Pubdate: Fri, 12 Jul 2002 Source: Wall Street Journal (US) Section: THE AMERICAS Copyright: 2002 Dow Jones & Company, Inc. Contact: http://www.wsj.com/ Details: http://www.mapinc.org/media/487 Author: Mary Anastasia O'grady, Editor U.S. POLICY FUELS POPULISM IN SOUTH AMERICA Bolivia's Socialist presidential candidate Evo Morales says that the U.S. ambassador in La Paz, Manuel Rocha, has been a marvelous "campaign manager." That's because Mr. Morales, who wants to toss the U.S. Drug Enforcement Agency out of Bolivia and reestablish coca growing as a legal business, was a long shot in the polls until Mr. Rocha publicly denounced his candidacy. A Morales victory, Mr. Rocha warned Bolivians, could mean an end to U.S. aid. The electorate read that as Yankee bullying and responded with nationalist pride at the ballot box. Mr. Morales was the prime beneficiary. In the June 30 elections Mr. Morales edged out a former army captain to place second, with just under 21% of the vote, behind former president Gonzalo Sanchez de Losada with just over 22%. According to Bolivian law, when no candidate wins more than 50% of the votes, the top two finishers compete in a runoff in congress. That's slated for the first week of August. Depending on how party coalitions line-up there is a chance Mr. Morales, who began his career in politics as a peasant leader of the coca growers in Bolivia's Chapare region, could prevail. Even if he doesn't, his party is now the second largest in congress. Win or lose, Mr. Morales' second place finish is worth examining. As the vitriolic spokesman of the rising left in a country that has made not an insignificant effort at reform in the last decade, he personifies what Latin Americanists like to call the "backlash" against economic liberalization. In doing so he brings to light the costs of failed U.S. policy in the region. That policy largely consists of a drug war aimed at peasant coca growers, regular but empty promises of trade expansion and a constant flow of international aid that chiefly serves to prop up corrupt public officials and defend the status quo. The Washington consensus applauded the sale of state utility companies to private monopolies, even though that once again left the region's poor at the pricing mercy of the traditional elite. It's not surprising that Mr. Morales' socialist, anti-American, anti-capitalist coca caucus is being heard. If the U.S. doesn't like it, it should think hard about why the Latin American electorate seems to. Mr. Morales likes to chew coca leaf, a centuries-old tradition of the indigenous Bolivians he leads, and he likes to denigrate the "yanqui," a decades-old tradition of Bolivia's left. He has even accused the U.S. embassy of a plot to assassinate him. The third leg supporting his socialist platform is demagoguery against the "neo-liberal" economic model. His party says it wants to reverse the decree that launched the government's market reforms, cancel the privatization of state companies and forgive the bank debts of small borrowers. He also wants to end coca eradication, on the grounds that crop substitution has failed to support former coca-growing families. Given Bolivia's intractable poverty and corruption it's not hard to understand why he has a following. Like Venezuela's President Hugo Chavez, an aficionado of Fidel Castro, and Brazilian presidential candidate Inacio "Lula" da Silva, Mr. Morales promises to avenge the harm done to Bolivians in a decade of so-called market economics. His raison d'etre mirrors that of his ideological brethren in Arequipa, Peru, who last month managed, by violent street protests, to derail the privatization of two state electricity companies. In Argentina, financial collapse has left stunned Argentines echoing his view that globalization is savage and senseless. Yet what passes for a surge in leftist ideology around the region is hardly a popular plea for a return to the legacy of the left, fiscal profligacy, hyperinflation, economic isolation, decrepit state utility companies and heavy regulation that stifles entrepreneurial activity. Rather, it seems a reflection of intense frustration with corruption, mercantilism and above all dashed economic hopes. Bolivia's socialists are making a comeback with the anger vote but like the rest of the region's left, they are short on productive ideas. The last time the radical left won power in Bolivia was in 1982. By 1985 roaring hyperinflation reached 23,500%. Gross domestic product growth averaged -1.4% from 1980 to 1985. A fiscal and monetary stabilization plan in the second half of the decade pulled the country out of its death spiral. Inflation dropped sharply. Mr. Sanchez de Losada was elected to his first term in 1989 and presided over a massive privatization program. By 1998 inflation was below 5%. For much of the 1990s gross domestic product growth averaged better than 4%. Per capita income was around $600 in 1985 but by 1998 it was nearly $1000. But then reform stalled, as did advances in living standards. Per capita income is still just below $1,000 and two-thirds of the population is stuck below the poverty line. Bolivians, told that their country has liberalized, could hardly be expected to embrace the model. It's obvious that Bolivia's reforms, while seemingly dramatic, fell far short of what was needed. As the World Bank says, there is "insufficient investment, weak institutional capacity and entrenched vested interests." The Heritage Foundation/Wall Street Journal 2002 Index of Economic Freedom notes a low level of private-property rights protection. Officially, trade barriers are low but the heavy volume of contraband is a sure sign of too many open palms at legal entry points and over-regulation. Mr. Morales's coca-growing goals shouldn't worry the U.S. If coca production goes up in Bolivia, it will go down in Colombia. Supply to Americans will remain constant as long as they want to shove cocaine up their noses. But his economic logic should be a concern. The radicalized left, as it has in Venezuela, could cause a spike in the misery index. The U.S. has at its disposal the tools to disarm Latin America's class warriors who preach hatred and pack the potential to destabilize the region. It's called trade leadership. By seriously engaging Latin entrepreneurs in trade, the U.S. could spread the values of liberty and creativity. Its current policy of turning a deaf ear to trade needs while lecturing coca-growers on the evils of cocaine and funneling "aid" through corrupt bureaucracies is only a prescription for empowering the likes of Mr. Morales. - --- MAP posted-by: Jay Bergstrom