The Politics of Economic Crisis in Latin America

During the 1980s, Latin America's historical pattern of intermittent democracy reasserted itself as one military regime after another gave way to demands for elections and other democratic reforms. Several countries held two or more elections with generally accepted outcomes—including, in some cases, alternation in government. More remarkable still, all of these transitions took place in the midst of a severe region-wide economic crisis, demonstrating that political democratization can succeed even under harshly adverse economic conditions.¹

In order to appreciate the full meaning of this conclusion, one must recall the longstanding conventional wisdom that sees democratic rule as depending upon high levels of economic development and growth. "Ever since the destruction of the fragile Weimar and Spanish democracies in the 1930s," notes Albert Hirschman, "it has been axiomatic that an impairment of economic health will be fatal for a fledgling democracy . . . . More recent experiences have shown, however, that at different historical times the connection is much less tight."²

The Latin American cases provide good examples of the disjunction between political and economic conditions that Hirschman perceives. Beginning with the collapse of the Argentine junta in 1982 and ending with the fall of the Pinochet and Stroessner governments in Chile and Paraguay in 1990, the 1980s were a decade of democracy in Latin America. At the same time, the 1980s were also a period of mounting external-debt problems that led to fiscal crisis, high inflation, and economic stagnation throughout the region.

Granted that economic hardships have not stymied political democratization in Latin America, one may still ask how and to what extent they have influenced the emerging regimes. To answer this question, one must begin by making distinctions among the particular experiences of different countries. There are those, like Chile and Uruguay, where the return to democracy took place in a relatively healthy economic environment. Others, such as Mexico, faced economic adversity within an institutional and political framework that was spared the discontinuities associated with democratization. Our focus here will be on a third set of countries—including Brazil, Peru, Bolivia, and Argentina—where democratic transitions roughly coincided with periods of grave economic difficulty.

The manner in which the political elites of these countries first approached the problem of governing new democracies in times of economic adversity suggests that these leaders saw themselves more as the undertakers of authoritarianism (and the economic hardships identified with it) than as the attending physicians of weak economies and unstable political institutions.³ This attitude owed much to the circumstances of political change. The advent of democracy touched off an explosion of optimism and heightened expectations. For most ordinary citizens, democratization seemed to promise not only the recovery of political rights but also a better chance for social advancement. When elections rolled around, politicians found themselves tempted to ignore economic restraints for a time in order to take up the demands of those who had felt neglected under authoritarianism. The sin of error seemed less deadly than the sin of disappointing the raised expectations of voters.

This policy of social reparation soon backfired, however, and inflation shot up. At the same time, the resource constraints and economic uncertainty imposed by massive foreign debts became apparent. Elected leaders who had believed that they were opening the path to a more just, prosperous, and caring democracy found themselves with a crisis on their hands. For presidents Raúl Alfonsín of Argentina, José Sarney of Brazil, and Alan García of Peru, macroeconomic stability soon began to rank ahead of income redistribution on the list of policy priorities.

Despite anguished—if ineffectual—calls for increased understanding and financial assistance from Washington lest more populist and less responsible leaders arise, the feared scenario never materialized. Rather, after the electoral victories and sudden ideological conversions of Carlos Menem in Argentina, Jaime Paz Zamora in Bolivia, Carlos Andrés Pérez in Venezuela, and Alberto Fujimori in Peru, we are now observing the convergence of adjustment policies across Latin America. The economic emergencies of the 1980s taught a hard lesson: political leaders must become the family doctors of the fragile...