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Aligning Latin American leaders behind a new "road map" for sustained growth and equity is only one part of a more complex reality. The international community and regional leaders must address at least two other essential issues if a viable new path for the region is to be mapped out.
The first issue is building popular support for macroeconomic reforms from voters who have lost faith in the reforms of the past decade. In recent years, voters in several countries have turned increasingly to populist candidates who blame globalization and free-market policies for Latin America's economic and social difficulties.
The second issue is to re-engage the United States more broadly in Latin America, at a time when U.S. policymakers are focused narrowly on homeland security and the war on terrorism to the exclusion of nearly everything else. It is imperative that the United States take an active, leading role in promoting sustained growth and social equity in Latin America. Greater access to U.S. markets will be vital to increase the region's annual growth rates, and U.S. engagement is crucial to reforms of financial, judicial, educational and public-sector institutions.
The reality is that the United States has been an absent partner in Latin America since Mexico's financial crisis erupted on Dec. 20, 1994, and killed U.S. congressional support for new free trade agreements with other Latin American countries.
The chances of re-engaging the United States more assertively in Latin American trade integration have improved substantially in 2002. President George W. Bush has trade promotion authority, and the Republican congressional victory in the Nov. 5 elections should make it easier for Washington to push ahead with new trade agreements.
However, in order to determine a route toward sustained growth and social equity in Latin America, the old road map should be studied to determine what went wrong in Latin America during the 1990s.
No two economists, corporate executives or international investors will ever agree on a definite set of answers regarding what went wrong in the region. However, there is a consensus that the boom-and-bust cycle of the 1990s resulted, at least in part, from the following mix of internal and external factors:
Exaggerated Expectations: The so-called "Washington Consensus," which articulated the macroeconomic policies applied across Latin America during the past decade, held that once the region's markets were deregulated, privatized and opened to global trade and competition, economic growth and investment would accelerate quickly and living standards would rise. A majority within the Washington Consensus also believed that the group's proposed macroeconomic reforms would pull other needed political and institutional reforms in their wake.
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