The Impact of Globalization on Latin American States

The Impact of Globalization on Latin American States: The Cases of Brazil and Colombia Author(s): Consuelo Ahumada and Christina W. Andrews Source: Administrative Theory & Praxis, Vol. 20, No. 4 (Dec., 1998), pp. 452-467 Published by: M.E. Sharpe, Inc. Stable URL: http://www.jstor.org/stable/25611309 Accessed: 30/07/2010 12:50 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=mes. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected].

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THE IMPACT OF GLOBALIZATION ON LATIN AMERICAN STATES: THE CASES OF BRAZIL AND COLOMBIA Consuelo

Universidad Ahumada, W. Andrews, University

Christina

Javeriana of Sao

of Bogota_ Brazil

Paulo,

ABSTRACT paper deals with the impact of globalization in Latin America, presenting Brazil and as examples of how specific political circumstances have served as means to T\hisColombia generalize the neo-liberal agenda. For Latin American countries, the debt crisis in the 1980s has marked thebeginning of the implementationof the conservative program prescribed by the IMF, which has been known as the "Washington Consensus." The consequences of the IMF prescriptions inLatin America were devastating, resulting in increased poverty and inequality.

In the 1990s, the implementation of the neo-liberal agenda, with its emphasis on privatization and commercial liberalization, has accelerated. This time, rather than a direct consequence of IMF imposition, conservative policies are being implemented in Brazil and Colombia as supposed

responses to aspirations of thepublic. In Brazil, after several failures in controlling inflation, the success of theplan implemented in 1994 has been used as a tool to neutralize any criticism to the neo-liberal program. In similar fashion, the legitimate aspiration of the Colombian people for a peaceful society has been used as a way to include US commercial interests in the country's policies. The current crisis in the internationalmarkets and the ineffectiveresponse of the IMF in the rescue as well for other packages demonstrate that there is an urgent need for Brazil and Colombia, to themost pressing to able alternatives address Latin in countries America, explore development needs of society.

INTRODUCTION Between

the late 1980s and the early 1990s, virtually all Latin American countries adopted

stabilization and structural adjustment programs prescribed by the InternationalMonetary Fund (IMF). These programs, which basically correspond to theneo

and the so-called globalization process, consist mainly of the complete opening of their econo mies to international trade and capital, a curb on public liberal model

econ expenditures, privatization, de-regulation of the cre the and the state, omy, the retreat of the role of investment. ation of appropriate conditions for foreign In Latin America, this sudden and profound shift toward free-market economies began in Chile in the 1970s, during the dictatorship of Pinochet. On theother hand, inmany other countries of the region, the imple

452

mentation of the neo-liberal economic model has taken place during the process of re-democratization of the region. The implementation of neo-liberal programs within democratic regimes requires a political strategy,

without which the rejection by the public is almost certain. As will be discussed, the cases of Brazil and Colombia are exemplars of this political strategy in the implementation of neo-liberal reforms.

This article is organized into four sections. In the first section, themain characteristics of the "new world in Latin America are order" and its consequences examined; the second and third sections present a discussion of process of implementation of neo-liberal reforms in Brazil and Colombia. Finally, similarities and contrasts between the two cases are presented and some

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THE NEW WORLD ORDER AND ITS IMPACT ON LATIN AMERICA In 1991, just before the beginning of the Persian Gulf War, thenU.S. President George Bush announced the coming of the "new world order," which he re garded to be an age of free-trade and globalization. This

new order, conceived and put in practice by the richest nations in theworld, especially theUS, has represented fundamental changes regarding the role of the state and the public sector inLatin American countries.

The generalization of theneo-liberal model through out the region was the result of a conjunction of interna tional, regional and domestic factors. The end of the cold war, the consolidation of American political and military might in the global sphere and the increasing economic competition among themain economic centers of theworld, are the fundamental facts in the interna tional context. A distinctive and contradictory trait of

thiscompetition is that thedeveloping nations have been forced to open their economies to international trade, whereas the advanced industrialized countries have increased theirprotectionist practices and restricted the access of products from thedeveloping countries to their domestic markets. In such a context, cheap labor has become themain asset Third World countries have to compete with in the prevalent international division of labor (Ahumada,

1996).

The transferofmanufacturing operations by multi national corporations (MNCs) from advanced to less developed countries and theprocess of global economic restructuring that started takingplace during the 1960s, was accounted for within theMarxist tradition. The theory of the new international division of labor claims that the traditional division of the world into a few industrialized

countries,

on

one

hand,

and

a

great

majority of developing countries integrated into the world economy solely as rawmaterial producers, on the other, has been undermined by the tendency to relocate manufacturing operations from the advanced industrial ized countries to developing nations (Froebel, Heinrichs

& Kreye, 1980). There were threepre-conditions to this process: (1) the existence of an almost inexhaustible reservoir of cheap labor in thedeveloping countries; (2) the division and sub-division of the production process, which is now so advanced thatmost of these fragmented

operations can be carried out with minimal levels of skill; and (3) the development of techniques of transport and communication which has created thepossibility, in

many cases, of the complete or partial production of

goods at any site in theworld. These facts account for thegeneralization of export-oriented zones and maquila dora-type industries throughout the developing world. Besides being extremely cheap, this labor-force has other advantages. It can be easily mobilized for produc

tion during practically the whole year and, in many cases, it can reach levels of productivity comparable with those of similar processes in the advanced industri alized countries; the huge size of this reserve army allows for an optimal selection of the most suitable labor-force (for example, young women) for the specific work required (Froebel, Heimichs & Kreye, 1980, p. 34).

Some authors have argued that the political de and exclusion of the population seen in many developing nations are not accidental, but a key mobilization

element of export-oriented industrialization (EOI). This is due to the fact that the EOI model of development relies basically on the existence of disciplined low-cost

labor (Deyo, 1990; Smith& Lee, 1990). This argument, drawn from the experience of East-Asian countries, holds true for the on-going restructuring of theworld

economy under the so-called free-marketprinciples. The neo-liberal model can only be implemented through the flexibility and disciplining of the labor force which, in turn, implies the deterioration of the living and working conditions forworkers and the deprivation of many of theirpolitical rights.

According toGoldsmith (1996), thereare now some three hundred free-trade zones in the Third World, usually situated near key communication centers.

Foreign industries are encouraged to establish them selves in these zones by being freed from any effective labor

or

environmental

controls.

In

such

areas,

de

regulation has been systematic and complete and envi ronmental devastation has occurred on a literaryhorrific scale (Goldsmith, 1996, p. 88). It is also worth noting

that, despite the dispersal of manufacturing operations to less-developed countries, the key decision-making processes affecting production and commercialization continue to be carried out in the advanced industrialized countries.

The process of conglomerate mergers has been another key strategy followed byMNCs throughout the

world, in order to increase their economic power. This strategyhas allowed such firms to control themarket in itsdifferent stages, diversify intomore dynamic sectors, reduce their tax burden and purchase existing plants and

AHUMADA & ANDREWS/ The Impact ofGlobalization on Latin American States

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equipment for less than the cost and risk demanded by new investments (Mytelka, 1987). Clearly, in theglobal are, more than ever, in a stronger market, MNCs position to take advantage of any liberalization of trade barriers. InMytelka's (1987, p. 61) words: Oligopolization has already begun in a number of knowledge-intensive industries, although its extensiveness is somewhat obscured by the fact that a large number of collaborative agree ments involve no exchange of capital and partners.

of thekey IMF prescriptions to indebted countries in the 1980s.

a process of economic concentration and oligopolization has been clear in every economic sector. Five firms control more than fiftyper cent of theglobal market in the following industries: consumer durables; Such

automotive; airlines; aerospace; electronic components; electricity and electronics; and steel. Also, five firms control over fortyper cent of the global market in oil, personal computers and media (The Economist quoted in 1996).

The outcome of theUruguay Round of theGATT and the subsequent confirmation of theWTO (World Trade Organization) inDecember 1993 emphasized this trend. It is clear that itsmain goal was to open up markets all over theworld, in order to create a booming

internationalmarket place where products and services glide, without any effort,across national borders. At the same time that it seeks to open up world markets, the WTO took important steps toward toughening copyright and patent protection in the service and high technology sectors, inwhich theUS continues to have the leading edge.

Financial speculation in the stock market has themost profitable type of investment during the 1990s. According to Korten (1996), the power in this system lies within a small group of private financial

become

institutions thathave only one objective: tomake money inmassive quantities. The so-called emerging markets became the center of attention of the main financial investments, given thehigh rates of return theyoffered.

In 1994, the flux of private capital to these countries reached US$173 billion, an unprecedented figure if it is taken into account that, as of 1991, the annual average of investment in these regions was less than US$50

billion. Such enormous private investment in emerging markets happened tobe an outstanding deal: in countries 454

when, for the very small circle of people from the financial sector who have experience, connections and updated information every minute, speculation in the stocks of these countries represented the biggest boom of enrichment anyone can remember (Latin America

Data Base, 1995). The current global financial crisis, which started with the collapse of the East-Asian economies, continued with Russia and with the threatof the imminent fall of Brazil, has brought attention to the negative impact of financial de-regulation, which is one

nominally preserve the independence of both

Korten,

like Hong Kong, Indonesia, Malaysia and Brazil, the of in shares the stock increased markets respective price an average of a hundred per cent. It is not surprising

The debt crisis in the early 1980s that affectedmost Latin American countries is key to understanding the process of implementation of the neo-liberal agenda in the region. During the last decade, Latin America paid almost US$224 billion to service foreign debt. Neverthe less, at the end of 1996, the joint debt of the region

reached US$ 656.5 billion. Latin American countries were paying, as debt service, an amount equal to one thirdof their revenues from exports (El Tiempo, 1997a). The external debt crisis strengthened the leverage and

control exercised by international financial institutions in thepolitical and economic decision-making processes in the entire region and marked the loss of autonomy on the part of these countries regarding the formulation of

development policies. Itwas within this internationaland regional context, thatthe so-called "Washington Consensus" was adopted. The termwas coined byWilliamson (1991) to describe the economic prescriptions thatwere imposed by the IMF and theWorld Bank-through the pressure of the US government-to indebted countries in the 1980s. According to theWashington Consensus, the debt crisis

was a result of the import substitution program adopted was very by most Latin American countries, which restrictive with foreign investment. However, by the mid-1970s, development programs based exclusively on import substitutionwere uncommon inLatin America. As a case in point, industrialization in Brazil was already far from the nationalist model and included substantial participation ofMNCs (Portella Filho,

and of foreign capital

1994).

According to Portella Filho (1994), the array of Consensus prescriptions emerging from theWashington

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were based on threepremisses: a) economic crises were always due to excessive expenditures in the public sector; b) there were no problems regarding to total commercial and financial liberalization; and c) external debts should be paid in totum in order to encourage the

return of private loans. The prescriptions, therefore, involved fiscal discipline; radical cuts on public expendi ture; tax reform (including indirect taxes and the broadening of the tax basis); financial and trade liberal

ization; a competitive exchange rate; direct foreign investment; privatization of state companies; de-regula tion and protection of property rights. In regard to the fiscal adjustment of the public sector, itwas recom

mended

that it should be undertaken by cutting expendi not tures, by raising taxes (Portella Filho, 1994). All these policies can be summarized as a blind belief in the free-market as the key for economic development (Williamson, 1991; Krugman, 1995).

The worst period for indebted Latin American countries was during theReagan administration. During this period, creditors and the international financial institutions refused to discuss any proposal regarding

debt reduction. From 1982 to 1982, net transfersfrom Latin America were US$24.2 billion, or 3.7 per cent of the region's GNP (Portella Filho, 1994). While the tough neo-liberal "medicine" was being imposed on Latin American countries, the US was applying, at home, a typicalKeynesian policy. In order tomove out of the recession of 1981-1983, theReagan administra tion increased public expenditure, mainly by boosting themilitary budget (Navarro, 1991). When the U.S.

government finallywaived debt relief through theBrady Plan in 1989, the negotiation was still conditional to shrinking the state. In Colombia, for example, strategic public companies were privatized within debt negotia tions and the buyers were American corporations. At the end, despite the forced push to export, Latin America entered the 1990s runningbehind industrialized countries in share of trade. Between the 1960s and the 1990s, the participation of the region in international trade was reduced almost by two-thirds. In 1990, the combined exports of all Latin America amounted to less than US$130 thousand million dollars; a figure that is less than the exports of Holland, a nation with only

fifteenmillion people (Vilas, 1994). More important, however, was the impact on the social and economic conditions of the population due to the implementation of theWashington Consensus. Throughout thecontinent, social inequalities became more pronounced. In 1980,

41 per cent of the population of Latin America were poor; by 1990, 46 per cent were living in poverty (CEPAL quoted in Portella Filho, 1994). The U.S. has benefitted substantially from the economic reforms thathave been undertaken throughout the region. In 1997, internationalprivate capital, mainly American, invested US$50 billion in Latin America in three key sectors: oil and mining, services-especially and telecommunications (El Tiempo, to figures from the Economic According

financial ones; 1998c).

Analysis Office of theDepartment of Commerce of the US, in the same year, American companies in the region produced US$20 billion in net earnings, which accounts for 19.9 per cent of the total net earnings made

by subsidiaries of these companies abroad. In addition, neo-liberal reforms have resulted in the re-establish ment of vital export markets for American products. Latin America was the only region of theworld where US

trade has shown positive results during the past years. As a case inpoint, inMay 1998, theUS obtained a commercial surplus of US$1.3 billion (El Tiempo, 1998c).

THE BRAZILIAN CASE The Debt Crisis and the Intervention of the IMF By 1973, themilitary government in Brazil, that gained power through a coup d'etat in 1964, was already facing the erosion of its political base and realized that itcould not sustain the authoritarian regime formuch longer. Right-wing extremistswere getting out

of the control under the regime, acting at will to imple ment a political cleansing; a situation thatwas bringing many former supporters of themilitary rule to opposi tion flanks. General Ernesto Geisel, who took office in January 1974, initiated the so-called abertura, or the opening of the regime, a process of gradual transition to democracy, to be secured by the involvement of respon sible elites (Schneider, 1991). The intention, therefore, was tomaintain democracy within controlled guidelines and to keep thepolitical Left alienated from theprocess. The

congressional elections of 1974 showed a in the popular support for the opposition party growth MDB (Democratic Movement Party), which made military hard-liners fear that the regime could lose control of the political process and face erosion of the (Renewed National Alliance). regime's party, ARENA the economic boom of the early 1970s Meanwhile, began to fade. The increase in the internationalprice of


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petroleum resulted in the first trade deficit in years. Exports revenues decreased, as the service of the debt increased, resulting, by 1975, in a current account deficit of US$6.9

billion (Schneider, 1991). Economic growth experienced a speedy decline, dropping from 9 per cent in 1975 to 4.8 per cent in 1978. From 1975 to 1978, foreign debt increased from US$15 billion to US$43.5 billion. Inflation also grew, from 28 per cent in 1974, to 40 per cent in 1978. However, get worse!

thingswould

billion. The conflict between theMinister of Planning, structuralisteconomist Jo?o Sayad, and theMinister of

Finance, neo-classic economist Francisco Dornelles, culminated with the substitution of the latterby Dilson Funaro, a businessman from S?o Paulo who inaugurated a series of economic plans aimed at curbing inflation.

During Funaro's term as Minister of Finance, two attempts to control inflation by freezing prices and wages (Piano Cruzado and Piano Cruzado II) failed. The next attempt would come from the new Finance

The 1980s began with Brazil facing the debt crisis at itspeak. Most of the loans to Brazil, as to other Latin American countries, were attached to the New York prime rate, a detail that happened to be disastrous. In

1977, the prime rate average was 7.8 per cent, soaring to 21.5 per cent by 1980. American banks, as creditors of most of the loans made to Latin American, were in danger of accruing huge losses, ifcountries defaulted on payments. Action was needed toguarantee repayment of

loans. The American government, taking the side of US private banks, used its influence in the IMF and the Consensus-to the Washington Bank-under World on the indebted a structural adjustment program impose Latin-American countries. It was the opportunity not only to guarantee an influx of service payments toUS private banks, but also to conform the economic system of Latin American countries to the conservative princi ples of economic liberalism. General Jo?o Figueiredo, who succeeded Geisel in 1979 after an internalpolitical

struggle between hard-liners, who demanded a returnof the "good old times" of the regime, and abertura supporterswho wanted to continue thegradual transition to democracy. As the economic crisis grew, the regime loosened the restrictions imposed on the political sys tem. In 1979, after a campaign involving several sectors

of civil society, the amnesty law was passed in Con gress, allowing many opposition leaders to return to Brazil and resume political activities. In 1980, a consti tutional amendment allowed for free elections of state governors by 1982. However, full democratic rules

were to be postponed.

During Jose Sarney's government (1985-89), the relation of the government with the IMF was ambiguous and difficult, for Sarney was aware of the unpopularity of the IMF as a foreign body interfering in Brazilian affairs. The alternative was a direct negotiation with creditor banks, but the recipe was no different: the

agreement includedmore cuts inpublic expenditures. At the beginning, Sarney had good economic indicators to 456

capitalize on. Unemployment presented a small decline and GDP was up to 5.7 per cent. However, inflation continued to grow and external debt reached US$ 96

Minister, Luiz Carlos Bresser Pereira. This time, though the plan also included the freezing of all prices and wages as had the previous plans, it adopted mea sures typical of the neo-liberal agenda: decreasing

salaries, high interest rates and currency de-valuation. Within a few months, the plan also failed and Bresser Pereira was dismissed from his post.

successor to Bresser Pereira, Ma?son da was on of the side the orthodox clearly N?brega, spectrum, but, once again, adopted prices and wages The

freeze as an initial attack upon inflation. The orthodox agenda, however, was in place but to no avail. For the fourth time in Sarney's government, the attempt to push

inflation rates down failed. As recession deepened, inflation sky-rocketed. Itwas the estagflag?o phenom ena, as economists called it,meaning economic stagna tion with hyper-inflation. There was no doubt that

inflationwould be the main topic of the presidential elections of November 1989-the firstdirect elections in Brazil since 1961. Inflation continued escalating and, as the year ended, totaled 1,861.6 per cent (World Bank quoted in Portella Filho,

1994).

The Setting of the Neo-Liberal Mello

Agenda

It was with the election of Fernando Collor in 1989, that the neo-liberal agenda became

de the

dominant ideology inBrazilian politics (Negrao,1998). Collor was a former governor of the small and poor state of Alagoas, where politics had been seen as a "game" permitted only to the rich and powerful. Despite his connections with the military regime, during the as presidential campaign, Collor portrayed himself offered as His discourse usual." outside of "politics something for everyone. To the middle class, he to promised to combat corruption in the government and eliminate privileges within the public

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mized by the small group of high-earning public ser vants, nicknamed the "maharajas." To the poor and disorganized mass of workers, Collor presented himself as the protector of the descamisados, copying the populist discourse made famous by Eva Peron inArgen tina in the 1950s. In addition, he made "modernity" his buzzword.

Collor's economic agenda, at thebeginning, was as confusing as his political discourse. As his first act in office, he launched another economic plan to control inflation. The ambitious plan was to be conducted by Zelia Cardoso de Mello, a professor of Economics at

theUniversity of S?o Paulo, about whom few had heard before. On March 15, 1990, Collor announced the workings of the plan, justifying the radical measures on

grounds that the government had "only one bullet to kill the tiger of inflation" and guaranteed that the target would not be missed. The most notorious measure of the plan was the retention of all private deposits in banks as well as financial invest that exceeded US$1,200,

ments, ofwhich only 25 per cent-or US$600, whichever was larger-could be released to theirholders. The rest

of themoney would be gradually released, in 12 allot ments, by September 1991. Similar to previous plans, the Piano Collor also included a freeze on prices and services; wages were to be corrected, based on an estimation of the future inflation rate.

Collor decided that he would not only implement theneo-liberal agenda, but thathe would also propagate the ideology of neo-liberalism as well. However, even this attemptwas disastrous. After publishing a series of

articles in the Folha

de S?o Paulo-one

of the main

Brazilian newspapers-in which Collor sold the neo liberal agenda in an intellectual wrapping, itwas re vealed that the articles were copies of writings by Jose

Guilherme Merquior, a former professor and diplomat who died a few years before. Nevertheless, therewere other intellectualswho took on themission of defending

neo-liberal proposals, though trying to disconnect the proposals from the term neo-liberalism. In 1991, the

formerMinister of Finance of the Sarney government, Luiz Carlos Bresser Pereira, wrote an article to argue thatCollor was not a neo-liberal (Negr?o, 1998). Later, in another article published in 1997, Bresser Pereira, now as minister of the Federal Administration and Government Reform, argued that the administrative

reform plan of President Fernando Henrique Cardoso was not neo-liberal (Bresser Pereira, 1997; see also Andrews & Kouzmin, 1998). In the two cases, how ever, Bresser Pereira failed to provide solid argumenta tion.The argument for social-liberalism, a term adopted

by Bresser Pereira (1997) to replace neo-liberalism, leaves no doubt that the two terms refer to the same agenda.

government came to an end when a major scandal corruption involving campaign funds, trafficof influence and mis-use of public money resulted in his impeachment inSeptember, 1992. However, themission Collor's

The plan failed within a fewmonths. Inflationwas back at a peak of 20 per cent a month and the recession was even worse than at the end of Sarney's government. The Minister of Finance tried yet another package of economic measures, the Piano Collor II. The agenda was even more clearly based on neo-liberal principles. Heterodox instruments-such as the indexation of the economy,

introduced in 1964 by themilitary govern

ment-were

abandoned.

Privatization,

government

downsizing, lower import taxes and opening the econ omy to external capital entered the agenda. More than a choice of economic instruments, as pointed out by Pinheiro and Giambiasi (1994), the privatization pro gram during the Collor government had the role of establishing the ideological commitment to theprinciples of the free-market. This became even more clear when Zelia Cardoso de Mello, after the failure of Collor II plan, was replaced byMarcilio Marques Moreira, well

known forhis commitment toneo-liberal principles. The new Minister was to follow the prescriptions of the IMF with devotion: high interestrates; liberalization of short term capital investments; and compressed wages (Ne gr?o, 1998).

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of sustaining the neo-liberal program would be contin ued by the next government. The Piano Real: Success and Debacle of a Conservative Program

Anderson (1995) has argued thathigh inflation rates were part of a strategy tomake neo-liberal prescriptions more acceptable within democratic regimes. If this is correct, what came to happen to the government of Itamar Franco-the vice-president who took office after Collor's impeachment-represents this strategy in full. During the tenmonths thatpreceded the implementation of thePiano /tea/-theplan thatwould finallybe success ful in controlling inflation-the new Minister of Finance of Franco's

government, Fernando Henrique Cardoso, seemed to intentionallypermit inflation to jump from 20 per cent per month to 40 per cent, in order tomake the tough neo-liberal prescription acceptable (Negr?o, 1998).

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to the public

markets. The net flow of dollars

The economic plan launched in 1993 was, indeed, creative. Instead of tryingonce more to freeze prices and wages, theplan went back to a radical indexation of the economy, introducing an index named Real Unit of

anchored in the dollar exchange rate. As the adoption of the new index began to be widely adopted by economic agents, it was transformed in the new currency, the Real, freed from inflation. Contrary to

Value,

previous plans, thePiano Real was implemented gradu ally so that itwould allow for a slow de-valuation of the new currency. More than a year passed from the new of the plan and the introduction of the beginning new currency, the Real, in July 1994. To the general public, itwas an almost incredible success. After five failed attempts since 1986, the Piano Real finally delivered the end of double digit inflation rates. This achievement had the ability to de-mobilize the opposi tion, for any criticism of the neo-liberal program was

in Brazil became Once the reacted, raising government negative. again, interest rates to 40 per cent. Itwas like shooting one's own foot: higher interest rates pushed public debt to

34.5 per cent of theGDP and it is forecast to reach 40 per cent by December 1998. The rest of the economy, not yet recovered from the impact of the first increase of interestrates, is facing recession. The US investment firm J.P. Morgan estimates that the Brazilian GNP in 1999 will decline by 4 per cent in relation to 1998

(Sachs, 1998). Even after raising interest rates, the flight of short-term investments continued: in only two days, from August 30 to 31, US$22 billion left the country; from September 16 toOctober 1, the average capital flow out of Brazil was US$429 million a day (Prado, 1998).

rebuffed on the grounds that alternatives would destroy the Piano Real and the hard won economic stability. Limitations to the plan, however, existed and the problems would soon become public. To keep inflation rates down, incentives to import consumer goods, initiated in Collor's term, continued. The argument was that Brazilian industry needed to become competitive and thiswould be forced by open ing the door to cheap imports fromAsia and elsewhere. The impact on the Brazilian industrywas huge. In the

district of Americana, state of S?o Paulo, for example, the number of textile industries declined from 1,486 in 1990, to 621 in 1996 (Calais, 1998). Productivity in several industries did increase, but at the cost of mil lions of jobs. In June 1998, the unemployment rate in S?o Paulo's metropolitan area was 19 per cent; the

percentage was higher among women (22 per cent) and young adults, between 18 and 24 years old (27 percent) (Pinheiro, 1998). To back-up the imports, the doors were opened to short-term capital investments. It is estimated that only one-third of theUS$30 billion that entered the country, during the four years of President Cardoso's first term in office, corresponded to produc tive investment. Most of these foreign investments, however, were due to the privatization of public enter prises (Fiori, 1998 ).

The perspective is that Brazil will enter the next centurymore fragile than itwas during thedebt crisis in the 1980s. The public sector will surely be poorer and

have less capacity to control strategic services. From 1990 to 1998, Brazilian public assets were privatized at record levels. During Collor's term, 18 enterprises were privatized, generating US$ 4 billion; Franco's presi dency implemented the privatization of 15 enterprises, generating a revenue of US$ 4.6 billion; during Car doso's first term as president, 23 enterprises were

privatized, providing US$ 27.6 billion1 to the govern administration ment (Paulani, 1998).The Cardoso eliminated the restrictions to theparticipation of foreign capital in the privatization program, previously limited to 40 per cent of the total capital. As a result, several strategicpublic services, such as electricity and telecom munications, are now controlled by foreign companies.

in theworld has seen such a speedy and in huge privatization program as has been implemented Brazil in the 1990s. The auction of the Telebr?s, the federal telecommunications company, in July 1998, was Nowhere

nicknamed the "biggest privatization on Earth." Sold at a price of US$ 20.83 billion, theminimum price estab lished by the government was US$ 11.25 billion. The

liberal magazine The Economist (1998, that theBrazilian government considered the p.22), said success a and that some buyers may have got auction

well-known

"bargains."

In 1997, Brazilian markets were affected by the financial crisis sweeping South-East Asia, with Cardo so's government reacting by raising interestrates.When the situation seemed under control, the crisis inRussia by mid-1998 ignited another panic among international financial investors who fled from Brazilian stock

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When compared with the privatization push, the administrative reform proposed by Minister Bresser Pereira in 1995, seems just as a small initiativewithin the larger neo-liberal blueprint. However, ithas served an important role as propaganda for thewhole project.

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The Directive Plan toReform theGovernmental Appara tus (Presidencia da Rep?blica, 1995) ismirrored inNew and includes Public Management prescriptions

contracting-out of basic public services, creation of quasi-markets, as well as proposing the separation between formulation and implementation of public policies, in a clear adherence to the assumptions and prescriptions of Public Choice Theory (Andrews &

Kouzmin,

1998).

Similarities and Contrasts in Response to Economic Crisis

to suppress inflation rates. The success achieved by the Piano 7tetf/-reinforcedby the failure of all the five the focus of governmental previous plans-changed action post-1994 to keeping the status quo; that is, low

inflation rates. Together, Brazilian authorities during these two periods have tried to achieve these goals without breaking with the international financial sy stem2. However, privatization-an IMF prescription since the early 1980s-only became a substantial part of

economic programs inCollor's government, reaching its peak during the first term of President Fernando Hen rique Cardoso's government (1994-1998). The strategy for obtaining dollars was distinct in the two periods. In

theperiod thatpreceded thePiano Real, the government needed dollars to keep foreign debt payments, which was mostly governmental debt. The main strategywas

in providing incentives to export and the exchange rate was adjusted accordingly with this policy. Because the debt was mostly governmental, the deficit was covered by monetary expansion, which boosted inflation. In contrast, the Piano Real needed dollars mostly to maintain the level of imports, in order to keep internal consumer prices low. This policy required keeping the real/dollar exchange rate high and opening the country to short-termforeign investments. The public deficit has been financed by borrowing and internaldebt became a

huge problem. As President Fernando Henrique Cardoso prepares forhis second mandate, the economic situationworsens. All things considered, it seems unlikely thatBrazil will

to avoid the recessive recipe that has been applied by the IMF in Indonesia, Korea and Thailand. Though theBrazilian government has announced thatthe agreement with the IMF settled in October 1998 is be able

AHUMADA

it still includesmany of theprescrip

& ANDREWS/

The

Impact

predominated from the governments of General Geisel to Sarney and the second beginning at President Car doso's first term-with Collor's and Itamar Franco's governments representing the transition between the two-one may see that at least two things did not change until today: unlimited flow of capital and the compro

mise for keeping foreign debt payments.

The debt crisis of the 1980s, and the current economic crisis inBrazil, present similarities, as well as contrasts, in governmental response. From the late 1980s to 1993, themain focus of economic plans were

uniquely Brazilian,

tions of the early 1980s: control of public deficits and financial liberalization. By analyzing the characteristics of the economic policies implemented in Brazil in the two distinct periods since the debt crisis of the 1980s-the firstperiod represented by the policies that

of Globalization

on Latin

In thepolitical sphere, Brazilian leaders have either succumbed in the struggle with inflation or, as in the government of President Cardoso, became captives of the financial market. In the two situations, however, leaders seem unwilling, or unable, to search for long term development alternatives. The trouble with neo liberal ideology is its effect on the search for alterna tives. Neo-liberalism has molded the beliefs of so many

Brazilian politicians and intellectuals since the 1980s (Oliveira, 1995), that the lack of a critical mass is impairing Brazil's ability in developing alternatives. While theneo-liberal agenda isbeing challenged all over theworld, inBrazil, neo-liberalism still survives.

THE COLOMBIAN CASE The State and Violence The widespread climate of violence thathas perme ated Colombian society during more thanhalf a century became increasingly acute from themid-1980s. From this time, the offensive against the state and its institu tions emerged clearly from threemain sources: drug trafficking;guerrillas; and private justice organizations, better known as para-military groups. The state seems to be losingmore and more ground in its confrontation

with these forces, to the point where para-military groups control important regional areas where there is neither state presence nor public authorities. Colombian drug policy and related reforms under taken by different administrations can only be properly

assessed within the context of the increasing economic and political influence of theUS inLatin America. The

"drug war" has been perceived as the new pattern of American interventionism in the region, put into opera tion once the Cold War faded away. The problem of drug-traffickingpresents thepeculiarity that itoccurs in an international environment where themain actors are Colombian, as producer, and US, as consumer, within

American

States

459

the framework of a dependency relationship (Infante, 1991).

instability. Like those in the rest of the continent, this movement arose under the influence of the Cuban Revolution. But, in contrast tomost of these groups, the guerrilla movement inColombia has strengthened from decade todecade. The most powerful guerrilla organiza tions in thecountry are theRevolutionary Armed Forces

It is precisely in the area of anti-drug policy where the relationship between the two countries has experi enced unprecedented deterioration during the present decade. The situation became particularly tense during

the administration of Ernesto Samper (1994-1998), who has been accused of reaching the presidency with drug traffickingmoney. In spite of thegovernments efforts to

of Colombia and the National Liberation Army3. It should be pointed out that the struggle against the drug cartels has provided

the main guerrilla groups the to strengthen and expand needed "breathing space" they in their influence practically all the regions of the

demonstrate its commitment to the anti-drug crusade, the countrywas de-certified on two occasions (1996 and

country.

1997), certified with conditions in 1998, with the Colombian president being stripped of his American visa in 1996. Also, under pressure by theUS, the so-called Proceso 8000 was set inmotion in late-1995, generating

Recently, theguerrillas have been more determined to consolidate numerous strategic territories. Although they continue to use kidnaping, extortion and military

the deepest political crisis in the country during thepast decades. This was a process throughwhich a consider able number of politicians were tried and imprisoned for their alleged links with drug-trafficking. As a conse

quence, thisprocess damaged and weakened the reputa tion of Congress and the traditional political parties, with which the groups thatare on trial are associated. In fact, because of international pressures, members of Congress have concentrated on the discussion and approval of anti-drug laws, impeding or minimizing the debate on other important economic and political issues.

and civilian attacks as tactics, they now identify the municipalities as favorable means for increasing their power, which is why they have concentrated on local government management. With regards to decentraliza tionpolicies, they try to impose municipal development plans thatguarantee they receive a percentage of public costs from the contractors. Intensification of guerrilla activities during theOctober 26 1997 electoral campaign to choose regional representatives was an

works

indication of this local interest.The tragic result was a large number of candidates threatened, kidnaped or

assassinated.

the In this context of institutional weakening, intervention and its the US open Embassy prominence of in all national affairs generated two opposing reactions. First, the securing of important concessions for North

Americans by the Samper administration, especially those which have to do with the adoption of anti-drug traffickingmeasures and the establishment of better

conditions for foreign investment. The second reaction was the revival of nationalistic feelings throughout the country, from Congress to trade unions and grassroots organizations.

The election of Andres Pastrana in the past presi dential campaign brought an immediate normalization in the relations with theWhite House. In fact, during this campaign, not only theClinton administration, but also

foreign investors, stated clearly theirpreference for the new president. For his part, Pastrana made a clear commitment to theAmerican agenda for Colombia in which the struggle against drug-traffickers is still a priority. In addition to the drug war, the guerrilla movement been a fundamental factor of violence and also has

460

To darken even more the panorama of Colombian violence, so-called paramilitary organizations, which exercise private justice, have become widely known during the last two decades. Their sprouting and prolif eration confirms the absence or incapacity of the state to fulfill essential functions. The problem of civil popula

tion displacement is well-known and has been aggra vated in the last year as a result of increasing confronta tions between paramilitary and guerrilla groups in numerous regions of the country. Also, both forces are waging a battle for airspace control. The former are determined to break the "runners" that the guerrillas use, which are of vital importance for food and arms transport.

Considering the previous analysis, itcan be clearly understood why Colombia has not been able to consoli date the monopoly of force in its national territory. According to a recent study, the costs generated by violence inColombia between 1991 and 1994 represent 32 per cent of national public investment, 12 per cent of farming production and nearly two per cent of the total In the words of Rangel (1996, p. 110), the GDP4.

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intensification of the conflict and itsdegradation cannot be controlled by a state thathas been over-whelmed and has become only a spectator of the confrontation, at the same time that very emphatically condemns all barba risms thatoccur, without the capacity neither to prevent them nor to punish them. As a consequence of this increasing violence, the search for peace has turned into a national goal. In July 1998, inMainz, Germany, a meeting between ELN chiefs and some members of the so-called civil society took place, under the auspices of the authorities and the church of this country. The result of thismeeting was

the exacerbation of violence gave momentum process of political transformation. The Implementation

to this

of the Neo-liberal Model

Although the administration of Virgilio Barco initiated the process of economic liberal (1986-1990) ization and statemodernization, the full implementation of the neo-liberal model, as such, started only with the

government of Cesar Gaviria (1990-1994). This process was furthered by the Ernesto Samper administration (1994-1998) and, most recently, by theAndres Pastrana government (1998-2002).

thePuerta del Cielo Agreement, thatcomplements some points agreed upon in a controversial document signed by the two parties. Later on, some of the representatives of this civil society held a meeting with theparamilitary

Several reforms were undertaken by the Gaviria administration to achieve its goal. In December 1990, the president sought, and got, Congressional approval

formally opened inColombia.

the same year, thePresident dissolved theCongress and a Constituent Assembly took itsplace. This body was in charge of writing a new Constitution for the country, one which provided the legal framework for the imple

groups and signed with them another controversial document called theParamillo Agreement. InOctober, the dialogue between the civil society and theELN was

At the same time, in spite of the aggravation of the armed conflict and of theproliferation of attacks on the a negotiation process with this part of the FARC, organization is starting.No doubt, thePastrana adminis tration has given high priority to the relationship with this guerrilla group, the strongest in the country. In themidst of

this general enthusiasm regarding the search for peace in the country, a deep and justified concern over the sovereignty and territorial integrityof the country has arisen. International interestand cooper ation in the process are perceived as mechanisms for

achieving the "Balkanization" of the conflict. In this regard, the US and, to a lesser extent, Germany and Spain, have been participating openly in the process. The US has even organized meetings and events with politicians, academics and several leaders, todiscuss the peace issue5. In addition, the FARC and theELN have been looking for new approaches with a variety of sectors inWashington. The latter group put forward, recently, the formation of a confederated state,with an autonomus public force, its own legislation and educa tion, similar to the Swiss model

(El Tiempo,

1998d).

As in the case of drug-trafficking, thepersistence of violence in theColombian society has given theUS the

pretext they need to intervene openly in the domestic issues of the country. At the same time, ithas provided some sort of legitimacy to thevarious administrations in the implementation of neo-liberal reforms. No doubt,

for labor reform. A structural reform of Colombian foreign tradewas made on January 10, 1991. In July of

mentation of neo-liberal reforms.

Authorized by theCharter, inDecember 1992, the Executive was able to design and decree a major admin istrativereform,which eliminated several governmental organizations. This reformwas clearly aimed at weak

ening the economic role of the state and at paving the way for the privatization of state-owned companies. Some economic and social functions, although essential, were not profitable and were either eliminated or substantially weakened by this administrative reform. 1993, the Health and Social Finally, in December which theprivate capital to introduces Security Reform, these sectors, was passed by theCongress6. The

Samper administration continued with the implementation of neo-liberal reforms, although it claimed to be moved by a social concern. In his Devel opment Plan, best known as The Salto Social (the Social

Samper expressed his commitment to a further opening of the economy and to theprivatization of state owned companies. Under increasingly strong pressure from theUS government, theColombian president made

Leap),

every effort to fulfill all its demands regarding these policies. In a recent evaluation of the results of the govern ment' s Development the National Planning Plan, Council raised strong criticisms about to the social

policy of the Samper administration, considered, by


461

In the electricity sector, important companies were auctioned, such as Termotasajero, Termocartagena, Epsa, thehydroelectrics of Chivor and Betania, as well as theElectric Power Company of Bogota. A common trait in all these processes was the reduced price the

him, to be his main achievement. In the past term, poverty in Colombia not only rose from 48 to 57 per cent, but also social investmentswere diverted to other aims. According to Sarmiento (1997, p. 72), in only three,years, the governmental plan has been able to increase the concentration of power and wealth and, of course, has generated greater poverty. The budgetary cutsmade to theoriginal plan have been of suchmagni

government set for their sale, after international experts were called upon to estimate the cost of these compa nies. In the telecommunications sector, this administra tion also opened the door to foreign investment in key sectors thatwere handled by Telecom, the state com

tude that, at the end of its term, the government only executed 50 per cent of themoney initially announced.

pany.

According to this same document, one of themain pillars of theDevelopment Plan and of thegovernment's

the fullprivatization of the strategic state companies, Ecopetrol and Telecom, was not achieved by the Samper administration. This setback was due to the combination of two factors: the persistent struggle by theunions of these sectors against privatization and the weak political stance of the Sampers government, as a However,

creation of 1,600,000 jobs-failed Colombia has 314,299 more unem Today, completely. than in the first trimesterof 1995, which ployed people an of 65.6 per cent, counting only increase represents those of the seven metropolitan areas (Sarmiento, 1997, p. 72). InMay 1998, unemployment reached an unprec social policy-the

consequence of the already mentioned drug scandal it had to cope with.

edented 15.8 per cent (El Tiempo, 1998b). Not only did unemployment levels rise, but the quality of work did not improve (El Tiempo, 1997b).

The Increasing Pressure of International Financial Institutions

As in the rest of Latin America, Colombia's high rate of unemployment is a direct consequence of the opening of the economy, which has brought about the bankruptcy in theproductive sectors of the country. The elimination of employment opportunities in the agrarian sector, aggravated by theweakening of the role of the state and the elimination of most of the agrarian institu tions, has worsened the prevalent climate of violence, forcing more and more agrarian workers to abandon their traditional crops and engage indrug production or or the para join either the irregular guerrilla armies

militaries.

The Samper administration continued with thedrive toward setting better conditions for foreign investment in the country. Toward this end, in 1995, Samper modified the oil contracts with theMNCs of the sector, in order to give themmore guarantees. Currently, there are more than one hundred of these contracts inColom bia. It was established thatEcopetrol, the state com

costs and pany, would assume 50 per cent of exploration were areas that in was first allowed key private capital handled previously exclusively by the state company. In addition, the cuts on public expenditure have affected the state company in a very significantway, reducing its new resources and to continue its capacity to explore modernization plan (El Tiempo, 1998a).

During the 1980s, Colombia managed, somehow, to evade the acute economic crisis thataffected the other Latin American countries. Nevertheless, although the

country did not reach the levels of external indebtedness of other nations, the debt has since increased. While in 1988 total debt amounted to US$16 billion, in 1997, it rose to US$31.2 billion, an amount representing one third of total goods and services production of the country. Thirty two percent of the total budget of 1998

will be used to pay for the debt service (El Tiempo, 1997c). In themeantime, the deficit in the balance of payments' current account, resulting from the liberaliza tion of imports and the increasing debt, is currently 5.8 per cent of the GNP, one of the highest in the world (Sarmiento Palacio, 1998).

on During the last two years, the IMF has insisted thenecessity of reducing thefiscal deficit and to restruc ture public spending. In its second official mission to the country in 1997, itwas settled that the deficit would

rise in 1997 to 4.8 per cent of theGNP (approximately US$ 4.5 billion), implying drastic budgetary cuts. If Colombia did not comply, itwould probably face a severe crisis before the end of the twentiethcentury (La insisted on Republic, 1997a). At the same time, the IMF and to the need improve condi speed-up privatization tions for foreign investment, especially in the oil and communication

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For itspart, the Inter-American Development Bank is a country of (IDB) has indicated that Colombia no that it reforms and is longer a model of incomplete

economic growth and stability inLatin America. Thus, whereas, in the 1980s, the country held firstplace in the region in terms of economic prosperity, in 1997, it placed fifteenth. In a recent publication of itsEconomic and Social Report, theBID (1997) indicates thatColom bia has advanced with regards to its international trade liberalization and in financial de-regulation, whereas in other areas such as tax policy, privatization and labor legislation, the level is just mediocre. The most critical sector, according to the report, is labor legislation, a field inwhich the reforms have been very timid. It also insisted on the necessity to advance educational decen tralization, giving more power

grass-roots

to municipalities

and

organizations.

The World Bank, on the other hand, continues to insist on fiscal reforms and recommends the use of second generation reforms for furtherdevelopment (La

Republic, 1997b). The World Bank knows thatalthough the economic prospects of the country depend on external factors, such as the relationship with theUS, themost

important factor will depend on the political and the general macro-economic management position of Colombian authorities, as demonstrated by the

country's historical development. In this regard, the Pastrana administration has just announced a strict adjustment program, which prescribes increases in indirect taxes, wage rises for state employees under the inflation rate estimated for thisyear, privatization of the oil and the telecommunications companies, new labor reforms and reduction in the fiscal transferences from the central state to themunicipalities and departments.

Politicians Versus Technocrats Traditionally, Latin American political parties and politicians have been widely associated with such practices as corruption and clientelism. Throughout the region, the public, encouraged by the media, has become increasingly disappointed with the performance of politicians and traditional parties. The outbreak of the economic crisis during the 1980s, and the perceived inability of the ruling classes to deal appropriately with it, added to their discredit.

The neo-liberal elite found a very appropriate to fully implement themodel in the region and managed to capitalize on this widespread feeling of milieu

discontent toward thepoliticians. The technical approach

to political problems exhibited by this elite, with its search for efficiency and its claim for neutrality, have further contributed to undermining the authority of traditional politicians. In fact, this new "technocracy"

took hold of Latin American states during the 1990s. It has close links to international capital and the interna tional financial institutions. It also has strong roots in the financial sector, which has enormously benefitted from the implementation of neo-liberal reforms in these countries. Although traditional politicians continue exercising theirpolitical leverage, the real power is in the hands of neo-liberal technocrats.

In Colombia, the consolidation of the neo-liberal elite in the control of the state took place between the Barco and theGaviria administrations and the presence of technocrats in high positions of power was substan

tially increased during the former. Barco held an engineering degree fromMIT and his reputation, before arriving in office, was more as a technician than as a politician. Further, under the Gaviria government, technocrats were brought to leading positions in the state, such as theMinistry of Finance, the board of the central bank and theNational Planning Office. In fact, the new Constitution concentrates in these three offices the key decision-making processes of the state.

A related issue is the strengtheningof theExecutive and the subsequent weakening of institutions, particu larly theCongress. This has been a significant trend in the countries of the region during the current century, to a greater or lesser extent.With the setting of the neo liberal agenda, the autonomy of theCongress regarding the Executive has been further reduced. In the case of Colombia, congressional functionswere severely limited in theConstitution of 1991. A fundamental source for strengthening the Presidential authority under the Gaviria administration came from the 59 Provisional Articles of this Charter, that granted extraordinary powers to the President inmany areas, at a timewhen themarket reformswere being set.

The already mentioned Proceso 8000, set inmotion during thepast administration by theAmerican embassy and the current President Andres Pastrana (who lost the

Presidential election toErnesto Samper in 1994), should be assessed against this context. It was a process in tended to denounce and put to trial many important figures of the two main political parties, including the then President of Colombia, Ernesto Samper, for their real or alleged linkswith drug-traffickers. As themost


463

evident representative of thepolitical class, theCongress has been completely discredited and submitted to enormous pressure by US and thedomestic neo-liberals to force itsmembers to approve every reform theWhite House advocates, from the extradition of Colombian citizens to theUS, to theMaritime InterdictionTreaty, which allows American troops to intercept ships in

Colombian territorialwaters. With such pressure, the US also induced important reforms regarding the setting of better conditions for foreign investment in the coun case exemplifies, very try. Indeed, the Colombian how moral arguments, such as the struggle clearly, to against drug-trafficking, are utilized by the US, advance itseconomic interestsand destabilize a country.

CONCLUSIONS generalization of the neo-liberal agenda throughout Latin America was the result of a conjunc tion of international, regional and domestic factors. The end of the cold war, the consolidation of the US political and military influence in the global sphere and The

intensification of the economic domination and political control traditionally exercised by the US. Most Latin

American countries lost their autonomy in the formula tion of development policies in the process of debt re negotiations. Neo-liberal policies, such as privatization and cuts in public expenditure, were the result of this process. In addition, thewar on drugs have played an important role in the process of re-colonization of the region, especially in theAndean countries.

the domestic level, some differences emerge new regarding the circumstances of the setting of the In to similar. be tend results the model, although quite the case of Brazil, there are two key factors thatprovide At

the the for

the of the of loss and the prestige complete political system reformers on were civilian during by capitalized military the democratization process. The second importantfact, which also accounts for the process in other countries such as Argentina and Peru, was the economic crisis and, especially, hyper-inflation. The success of the Piano Real in the struggle against inflationwas a key fact in President Cardoso's election in 1994 and his re 464

Cardoso-became

the ideological expression of the ruling

elite.

The internationalmarkets crisis only added to the public's fear of economic instability, enhanced by a recent past of hyper-inflation and a list of failed eco nomic plans. However, the growth in unemployment seems to be threatening the ideological hegemony of neo-liberalism: the new Brazilian congress will have

larger number of opposition deputies, though the government's coalition stillholds amajority in theupper and lower houses of congress. This majority is essential to the government's strategy, due to the need to pass

constitutional amendments in order to implement the tough fiscal adjustment negotiated with the IMF.

the increasing economic competition among themain economic centers of theworld, are the fundamental facts in the international context. As discussed, the above mentioned changes in the global situation have meant an

the reformers with the rationale to implement reform. The firstone was the growing opposition of population against military regimes, prevalent twenty-one years. The push toward the opening of

election in 1998. Thus, inBrazil, theneo-liberal agenda began to be implemented as an imposition of the IMF during thedebt crisis and, then-especially in thegovern ments of Collor de Mello and Fernando Henrique

the situation was quite Regarding Colombia, different.As explained above, thewidespread climate of violence, which became more acute during the late 1980s, set thepolitical conditions for the enacting of the new Constitution and the putting into practice the neo liberal agenda. The Colombian people put their expecta tions in the reforms, especially in the constitutional changes, in hope of peace. However, the reforms have given theUS administration the rationale to intervene,

openly, in all key domestic issues inColombia, impos ing economic and political reforms. The Proceso 8000 and the deep political crisis that took place during the administration of Ernesto Samper is a case in point about how theUS utilizes thewar on drugs to pursue its economic and political interests.

It is apparent that themodel of development adop ted inBrazil, Colombia and elsewhere inLatin America has caused unrest and increasing social tensions through out the region. As the implementation of neo-liberal con crisis the social deepens prescriptions and poverty-are already cerns-increasing unemployment arising fromwithin international financial institutions. This is illustrated by the tone of the address of the President of theWorld Bank, JamesWolfensohn (1988, on p. 6), to the institution's board of governors, made October 6, 1998: The notion thatdevelopment involves a totality of effort-a balanced economic and social program-is not revolutionary, but the fact

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remains that it is not the approach thatwe

in

the international community have been taking. [...] We have not thought sufficientlyabout the vulnerabilities-those parts of an economy that can bring all the building blocks tumbling

down. Or about sustainability-what it takes to make social and economic transformation last. Without that,we may build a new international financial architecture. But itwill be a house built on sand.

ENDNOTES 1 Privatization of regional enterprises, owned by state governments, generated US$ 21.4 billion (Paulani, 1998). 2

Except for a short period, when Brazil declared a moratorium, during theCollor government.

3

In 1995, the FARC had approximately 7,000 men and 60 fronts,while the ELN drew on 3,000 men and 32 fronts.If the pace of expansion and growth continues to be the same as the past decade, in littlemore than five

years, guerrilla groups could count on almost thirty thousand armed men and threehundred frontsof irregu lar struggle (Rangel, 1996).

REFERENCES Ahumada, Consuelo (1996). El modelo neo-liberal y su impacto en la sociedad Colombiana (The neo liberalmodel and its impact on Colombian society). El ?ncora Editores: Bogota. Anderson, Perry (1995). Balanco do neo-liberalismo (An assessment of neo-liberalism). In Sader, E. and Gentiii, P. (Eds.), P?s-neo-liberalismo: As poUtica Sociais e o estado democr?tico (Post Neo-liberal ism: Social Policies and theDemocratic State), (pp. 9-23). S?o Paulo: Paz e Terra. Andrews, Christina & Kouzmin, Alexander (1998). O discurso da nova administrac?o publica (The new public management discourse), Lua Nova, 45, pp.

The seriousness of the global economic crisis jeopardizing the lives of billions of people in the Third world must remain a clear warning. For once and for all, Brazil and Colombia, as well as Latin American countries and the rest of the developing world, have to be clear about thenecessity of preserving theirnational sovereignty and recovering their autonomy in order to set a project of development according to the national

interest and, thus, achieve better living conditions for themajority of theirpeople.

4

Echandfa, Camilo, Enrique Leon Queruz y Roberto Escobedo, Insuguridad, violencia y desempeno econ? mico en las areas rurales (Unsafety, violence and economic performance in rural Universidad Externado de Colombia, folio (1997, p.9).

areas), Bogota, quoted by Porta

5

In February 1998, the State Department gathered a group of Colombian citizens, to talk about peace in Houston, Texas,. This is known as theHouston project. A follow-up meeting was held inMay inCartagena. 6 For a thorough analysis of some of this reforms and its impact, see Ahumada (1996).

Banco Interamericano de Desarrollo (1997) Informe econ?mico y social (Economic and social report). Washington DC: Banco Interamericano de Desar rollo.

Bresser Pereira, L. C. (1997). A reforma do estado nos anos 1990: Logica e mecanisnos de controle (State reform in the 1990s: Logic and control mecha nisms). A paper presented at the second meeting of theMontivideo Circle. Barcelona. 25-26 April.

salva polo Calais, Alexandre (1998), Modernizag?o textilde Americana (Modernization saves the textile industry inAmericana). GazetaMercantil. Septem ber 30, A-9.

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Consuelo Ahumada holds a Ph.D. in Political Science from New York University. She is the author of the book El modelo neo-liberal y su impacto en la sociedad colombiana (The Neoliberal Model and Its Impact on Colombian Society), El Ancora Editores, Bogota, 1996. Currently she isAssociate Professor in the Faculty of Political Science and International Relations of theUniversidad Javeriana, Bogota, Colombia.

Christina Windsor Andrews is a Researcher at the Instituteof Administrative Foundation at the University of S?o Paulo (FIA-USP), a graduate student, theDepartment of Administration, of S?o Paulo and a Research University Fellow with the National Research Council (CNPq), Brazil. Her professional includes program experience coordination at theBrazilian Ministry of Agriculture and theBrazilian Environmental AM S?o (IB Paulo, A), Agency Brazil and the United States Forest Service, Washington DC, as well as work for consulting not-for-profit and governmental organizations in Brazil and theUS. Research interests include: public involvement in governmental organizations; government reform; critical theoryapplied topublic management; public administration; international comparative studies; and policy design and analysis.


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