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Regional Outlook : After the 'Lost Decade,' a Strong Latin Spirit : Forecasts for prosperity and stability were surprisingly rosy at a Mexican summit.


GUADALAJARA — Latin American history has been shaped by stubborn and often frustrated idealists.

Simon Bolivar helped liberate the colonies from Spain in the early 1800s but failed to keep them united in independence. Late in the 1980s, Costa Rica's Oscar Arias Sanchez won a Nobel Prize for pushing Nicaragua from war to peace but couldn't persuade any of his neighbors to abolish their armies.

Today the region's utopian spirit is as vital as ever. It was in full bloom here last month as presidents of 19 countries gathered to sketch their vision of the 1990s and, five centuries after the Spanish colonization, to project Bolivar's old dream of a unified Latin America into the next millennium.

For a region struggling to emerge from the "lost decade" of debt crisis--the most punishing economic decline and wildest inflation in its modern history--the presidential assessments sounded surprisingly upbeat. Unity in the coming decade, they declared, will help overcome the continent's chronic poverty and political instability.

For the Record
Los Angeles Times Tuesday August 13, 1991 Home Edition World Report Page 4 Column 4 World Report Desk 1 inches; 22 words Type of Material: Correction
Nobel--In an article on Latin America last Tuesday, World Report incorrectly referred to Mexican poet and novelist Carlos Fuentes as a Nobel Prize winner.

"A new Latin American era is dawning," exulted Venezuelan President Carlos Andres Perez, one of the region's elder statesmen. "It will be a continent where the utopia of an authentic democracy of free and equal citizens reigns, the model for a prosperous new society that seeks to join the First World."

Such euphoria might be dismissed as a fleeting emotion of the two-day summit, the region's biggest-ever gathering of so many like-minded democratic leaders. After a generation of nationalist paranoia, dictatorship and protectionist economics, the elected civilians and free-market believers now in power were congratulating themselves simply for being in the same room.

But their optimism stems as well from the results of two common policies and is supported by a hopeful forecast from the Inter-American Development Bank.

First, negotiations over the last two years to tie their economies together through a web of free-trade agreements, among themselves and with the United States, have proceeded faster than expected. By the mid-1990s, they say, these alliances could lay the foundation for a common market of 400 million Latin consumers, twice as many as the European Community.

Also, many Latin leaders are convinced that painful surgery on their national economies in recent years--cutting public spending, withdrawing subsidies for pampered industries--is starting to pay off; at least it is taming hyper-inflation.

"If policies continue down this road and the reforms are intensified, the economic recovery of the region could be a reality in the course of this decade," the Development Bank predicted last month in its forecast for the '90s. "There are solid reasons to face the future with confidence. . . . Latin America again can achieve significant growth rates with moderate amounts of external borrowing."

The road uphill is long. According to the U.N. Economic Commission for Latin America, the region's per capita production stands today at 1977 levels, having slid by 10% during the 1980s under the weight of unpayable foreign debts.

By 1982, when foreign banks virtually stopped lending for new projects, the Latin model of the 1960s--state-driven development--had gone bankrupt, sapped by self-defeating trade barriers and inflationary public deficits. Billions of dollars in flight capital drained from the region.

Human damage is still being assessed. According to the U.N. commission, 47 million Latin Americans plunged below the poverty line during the 1980s, joining 136 million already mired there.

Health, education, water and housing services deteriorated. Despite falling birthrates, unemployment reached record highs. Crime rates soared in overcrowded cities. A quarter of a million poor people in Andean nations, Brazil and Mexico have been stricken this year by Latin America's worst cholera epidemic of the century; more than 2,500 have died.

The collapse of the 1980s was stunning, frustrating to Latin American visionaries long puzzled by why such a huge region with common language and heritage and no serious ethnic or religious conflicts cannot rise to the greatness of well-being.

"We have not been capable of transferring our cultural richness and continuity to a similar economic richness and political continuity," wrote Mexico's Nobel Prize-winning poet and novelist Carlos Fuentes in a recent essay on the lessons of the 1980s.

Latin America's solution for the 1990s, a free-market model with tight-fisted controls on public spending, has produced the initial effect in many countries of making poverty more acute. But the Inter-American Development Bank predicts that prevailing policies will soon inspire enough new domestic savings and foreign investment to reverse the downward slide.

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