Oh, for the good (?) old dictator days!


Do authoritarian regimes do economics better? The question is surfacing across Latin America as countries place tough financial decisions in the hands of newly empowered democratic players.

Critics of democracy often point to Chile, Latin America's "economic miracle," saying its foundation was built during a 17-year military dictatorship.

Even many Chilean supporters of Augusto Pinochet's military regime argue that it doesn't take guns and dictators to reform economies - and that reform by democratic debate, even if untidy, can in the long run end up stronger.

But a nostalgia for simpler days of centralized and unchallenged decisionmaking rises in some political and economic sectors from Chile to Venezuela, Brazil, and Mexico.

The region shows varied signs of what might be called authoritarian nostalgia.

•In Mexico, the country's first opposition-led Congress spent nine months of rancorous debate, name-calling, and stalemate before approving earlier this month a $67 billion bank bailout plan proposed in March by President Ernesto Zedillo. Some congressional critics point to the "chaos" and conclude Mexico was better off in what has been called the "perfect dictatorship" when the Institutional Revolutionary Party (PRI) - with one of its own as president - ruled the country. Some analysts see a "nostalgia" for those days as a factor in what César Morones of Guadalajara's Center for Opinion Studies calls a "re-PRI-ization" of Mexico.

•In Venezuela, the leader of a failed 1992 military coup, Hugo Chávez, won this month's presidential election with populist promises to play hardball with the country's political class and write a new constitution. Affectionately called "Comandante" by supporters, Mr. Chávez says he needs a new constitution to rebuild Venezuela's disastrous economy.

•In Brazil, the wild card in President Fernando Henrique Cardoso's game plan to pull the South American giant back from the brink of financial collapse is the Congress, which has already held up key pieces of financial reform legislation. As with many Latin presidencies, Mr. Cardoso still holds tremendous powers, especially after his reelection this year, but a balking Congress could spoil his plans and spread the economic difficulties Brazil anticipates in 1999 around the region.

Controversial legacy

In Chile, the economic legacy of General Pinochet's regime has been a controversial issue ever since former President Patricio Aylwin said last year that Pinochet should not be given credit for Chile's economic success, which has been held up as a model for Latin America. Mr. Aylwin was the first democratically elected president to follow Pinochet in 1990.

"If Aylwin doesn't want to give the credit to Pinochet, who does he give it to?" responds retired Gen. Jorge Ballerino, who was the Pinochet regime's secretary-general of the presidency (somewhat akin to chief of staff) from 1987 to 1990. "The reality is [Pinochet] succeeded in a revolution that allowed Chile to prosper."

Even many of the former dictator's strongest critics "credit" him with Chile's economic turnabout in the mid-1970s, though it is more with the idea of burying than praising Pinochet.

Latin America's 'jaguar'

"Oh yes, thanks to the dictatorship, Chile is Latin America's 'jaguar,' " says Maria Luz Trautmann, an economist and consultant with Santiago's Taller Piret, a network of workers' and women's organizations. "But there's no getting around the fact that it's a malnourished jaguar."

Critics like Ms. Trautmann say that behind the "miracle" hides one of Latin America's worst rich-poor gaps and an overworked labor force with few labor-law protections.

Patricio Garcia, a historian at the University of Chile in Santiago, says it was completely out of character for a Latin military regime to go against the region's centralized and statist economies in favor of the free-market model, and he says it was Pinochet who made that economic choice.

Dominique Hachette, an economist at Santiago's Catholic University who was teaching at the time of the 1973 military coup, agrees.

"I was in my office when the generals called [the economics department] looking for someone to handle things for them," recalls Mr. Hachette. "They didn't know what to do."

Several months of internal debate followed during which many military leaders favored the state-run economy typical of Latin America after World War II, says Hachette. The debate ended, he adds, only when Pinochet imposed a program of privatizations, open borders to foreign products, and an end to time-honored price controls.

Such changes were so revolutionary for Latin America in the mid-1970s that they may have required an authoritarian regime to impose them - especially since Chile was the "pioneer" in a region of closed economies, says Antonio Recabarren, managing director of Larrain Vial, a Santiago investment bank.

"You have to remember that 95 percent of prices were controlled, right down to the price of a plain hot dog and the price of one with tomatoes," says Mr. Recabarren. "The state decided how bread could be sliced."

Such state control was par for the course in Latin America. "This was not a Communist dream introduced by [Socialist president] Salvador Allende, but a part of a long-standing statist system that Allende simply tried to take to an extreme."

Given the deep roots of the economic system - not to mention the extreme polarization of Chilean society over the Allende experiment that ended in a coup - Recabarren says it would have been "very difficult for a democratic government to accomplish" what the military regime did, once it decided the course to take.

Still, Recabarren says, "that doesn't mean you can argue that only a dictatorial government could accomplish this," and he singles out the example of Argentina as proof.

"Argentina under [President Carlos] Menem has actually gone further in market reforms than Chile," he says, "and it didn't take a dictatorship to do it."

Argentina's freedom

While Chile maintains certain currency controls, for example, Argentina has complete freedom in the entry and exit of foreign capital. And in Chile copper, water, and trains remain state industries.

Other observers point to deep reforms carried out in other Latin countries as well, including Colombia, Peru, and Bolivia.

"All of which debunks this idea that you had to have an authoritarian regime to achieve such reforms," says Oswaldo Rosales, an economist with the United Nations Economic Commission for Latin America and the Caribbean in Santiago.

An important plus for democratic regimes is that they have to deal with the governmental checks that sometimes end up holding them back from making costly economic errors, Mr. Rosales says.

"The 1982 economic crisis that hit all of Latin America was worse in Chile ... probably because of the mistakes of a rigid political regime that faced no challenges to its direction," Rosales says.

Catholic University's Hachette argues that Pinochet "built" Chile's economic success, while subsequent democratic government's "built on" to it.

Since Pinochet left power in Chile in 1990, the two subsequent democratic governments have focused on making up what they have called the "social cost" of the dictatorship: the high unemployment that accompanied the military regime's labor and trade reforms, and high poverty levels. Unemployment fell from 11 percent in 1987 to about 6 percent at the beginning of 1998; the percentage of the population living in poverty fell from 45 percent in 1987 to 23 percent in 1996.

Hot-dog price controls

But perhaps the most important drawback of an authoritarian regime like Pinochet's is the implicit and explicit limitations on freedoms, observers say. Chile's military regime did spur the rise of an entrepreneurial class that has been important to the country's economic dynamism, Rosales says.

But economic expansion has also been limited by a "truncated political and cultural opening," he adds.

Investment banker Recabarren points to Chile's traditional hot-dog makers who yesterday wanted the government protection of price controls - and compares them to those nostalgic today for more authoritarian times.

"Freedom always brings with it some problems and awakens some fears," he says. "But with experience and foresight most people realize they're better off with it. Little by little that's what people in Latin America are realizing."

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.