The MasterBlog: Latin lessons for Europe | Moisés Naím
Subscribe to The MasterBlog in a Reader Subscribe to The MasterBlog by Email

MasterBlogs Headlines

Thursday, November 10, 2011

Latin lessons for Europe | Moisés Naím

El País

by Moisés Naím

November 06, 2011

Some weeks ago I was in Brussels, and by chance found I was sharing the same hotel as many members of the delegations to the EU summit, with whom I had numerous conversations after work or at breakfast. Their tales, anxieties and exhaustion (working nonstop through months dominated by emergencies, bad news and frustration) brought back many memories.

In another age, in the early 1990s, I was a minister in Venezuela, when the government couldn't pay its debts and the economy lay prostrate. Later I was at the World Bank, and a party to similar negotiations in other countries. Failures often outnumbered successes. And we are supposed to learn from failures.

In my Brussels conversations, I was struck by the surprising similarities between this crisis and those earlier ones. Surprising, too, was the general reluctance to admit that the Latin American experience holds lessons for the handing of the EU crisis. "Europe is different," they said. "We have the euro, our economies and financial systems are different, besides our institutions and culture." All true. But there are other realities, also true.

From 1980 to 2003, Latin America suffered 38 economic crises. The region, from its technocrats to its public opinion, have learned from these painful experiences. Perhaps the most important lesson is "the power of the package." The "package" is a set of economic measures that is complete, coherent, credible and politically sustainable over time. Importantly, it offers not only austerity, but also a fair distribution of adjustment costs between social groups, a reinforcement of the safety net for the most vulnerable, structural reforms to generate employment, and, above all, hope for the future.

The curative effect of such a package is great, but so is the temptation to skimp on it. The most recurrent error in Latin America was that of treating the crisis with partial, fragmented measures, thinking it possible to indefinitely postpone unpopular decisions. This is what is now going on in Europe. You need only look at Italy or Greece to discern the Argentinian experience, for example. But sooner or later, reality prevails and half-measures fail. This paves the way for making simultaneous efforts in the infirm areas of the economy: excessive debts, runaway public spending, under-capitalized and ill-regulated banks, uncoordinated fiscal and monetary policies, low international competitiveness, laws that inhibit investment and job creation. To attack one or several of these ills, leaving the others intact, doesn't work. Nor does offering a country perpetual austerity to pay debts to foreigners.

When some critics say that Europe is looking more like Latin America every day, they are thinking of the Latin America of the past, when it was plagued with economic crises. Looked at in another way, the best thing that can happen to Europe is to look more like today's Latin America, which has been weathering the world crisis well, handles its public finances prudently, and takes care to regulate its banks. The region's best countries, Brazil, Chile, Colombia and others, have been growing, generating jobs and broadening their middle class in recent years. To the surprise of many, "Latin America now has the world's most solid financial system," as one well-placed observer said to me the other day.

This does not mean that Europe should adopt the poverty, inequality, corruption and violence so common in Latin America. But it should learn from the successes and failures of a region that knows a great deal about economic crises, bank failures, external shocks, the effects of squandering, excessive debt and the empty promises of populism. Let's hope Europe can handle its crisis as the new Latin America learned to do. In this sense, a little Latin Americanization of Europe is a desirable thing.



Latin lessons for Europe | Moisés Naím

No comments:

Post a Comment

Commented on The MasterBlog

Tags, Categories

news United States Venezuela Finance Money Latin America Oil Current Affairs Middle East Commodities Capitalism Chavez International Relations Israel Gold Economics NT Democracy China Politics Credit Hedge Funds Banks Europe Metals Asia Palestinians Miscellaneous Stocks Dollar Mining Corruption ForEx obama Iran UK Terrorism Africa Demographics UN Government Living Russia Bailout Military Debt Tech Islam Switzerland Philosophy Judaica Science Housing PDVSA Revolution USA War petroleo Scams articles Fed Education France Canada Security Travel central_banks OPEC Castro Colombia Nuclear freedom EU Energy Mining Stocks Diplomacy bonds India drugs Anti-Semitism Arabs populism Brazil Saudi Arabia Environment Irak Syria elections Art Cuba Food Goldman Sachs Afghanistan Anti-Israel Hamas Lebanon Silver Trade copper Egypt Hizbollah Madoff Ponzi Warren Buffett press Aviation BP Euro FARC Gaza Honduras Japan Music SEC Smuggling Turkey humor socialism trading Che Guevara Freddie Mac Geneve IMF Spain currencies violence wikileaks Agriculture Bolívar ETF Restaurants Satire communism computers derivatives Al-Qaida Bubble FT Greece Libya Mexico NY PIIGS Peru Republicans Sarkozy Space Sports stratfor BRIC CITGO DRC Flotilla Germany Globovision Google Health Inflation Law Muslim Brotherhood Nazis Pensions Uranium cnbc crime cyberattack fannieMae pakistan Apollo 11 Autos BBC Bernanke CIA Chile Climate change Congo Democrats EIA Haiti Holocaust IFTTT ISIS Jordan Labor M+A New York OAS Philanthropy Shell South Africa Tufts UN Watch Ukraine bitly carbon earthquake facebook racism twitter Atom BHP Beijing Business CERN CVG CapitalMarkets Congress Curaçao ECB EPA ETA Ecuador Entebbe Florida Gulf oil spill Harvard Hezbollah Human Rights ICC Kenya L'Oréal Large Hadron Collider MasterBlog MasterFeeds Morocco Mugabe Nobel Panama Paulson Putin RIO SWF Shiites Stats Sunnis Sweden TARP Tunisia UNHRC Uganda VC Water Yen apple berksire hathaway blogs bush elderly hft iPad journalism mavi marmara nationalization psycology sex spy taxes yuan ALCASA ANC Airbus Amazon Argentina Ariel Sharon Australia Batista Bettencourt Big Bang Big Mac Bill Gates Bin Laden Blackstone Blogger Boeing COMEX Capriles Charlie Hebdo Clinton Cocoa DSK Desalination Durban EADS Ecopetrol Elkann Entrepreneur FIAT FTSE Fannie Freddie Funds GE Hayek Helicopters Higgs Boson Hitler Huntsman Ice Cream Intel Izarra KKR Keynes Khodorskovsky Krugman LBO LSE Lex Mac Malawi Maps MasterCharts MasterLiving MasterMetals MasterTech Microsoft Miliband Monarchy Moon Mossad NYSE Namibia Nestle OWS OccupyWallStreet Oligarchs Oman PPP Pemex Perry Philippines Post Office Private Equity Property QE Rio de Janeiro Rwanda Sephardim Shimon Peres Stuxnet TMX Tennis UAV UNESCO VALE Volcker WTC WWII Wimbledon World Bank World Cup ZIRP Zapatero airlines babies citibank culture ethics foreclosures happiness history iPhone infrastructure internet jobs kissinger lahde laptops lawyers leadership lithium markets miami microfinance pharmaceuticals real estate religion startup stock exchanges strippers subprime taliban temasek ubs universities weddimg zerohedge

Subscribe via email

Enter your email address:

Delivered by FeedBurner

AddThis

MasterStats