Pugwash Meeting no. 284
Pugwash Workshop
English
| Español | Participants
Workshop
Taller sobre iniquidades económico-sociales en América
Latina
29 May - 2 June 2003, Bariloche, Argentina
Report (In
English)
by Darío D'Atri and Walter Scheuer
The First Regional Workshop held within the programme of the Pugwash
Study Group named 'Towards the Solution of Economic Inequities in
Latin America and of their Social Consequences', met in the outskirts
of San Carlos de Bariloche, Northern Patagonia, Argentina, from May
29 to June 2, 2003. It was hosted by the 'Bariloche Group for Science
and World Affairs' (BACyAM Group) and made possible by the generous
support of Pugwash Conferences on Science and World Affairs, Pugwash
Netherlands, as well as of the following Bariloche based entities:
Balseiro Foundation, Bariloche Atomic Centre (Argentine Atomic Energy
Commission), City Council, Hayland Travel, and Southern Winds Airlines.
One Spanish participant specialized on Latin American issues joined
11 Argentines covering different socio-economic areas, plus some observers
from the hosting group.
The search of ways for solving the many problems associated with
the alarming present socio-economic situation in most of the Latin
American countries has emerged on the regional scene as one of the
issues of highest priority. Think tanks of different fields, leaders
of industrial and financial corporations as well as of labor unions,
some up-dated political parties, and leading NGOs, all over the region,
are considering or starting to consider matters related to these problematic
issues. It was thus considered that the activities of the Study Group
should join this trend and, therefore, begin as soon as possible.
One consequence of this determination was that the participation was
- as said - mainly Argentine and that a large part of the debates
and presentations examined the Argentine crisis and its effects on
the steady rise in poverty and inequity. Great effort will be devoted
to having a highly diversified Latin American, as well as non Latin
American, participation in the follow-ups.
The Workshop focused its analysis and discussions along two main
lines:
1) The deterioration of the macroeconomy and productive
systems in Latin American countries as a result of over a decade
of neoliberal economic policies, including accelerated programs
for privatization of state-owned enterprises, the withdrawal of
the State from its directing role in Latin American economies, deep
commercial aperture, and the liberalization of economic relations
within each country.
2) The public policies and juridical framework which
allowed a steady rise in poverty and social and economic inequity.
In addition, within the macroeconomic issue, the effects (conditionings)
produced by Latin American countries' huge foreign debts, as well
as the impact of globalization, on the region were analyzed with
special attention.
In what follows, a first view of the matters dealt
with has been grouped into four sections. The text is the sole responsibility
of the authors. Extended information on the Workshop, the Study Group,
and the 'Bariloche Group for Science and World Affairs', as well as
the text of the papers submitted, are available in www.forobariloche.com.ar
I. Macroeconomic Situation and Analysis of Productive Systems
Of all the regions in the world, Latin America is the one which,
since the late '80s, most thoroughly applied policies of economic
liberalization, privatization of state-owned enterprises, fast trade
liberalization, and withdrawal of the State. At the same time, from
1980 to 2000, the number of poor people in Latin America rose by 75
million to over 200 million. Of the new poor, almost 95% are urban
poor. The economic liberalization programs were largely inspired in
the so-called Washington Consensus (a set of political and economic
guidelines which, as from the late '80s, became the main defining
force behind the doctrine promoted by the central countries and multilateral
credit organizations towards Third World countries). Not only did
these programs create large numbers of poor and indigent people, but
they also produced a spectacular rise of economic and social inequity
and increased unemployment rates to over 15%. Furthermore, by promoting
the withdrawal of the State from its directing role of previous decades,
they caused a rise in illiteracy and school dropout rates as a result
of lack of funding for public education, and unprecedented deterioration
in the public health systems that most of the population rely on in
Latin America.
At the same time, during the 90s there was an extremely high rate
of financial and productive capital inflow to Latin America. Together
with the privatization process, in most countries this brought about
a huge leap in the rate of investment in infrastructure for telecommunications,
ports, roads and services in general. Added to the effect of trade
liberalization, greater investment led to rapid progress in the overall
condition of services and infrastructure, and an ensuing positive
impact on the production standards of Latin American enterprises.
According to what was put forward at this meeting, the combination
of trade liberalization, privatizations and the considerable increase
in foreign investment brought about a microeconomic phenomenon characterized
by the following features:
1) The ownership of the main local enterprises and industries passed
into foreign hands.
2) The incorporation of technology and process re-engineering had
a major impact on the efficiency of enterprises and industries.
3) There was an increase in the relative importance of services
in the overall economy.
4) A noticeable difference became apparent between some companies
that survived competition from imported products by making major
changes in their production methods and matching their production
costs and quality to international standards, and, on the other
hand, the large proportion of companies and industries that were
unable to withstand foreign competition and were forced to close
down.
5) Although the main cause of the rise in unemployment was the
closure of companies due to the impact of foreign competition caused
by trade liberalization, unemployment was also produced by microeconomic
phenomena like the generational turnover related to the incorporation
of technology or process re-engineering and rationalization.
Throughout the discussions on the economic context of inequity in
Latin America, there was heated debate about the impact of fixed,
overvalued exchange rate policies - as happened in Argentina from
1991 to 2001 - on the loss of competitiveness and the destruction
of national economies. Several members of the panel argued that this
kind of exchange rate policy was adopted not merely as a result of
mistaken political decisions, but rather as a response to the private
interests of local and foreign finance and service groups, who were
highly privileged by those policies. Another factor mentioned as causing
growing instability in the region was the lack of rules controlling
the inflow and outflow of financial capital. Thus, not only did the
real economy of countries like Argentina suffer the impact of an overvalued
currency causing a growing loss of competitiveness of local production,
but also the total liberalization of capital flow produced a twofold
deleterious effect. On the one hand, there was rapid inflow of financial
capital, which made it possible to finance inconsistent fiscal policies
and increase consumption with foreign savings. On the other hand,
it created vulnerability to external shocks when there was a sudden
interruption of international financing during times of crisis, as
occurred during the Tequila crisis, South-East Asian crisis and Russian
devaluation. All participants fully agreed on the need to apply rules
for controlling capital, as Chile does.
It was also pointed out that the conversion from closed economies
with high State participation to open economies with no State control
produced negative consequences, which were enhanced by the lack of
adequate compensation policies. The following lacks were mentioned:
1) Lack of a planned financial system focused on productive investment.
2) Lack of systems and institutions for generating innovation.
3) Lack of training to create skilled human resources.
4) Lack of international negotiation strategies.
5) Lack of promotion of cooperation and association among enterprises.
6) Lack of development of the production network in order to gain
economies of scale and specialization.
The issue of poverty in Latin America was also discussed from an
ideologically broader point of view. One of the participants argued
that one can either consider the issue of poverty from a "mitigation"
standpoint, as suggested for example by international financial organizations,
or otherwise, one should move towards a system of social relations
where changes in public polices and cultural revaluation would enable
structural changes to be made. He centered the need for structural
change on what he considers to be the current situation of 'structural
productive overcapacity', where the supply capacity is greater than
real future demand. He identified this situation as the cause of many
of the aforementioned mistaken public policies and negative effects
of globalization. He highlighted the role of education and the media
in achieving the major cultural changes he believes are needed in
order to attain a more humanistic perception of society.
A small yet significant example of structural change was put forward.
As the widespread closure of companies has had a major impact on the
rise in unemployment, poverty and inequity, several members of the
Study Group suggested seeking and promoting mechanisms to support
the continuity of these companies, for example through cooperative
systems or by placing the control of an affected company into the
hands of its employees. Although Argentina was taken as a case in
point, since during its crisis, there was a growing phenomenon of
workers taking control of bankrupt companies, one of the participants
mentioned a Spanish example, by which, during the mid-seventies, a
law was passed to rule the labor stock companies (run by the employees).
Several participants discussed an ideologically deeper issue in
the search for solutions to social and economic inequity, asking which
should come first: the creation of methods to increase wealth or the
creation of methods to improve the social distribution of existing
wealth. Of similar relevance was the exchange of opinion on tax policies,
with reference to deciding onto which area should taxation be centered:
work, capital or profits.
II. Globalization and Inequity
Within the discussions on economy, one of the presentations dealt
with the impact of globalization on the social and economic conditions
in developing countries and its characterization in Latin America.
The presenter did not agree that power has been transferred entirely
to a transnational level, hindering or even preventing peripheral
countries from establishing their own processes of development and
leaving them with no choice but to implement adaptive policies. He
believes that to confront the problem of inequity, an alternative,
realistic paradigm should be created, whereby each nation would assert
its own identity, its own distinctive presence in the world, and,
on that basis, generate its own potential for development. He outlined
the main trends of globalization as follows:
1) Major increase and transformation of trade, with greater participation
of goods and services having high added value. Within manufactured
goods, a major increase in those having high added value connected
to knowledge.
2) Internationalization of production due to the expansion of multinational
companies. Over one third of international trade is within-company,
and markets are shaped by the rapid growth of the subsidiaries.
3) Integration of financial markets and generalization of speculative
capital flow, especially affecting emerging markets in spite of
the fact that they receive no more than 10% of these financial flows.
4) Implementation, by developed countries of regulations that favor
the interests of their own enterprises and governments and discriminate
against developing countries. The same happens, of course, with
access to knowledge.
The main presentation on this topic forwarded the following points
in terms of alternative ways:
1) Although globalization is the space in which power is exercised
within the aforementioned basic tendencies, there are still alternatives
for trade policies and international insertion. As far as financial
policies are concerned, a country may either enter globalization
passively, without any rules to control financial flow, or it may
do so after imposing certain rules. Similarly, as multinational
companies expand, a country may either assume that all foreign investment
should be welcome and, therefore, eliminate any kind of checks,
rules and regulations, or it may establish rules and policies to
create a framework for controlling national resources, directing
investments towards the production of exportable goods, etc..
2) The process of access to knowledge must be made endogenous,
because transplanted knowledge is only a partial process and does
not contribute toward the transformation of the productive network.
3) The degree of injustice and inequality existing in a country,
depends on the way it reacts to the challenge of globalization.
The way in which each country will become part of the international
context lies in its own hands. Each country shares globalization
according to which policies it implements: either a dynamic one,
of expansion of international trade and access to knowledge and
innovation, or one of increasing inequality and loss of control
over its own resources, as well as over financial flows.
4) The country's degree of social and economic inequality is a
key factor. In countries that have entered globalization 'successfully',
society is better integrated and inequality more moderate. In contrast,
countries with huge social differences, high concentration of wealth,
waste, extreme inequality and leaders who tend to be at the service
of foreign interest, have not integrated well into globalization.
In these countries, economic ideas remain trapped and they are unable
to create alternatives to the univocal discourse produced by developed
countries.
5) Violence, extremism and terrorism should be viewed as a natural,
foreseeable consequence of the high degree of inequality and inequity
created by globalization, threatening even the very interests of
developed countries themselves. It is their duty to intensify the
search for a more equitable, more balanced order.
6) The developing countries must accept that they will not solve
their problems on the international scene, but rather through autonomous
decisions on public policies. It is essential that they regain control
of themselves, after having lost it largely through the conditioning
of their foreign debt. There is no lack of resources. The problem
is organizational, requiring the construction of a converging political
system, where the majorities should be able to create a viable way
of becoming integrated into the rest of the world.
During the ensuing discussion, two main ideas arose. On the one hand,
the notion that a supra-national integration of Latin America is necessary
(based on MERCOSUR), in order to create a critical mass which could
attain a certain degree of strategic invulnerability. On the other
hand, it was pointed out that a strong MERCOSUR - as a driving force
behind a better insertion in the world - would only be possible as
a result of the integration of strong countries, as a successful supranational
entity can only be achieved if it is based on a group of successful
nations.
Two contrasting prospects were outlined: one foresaw the USA succeeding
in its present aspirations for world domination and the establishment
of a new hegemonic order; while the other foresaw a not too far off
multipolar world, with a strong presence of USA, Europe, China and
India.
III. Foreign Debt and Social and Economic Inequity
Two of the presentations and discussion sessions were given entirely
to debate the impact of foreign debt on the economies of Latin American
countries. Several members of the panel criticized the role of international
financial organizations like the IMF, which have for decades imposed
structural conditioning on the economies of Latin American countries,
mainly in the form of budget adjustment plans tending to generate
a tax surplus in order to enable the payment of the services of the
foreign debt. It was stated that while most Latin American governments
irresponsibly resorted to foreign financing in the face of local mismanagement
of economy, international financial organizations also acted irresponsibly
because, far from setting limits to the negative debt - tax adjustment
circle, they consolidated a model of unpayable foreign debt.
Considering the problem of foreign debt and that countries like Argentina
have been in default for over a year, some participants proposed the
implementation of strong measures leading to the investigation of
the origin of the debt and its successive renegotiations, as well
as taking to court any government officials who participated in illegitimate
dealings to obtain or refinance foreign debt. There were also proposals
that Latin Aemrican countries should renegotiate their foreign debt
according to criteria of the 'common good' of the people, in other
words, that they should pay only the interest and capital of genuine
debt after having satisfied the basic needs of the people.
As a tool to exert juridical pressure, though not as an actual solution
to the problem of foreign debt, it was proposed that foreign debt
should be brought before highly independent organisms such as the
International Court of The Hague, in order to have it pronounced legitimate
or illegitimate. Within this context, it was recalled that in Latin
America, and particularly in Argentina, there is a longstanding tradition
and international recognition for the successful legal treatment of
Latin American foreign debt, which developed creditor countries had
been demanding by means of strong pressure, even armed.
IV. Public Policies and Juridical Framework of Social and Economic
Inequity
The final sessions of the Bariloche meeting analyzed the legal and
institutional frameworks which have direct or indirect bearing on
the creation of conditions that heighten and sustain social and economic
inequity. One presentation and the ensuing debate focused on the need
to consolidate independent judicial systems, as opposed to the present
situation, where the Judicial Power in most Latin American countries
depends on the political and economic powers.
One participant argued that "Nowadays, people mistrust the
judicial systems, and the weakest social sectors are the most skeptical
about the ability of the courts of justice to satisfy their needs."
In response to this, a first proposal was:
1) To increase the independence, impartiality and capacity of judges.
Other constitutional powers should not interfere with the Councils
of the Judiciary, which should work as autonomous bodies for the
administration of justice, and be in charge of training judges,
assigning posts and the system of discipline.
2) To increase the competence of the justices of the peace, who
are so much involved with communities, enabling many judicial matters
to be more swiftly resolved.
3) To recognize Inter-American jurisdiction, such as the San José
Court on Human Rights, as more binding. Not only would this increase
the jurisdictional guarantees of human rights, but it would also
tend to make the work of national judges more rigorous, if their
sentences could be appealed and revised before the Inter-American
Court of Justice or other such courts which should urgently be created
within the framework of regional bodies such as the Pacto Andino
or the MERCOSUR.
With regard to this point, the negative aspect of the 1985 reforms
to the World Bank and IDB charters on Latin American public policies
was mentioned. These reforms enabled the banks to start financing
projects involving institutional reform instead of attending to projects
involving infrastructure, health, etc. Not only did this interfere
with the institutional shaping of those countries, but also the shaping
tended to enhance fiscal efficiency criteria rather than the real
need for efficiency and judicial independence.
Finally, there was a presentation on independent government control
entities, summarized by the following points:
1) Inverting the rule: instead of political power controlling society,
there should be a new system whereby society controls political
power.
2) Establishing a mechanism whereby governors would be required
to account for their actions regularly, and a mechanism enabling
them to be divested of power. This would prevent voting from becoming
a mere formality whereby citizens periodically express their opinion
only to have the ensuing governors doing whatever they please, even
when it goes against their campaign promises. The mechanism should
be efficient enough to prevent bureaucratic delays when it needs
to be applied.
3) Establishing that one of the conditions to become a controller
is not to have acted in bodies subject to control for the past ten
years.
4) Creating bodies that really work (unlike current ones) to control
public enterprises. Analyzing the feasibility of creating organizations
formed by the consumers of these companies' services to carry out
a twofold control: on the control bodies and on the companies. A
simple mechanism should be implemented for cases of members of the
control bodies neglecting their duties. In addition, analyzing the
possibility of having the Judicial Power handle this kind of control.
This, in many cases, would involve first solving the problem of
the lack of a judicial police force depending directly on the judges,
to enable the immediate application of their resolutions.
5) Creating a body to control Justice. In Argentina, the situation
in the Council of the Judiciary is sufficient to show not only that
a control body is necessary, but also that judicial control cannot
be in the hands of members of the Judicial Power. This would entail
creating new rules in most Latin American countries. For example,
during the first four years of the Council of the Judiciary in Argentina,
there were over 600 denouncements but only three minor sanctions.
The judicial corporation is closed and there is no way to control
members effectively when the controllers are also members.
6) Creating systems to control the security forces, particularly
the police force (control of the army was not considered). It is
entirely unacceptable that the public should be unaware of any human
rights violations that may occur at police stations, in spite of
the fact that these violations may be serious, sometimes even leading
to death. Police stations should be controlled, though not permanently.
Systematic checking should be carried out, not by government officials
but by agents designated by human rights associations or lawyers'
associations.
The content of these proposals was broken down and reinforced in
the ensuing discussion. The following topics were given special attention:
(a) implementation of mechanisms to divest government officials of
power as a key tool to empower society, (b) the importance of having
bodies to defend competence, (c) the possibility of analyzing radio
and television media as public services, since they act in spheres
which are definitely not private, (d) the major rise in social awareness
of consumer rights and duties towards public service enterprises (especially
public conviction against these companies aspiring to the right of
unlimited returns).
PARTICIPANTS
- Buch, Tomás - Consultant of a local advanced technology
company. Writer on social aspects of technology. Member of the BACyAM
Group.
- Cafiero, Mario - Member of Argentine Parliament. Specialized in
economic-financial issues, particularly foreign debt and banking procedures.
- Colomer Viadel, José - President, Spanish Council for Ibero
American Studies. Professor of Constitutional Law, Autonomous University
of Madrid and University of Valencia. Specialized in advanced participative
democracy, particularly socio-economic aspects.
- D'Atri, Darío - Journalist, specialized in local and international
economic matters. Member of the BACyAM Group.
- Ferrer, Aldo - Economist. Leading collaborator in the elaboration
of the "Plan Fénix", an alternative project for present
Argentine economic policies. Formerly: Minister of Economy; President,
Bank of the Province of Buenos Aires [one of the three main public
banks of Argentina], and of other public agencies. Author of many
articles and books.
- Espeche Gil, Miguel Ángel - Jurist and career diplomat.
Expert in juridical aspects of foreign debt and international law.
Former Ambassador in many countries.
- Kosacoff, Bernardo - Head, Argentine branch, Economic Commission
for Latin America and the Caribbean [CEPAL]. Expert in industrial
policies.
- Kozulj, Roberto - Economist, social communicator. Specialized in
cultural development and energy. Adviser in economy, poverty and energy,
at CEPAL, World Energy Forum, UN University, Latin American nations.
Full Professor, Institute for Energy Economy, Bariloche.
- Lozada, Martín - Jurist. Specialized in international justice,
human rights and privatization of security. Member of the American
Society of Jurists. Member of the BACyAM Group.
- Lozada, Salvador - Renowned former judge. Specialized in foreign
debt and human rights. Member of the BACyAM Group.
- Szmukler, Beinusz - Member, Argentine Council of the Judiciary;
President, American Society of Jurists.
- Viglione, Abel - Chief economist, Latin American Economic Research
Foundation [FIEL]. Specialized in industrial policy issues.
- Other BACyAM Group members attending: Jorge Gil, Octavio Gorraiz,
Karen Hallberg, Humberto Raiti, Walter Scheuer.
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