THE WASHINGTON CONSENSUS

1
THE WASHINGTON CONSENSUS

• Osvaldo Jordan
• September 10, 2009

2
ECONOMIC DEVELOPMENT

• OUTWARD DEVELOPMENT - Growth is based on the
  export of those crops in which a country has a
  comparative advantage (Free International Trade).
• INWARD DEVELOPMENT - Growth is based on the
  industrialization of the national economy (Trade
  Barriers and Protective Tariffs).

3
OUTWARD VS. INWARD

• After the 1930s, nationalistic and
  socially-oriented governments leaned towards
  inward development. Getulio Vargas, Lazaro
  Cardenas, Juan Domingo Peron.
• During the Cold War, the US considered these
  government anti-American, and acted to protect
  the interests of Multinational Corporations
  (MNCs).

4
OUTWARD VS. INWARD

• In the 1970s, the World Bank and American
  universities propagated the notion that ISI was
  reducing Latin American competitiveness, and
  therefore countries should undergo Structural
  Adjustment (SA) economic policies.
• During this period, military governments borrowed
  millions of dollars from International Financial
  Institutions (IFIs), and the Club of Paris, to
  finance massive development projects, such as the
  Itaipu Dam and the Trans-Amazonian Highway.

5
THE LOST DECADE

• In the 1980s, several Latin American countries
  declared bankruptcy confronted with the debt
  crisis and uncontrolled inflation rates.
• Since Latin American countries had borrowed
  millions of dollars from International Financial
  Institutions (IFIs) and the Club of Paris, they
  were required to undertake SA measures as a
  requisite for economic stabilization (Washington
  Consensus).

6
STRUCTURAL ADJUSTMENT

• Reduce Inflation and stabilize currency.
• Privatize state-owned enterprises (including
  public utilities)
• Promote international trade and investment.
  Eliminate tariffs and quotas.
• Reduce government spending and social services.
• Relax labor and social security legislation.

7
THE NEW LIBERAL AGE

• During the 1980s and especially in the 1990s,
  most Latin American governments implemented SA
  measures.
• However, these economic policies had dismal
  economic and social results, such as the Peso
  Crisis of 1994 and the Collapse of the
  Argentinean Economy in 2001.
• By the late 1990s, several Latin American
  countries began turning away from the Washington
  Consensus, as well as from traditional political
  parties.

8
THE PINK TIDE

• Former General Hugo Chavez is elected President
  of Venezuela.
• 1999. An indigenous uprising leads former General
  Lucio Gutierrez to the Presidency of Ecuador.
• 2000. Ricardo Lagos becomes the first socialist
  president of Chile after the death of Salvador
  Allende.
• 2002. Former Workers Party Leader, Luis Ignacio
  Da Silva becomes President of Brazil.

9
THE PINK TIDE

• Socialist candidate Tabare Vasquez wins the
  presidency of Uruguay.
• 2005. Former cocalero leader Evo Morales wins
  the presidency of Bolivia.
• Ollanta Humala threatens to win the presidency
  of Peru elections finish virtually tied in Costa
  Rica and Mexico Sandinista leader Daniel Ortega
  wins the presidency in Nicaragua, and Rafael
  Correa wins in Ecuador.
• The Reverse of the Tide?
• Fernando Lugo wins in Paraguay.
• Mauricio Funes wins in El Salvador, but Manuel
  Zelaya is overthrown in Honduras.

10
Is Washington Losing Latin America?

• Free Trade Area of the Americas (FTAA) (Hakim
  2006).
• Alternativa Bolivariana de Las Americas (ALBA)
  (Harris 2005)
• Is there a single tide or are there two different
  kinds of Lefts in Latin America (Castaneda 2006)?