? Do you think this has been special in the G20 or not?

Yes and no, yes and no. I think that in many cases, we have had to contribute to criticisms of the Washington Consensus, because after the crises the issue was the need to revive the world economy. The 2009 G20 in London was very good when, in half an hour, the group agreed that the International Monetary Fund, which had capital worth $250 billion, should become $750 billion instead. Because now the developed countries needed the Fund to save Europe. Right? Something that had been impossible to achieve during the past twenty years — that to arrive at the $750 billion, the Special Drawing Rights [supplementary foreign exchange reserve assets managed by the IMF] would be $250 billion. China supplied $50 billion of these funds because China is interested in special rights that may eventually allow it to become the international currency of the future, instead of the dollar.

The 2009 G20 was decisive because similar policies existed between the United States and Europe to revive the economy. But it was in Pittsburgh in 2010 when those policies were developed. Obama was still saying, as he does today, although perhaps a bit more timidly, that we needed to reactivate the economy and Merkel [Angela Merkel, German chancellor, 2005-] was saying that the problem was inflation and austerity was the answer. And this provoked the end, I think, of a common politics in the G20 and it lost its relevance, its ability to face the crisis. And it was then, unfortunately, that Latin America, despite being in favor of Obama's policies — it didn't express this viewpoint with a single voice, with enough force. If you push me a little bit, I would say that we haven't really taken full advantage of our position in the G20 where, if we have three countries, we technically make up 15 percent of the group.

DEMOCRACY AND DEMOCRATIC MODELS

Politically, we obviously talk a lot about Latin America when we speak about democracy, about democratic models. Many political analysts who study Latin America suggest that it is an example for the rest of the world, including in the sense of showing how to end dictatorships and arrive at a democracy, to achieve real democratic participation. What do you think?

I think two things. One, the ways in which we moved from dictatorial systems to democracy worked well in some cases, but it is certainly a slow process. If we take the case of Chile, I mean, the context in which these changes happen are very different. I liked to say to my Spanish friends, "You waited until Franco had died." We achieved the transition while our Franco was still alive and commander in chief of the army. So it was a little different, right? But, that said, each context is different. In Argentina, the context was different because the transition happened in the context of the implosion resulting from the Falkland Islands disaster. In our case, the transition happened based on Pinochet's constitution because it called for a plebiscite, and we thus defeated him in a plebiscite included in his own constitution. Chile is different.

Today in Chile, the man who was the head of Pinochet's secret police has been sentenced to four hundred years in jail, and he's still in prison. In other words, there is also something to show. The commissions created by Aylwin [Patricio Aylwin, president of Chile, 1990–94], the Rettig Report, published by the National Commission for Truth and Reconciliation, well, those who worked on that later went to work with Mandela [Nelson Mandela, president of South Africa, 1994–99]. Aylwin's commission was first. But what the South Africans did was something that wasn't done in Chile, that if you admitted to your crimes, you gained automatic amnesty. That's an important point. If I go and I admit that there was torture, that you tortured, that I tortured, they can't incriminate me. So, for admitting the truth, you gained amnesty. It wasn't like that in the Chilean case because the courts could sentence you.

During my presidency, we appointed a presidential commission on political prisoners and torture — it is important to note that very few countries in the world have done investigations into political prison and torture. There are commissions on political killings, on the detained-disappeared, but there are so many people who were imprisoned and tortured. It's hard. It opens wounds. How do I do it? What we decided to do was say that the commission would establish the truth about what had happened, but it wouldn't bring people to justice. It's one thing to establish the truth and say, yes, you were tortured and we must therefore remove your criminal record on Interpol because you were in prison not as a criminal but because you were politically persecuted by the dictatorship. Very well. Now, if you want justice in regard to what you testified about before the commission, you have to go to and testify in court, and the court has the power to bring the torturer to justice if necessary. Do you understand the distinction?

This distinction allowed us to create a report on political prison and torture, which is a form of teaching. Now, reading the document, reading the report, it's a trip through hell. There are details about the places where people were detained, and these places are classified according to the kinds of torture that took place in them, because there were different kinds of torture in each place. But, in this sense, I think that the democratic models that emerge are also different. Today I would say that it is in a country like Brazil where you have the most democracy and the least democracy, when you choose a union leader as your president. I don't think that anybody thought that, fifteen years after democracy was established, Lula [Luiz Inácio Lula da Silva, 2003–11] would be the president of Brazil, or Dilma [Dilma Rousseff, 2011–], a woman and former militant of a guerrilla group. Or that you would have in Chile, sixteen years after Aylwin, that is, after the transition, a woman elected twice as the president of Chile.

And keep in mind that in Chile there wasn't serious debate around the idea that a woman could be president. I think why it happened is because there were two women who were in the best position to succeed me. Both had been members of my cabinet.

In Latin America there have been many women presidents. Not in the United States yet.

Not yet.

And why would that be?

Because they chose a black man first, an African American. I think that the 2008 elections were going to be a first because it was either going to be an African American or a woman. So, there was an important step. Now, I think that in Latin America a few of these women such as Evita Perón [1919–52] in her time, then Isabelita Perón [1974–76], both were wives of President Perón. The wives of former presidents. One could say something similar, more respectfully, about Cristina Fernández de Kirchner [president of Argentina, 2007– ]. But I think that, in any case, Latin America has been able to advance more quickly in this sense.

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Excerpted from Global Latin America by Matthew Gutmann, Jeffrey Lesser. Copyright © 2016 The Regents of the University of California. Excerpted by permission of UNIVERSITY OF CALIFORNIA PRESS.
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