“The virtuous cycle of Latin America is over. It benefited for a time from the high price of raw materials, especially oil. Then it was crushed by wrong economic policies, with the coup de grace received by the Peronism of Cristina Kirchner in Argentina and then by what is happening in Venezuela". Giulio Sapelli, Professor of Economic History at the State University of Milan and a great expert on South America, traces with FIRSTonline the state of the art of a continent that has always been a land of strong social tensions and repeated colonialist interference. "The model to follow to relaunch the economy is that of Bolivia and Uruguay, with the unknown factor however of its applicability in much larger countries, where there are dozens of parties in Parliament and too many interests at stake".
Professor Sapelli, let's start with the most current and dramatic case: what is really happening in Venezuela?
“Even though it is a rather sui generis case in the history of Latin America, as a mix between the military revolution of Juan Algarado in Peru in the 70s and the Cuban model, the Venezuelan case is nothing more than the result of an ongoing process for the past 15 years in South America, namely the disintegration of the historic parties. Peronism is dead and buried, and corruption has destroyed the political system. In some cases, such as in Brazil, it has been manipulated by the United States through a certain influence on the moves of the judiciary. But even in Peru the last four presidents are all under investigation for corruption. The traditional parties, however, having always had a nationalistic tendency, have suffered from globalization proving to be inadequate in many cases, above all where it has resulted in military dictatorships”.
Like in Venezuela.
“Venezuela, especially with Maduro – because at least Chavez had greater consensus – has taken the worst of the Cuban model, that is, entrusting the economic management of the country to the military forces, what I call Cheguevarism. The inspiration from Algarado's Peru, which was the first left-wing military revolution in South America, was instead more correct as it went from the point of view of nationalization, which is an unavoidable path for South American economies, provided it is pursued democratically as for example in Bolivia or Uruguay, but also in Ecuador. It is a fact that these countries, which have not joined the austerity program imposed by the IMF, have not fallen into the inflationary spiral like others and have a foreign debt that is not as high. Indeed, to put it bluntly in Brazil itself, the crisis worsened precisely when Dilma Rousseff joined the IMF programme”.
In Venezuela, inflation is at 1600% and the situation is getting out of hand. How important is oil and the interference of foreign countries?
“There has been a drop in the price of oil but in this case it has little to do with it, the fault was mainly Maduro's mismanagement. Chavez was a little different, his was a soft dictatorship on the model of Brazil in the 70s, even if it had nothing to do with Bolivarianism: the truth is that in Venezuela, as in much of South America, it is still Cuba that has a strong ideological role. The United States does not know how to move at the moment: it is no longer better for it to support a coup as it did in the past in other countries, because they would have the whole army against it, nor even to mount clean-handed judicial cases as in Brazil, because Maduro has already occupied those loads. A hypothetical solution could be to create a puppet state on the Rwandan model, to justify a conflict”.
Over Caracas there is also the shadow of strong economic and strategic interests of Russia, China and India.
“Certainly, and it is precisely for this reason that it will not be easy to send Maduro away. Putin is not hostile to him: he may no longer need his oil, but he still has the Caribbean area at heart by virtue of his historic ties with Cuba. The Chinese oil company has invested tens of billions of dollars in recent years for the oil extraction in Venezuela, through mergers or acquisitions with local companies, while India itself imports crude oil from Venezuela after the sanctions against Iran”.
The crisis in Venezuela is certainly not a snapshot of the state of all of Latin America, but the impression is that the best years for that continent are behind us.
“Yes, South America is closing a cycle that had benefited from very high prices on commodities, especially oil but not only, also minerals and other natural resources in which it is rich. Then the political crises of which we have spoken and above all the economic model of Kirchner in Argentina, which is the second largest economy on the continent and has always been a reference point for economic policy, gave the coup de grace. Kirchner has implemented a wicked protectionism, for example by imposing duties on the export of meat, which could represent an alternative cycle to raw materials: the result is that today Uruguay, a small country of 3 million inhabitants, produces more meat of Argentina".
Speaking of Uruguay, Mujica's project has been one of the few virtuosos in recent years.
“It is from there that South America must start again: nationalization of the economy, the fight against corruption, investing income not in welfare as was done in Argentina but to support entrepreneurship, even small ones, as Evo Morales did in Bolivia . Morales managed the conflict between the Indians and the white bourgeoisie of the country in the best possible way. He achieved a 'peaceful indigenism', leading the Andean population to create an industrial and no longer just rural petty bourgeoisie. He was a bourgeois revolutionary, like the European ones of the 800th century”.
However, the Bolivia and Uruguay models are difficult to replicate.
“Yes, because these are small countries, it was and will be much more complicated for example in Brazil, a country of 200 million inhabitants with dozens of parties in Parliament, often corrupt and influenced by too many interests at stake”.
What about Macri's Argentina instead? In 2017, according to some estimates, the Latin American country will grow the most and a few months ago it launched a 20-year bond. Inflation is also normalizing, although it is still around 40% (but with the previous government it was XNUMX%).
“Macri is better than the Kirchners but he must understand that Argentina is not England and that Buenos Aires is not Argentina. It is good that international investors are returning to invest in the country, and in this sense the centennial bond is an interesting operation that repositions Argentina in the attention of the markets, but political stability is also needed. He must not fall into the error of Menem, who pursued too far-right a policy with disastrous results. The Argentine population is still paying the price, with Macri the economy is starting to turn again but for now the average citizen is not benefiting from it, indeed the cost of living has increased (the latest data on consumer prices speaks of a +22 %, second in the world only to Egypt, ed): he has to concede something to social policies, he cannot afford to suffer a strike a day”.
The reopening of international markets is Macri's true discontinuity with Peronist protectionism, which demonstrates how dangerous that type of approach can be. Is this also a warning to Trump?
“There is protectionism and protectionism. Trump's is actually more ideological and propaganda: his secretary of state, Rex Tillerson, is the former CEO of Exxon, so let alone if the intention is really to isolate himself from the markets, even more so from the oil of exchanges. Trump practices selective protectionism at best, to protect some sectors in difficulty such as industry, and it's not such a far-fetched choice".
How do you imagine Cuba's future after the death of Fidel Castro and Trump's arrival in the White House? Is the thaw at risk or will it continue anyway?
“Unfortunately it is at risk. The thaw was one of Obama's few foreign policy moves. Cuba is a family-military model, a scandal. But the sanctions must be lifted, the sanctions have proven to be a bad thing everywhere, for the affected countries and for the global economy. If Trump stops this process, he is wrong, also because Raul Castro seems more predisposed to dialogue than his brother ”.
