Dr. Evan Ellis

Introduction

As in previous eras of its history, Latin America is currently in the midst of profound change, impelled by both internal and external drivers that are transforming its political institutions and economic structure, and leading individual countries in opposite directions.  Two powerful and interacting dynamics stand out among the myriad of forces impacting the region.  One, the increasing commercial and sociopolitical engagement with the People’s Republic of China, separates the current period from that preceding it with respect to the sheer magnitude of the changes which are taking place.  The other, populism, is the latest chapter in the tragic cycles of hope and frustration, in which large, marginalized segments of the Latin American societies react to the persistent inability of political elites to improve their situation.

Although Latin America has long maintained low level economic and diplomatic relations with the People’s Republic of China¹, the current level of Chinese engagement with the region, and the rate at which that engagement is expanding, represents a historical break with the past.  Bilateral trade between China and Latin America, which was a mere $2.8 billion in 1988,² reached $70.2 billion in 2006,³ and is expected to surpass $100 billion per year by 2010.⁴  Across the continent, new business deals with China, new export patterns, new products in local markets, and the spreading belief that China will be a key part of the region’s future, is transforming Latin American societies in was that are not yet well understood.  In each country in Latin America, the pattern of engagement with China, its socioeconomic consequences, and the political reaction to has been different, depending on the economic structure of the country, its ability to leverage the possibilities afforded by China as a market, its ability to withstand damage from Chinese competition in manufactures, and the political-ideological lens through which engagement with China is interpreted.

Concurrent with the expanding interactions with the PRC, an increasing number of Latin American nations have chosen political paths which depart sharply from the party structures and political coalitions of the past.  The new leaders in states such as Venezuela, Bolivia, Ecuador, and Nicaragua, have typically come to power through established electoral mechanisms, leveraging their ability to mobilize and unify diverse groups of marginalized and discontented segments of the population in support of their candidacy.  Once in power, these leaders have initiated processes of transforming the ideological orientation, economic structure, and political rules of the game of their countries.  Typically, these changes have included public positions sharply critical of the United States, multinational corporations, and western institutions, efforts to rewrite the constitution through “constituent assemblies,” and a much more demanding orientation toward the private sector, from the revision of contracts in primary product sectors to obtain greater tax and royalty payments, to the nationalization of strategic industries and the expropriation of private property.

This paper will use the term “populism” to refer to those governments in which leaders have come to power by uniting and mobilizing marginalized classes against a political system that is perceived as broken, but then use that perceived mandate to change the rules and structure of the system in a manner that increases their own power.  This paper thus makes a distinction between populism and “Leftism,” in which leaders come to power based on appeals to the disenfranchised masses, but once elected, pursue their agendas within existing democratic structures and do not attempt to “change the rules of the game.”⁵

Because the impact of China, and the political situation of populist forces are different in each country in Latin America, the interaction between the two can be understood in terms of a series of three distinct patterns:  (1) China as a sustainer of existing populist regimes, (2)  China as a sustainer of successful free trade and market-oriented regimes, and (3) China as a source of systemic stress moving troubled market-oriented regimes toward radical political change. 

This paper examines the nature of populism and engagement with China, and the impact between them, and the potential ways in which these interacting forces may impact the political character and economic future of the region.

The Dynamics of Populism.

Recent polling data indicates that confidence in democracy in Latin America as a system that can produce economic development, is ambiguous and falling.  The chart in Figure 1 shows the percentage of people in various states who believed that through democracy, their country could become “developed.”

As the results below show, in 11 of the 17 countries included, less than 60% of those surveyed in 2006 believed that democratic institutions represented a path through which their country could advance.  While the results do not indicate that those surveyed actively wish to change their form of government, it suggests that for many in Latin America, democracy has become a “habit” that is continued without expectations of achieving real material benefits.

What is also striking about the results is that in 12 of the 17 countries, faith in democracy as a path to development fell between 2003 and 2006.  Moreover, with the exception of Guatemala, the only countries in which confidence in democracy as a vehicle for development actually increased were those in which new leaders had recently come to power with promises and initiatives for re-orienting the country away from conventional trade and free-market-oriented practices.  The loss of faith is not explainable in terms of macroeconomic performance alone.  During each year of this period, actual economic growth was greater than 4%, including a aggregate 5.3% rate of growth for the region as a whole in 2006.⁶ In other words, the data suggests that, almost without exception, and contrary to progress at the macroeconomic level, the people of Latin America are loosing faith in the ability of conventional democratic institutions and economic structures to solve endemic problems such as poverty, corruption, and inequality.⁷

Figure 1:  Confidence in Democracy as a Path to Development ⁸

Populism, as a political phenomenon, has a longstanding tradition in Latin America, based in leaders who have successfully brought together and mobilized a diverse array of segments within their society, leveraging and focusing their discontent with the status quo.  As Alexander Crowther notes, Latin American populists have included politician populists who took power from traditional agrarian and mercantile elites during the first half of the 20^th century, including leaders such as Getúlio Vargas in Brazil, Juan Peron in Argentina, and Victor Paz Estenssoro in Bolivia, as well as the military populists which followed them.⁹

In order to understand the dynamics and effects of populism, it is important to define what we mean by it.

 As noted previously, this paper characterizes populism in terms of two elements:

1.      The use of raw support and perceived popularity to achieve political objectives.  This may include, but is not limited to being elected to office within the established processes of a democratic political system.

2.      The use of a perceived mandate, once in power, to transform the political system.  This transformation typically involves the use of raw support, including support outside the confines of the legislature from street protests to referendums, to subvert or overcome checks and balances within the system itself, and to advance the power of the charismatic leader and his movement.

In a broader sense, populism must be understood as an interaction between elite rhetoric and action, and conditions such as corruption, inequality, and social or economic marginalization.  In this interaction, the populist leader plays a key role.  The rhetoric and actions of this generally charismatic figure are key to generating and diffusing a compelling message which unites and mobilizes diverse segments of the population.  The message of the populist leader helps the discontented to focus on a common enemy or phenomenon as the source of their suffering, such as the United States or the capitalistic system.  The message identifies the charismatic leader and his or her movement as the path for overcoming the source of this suffering, and mobilizes potential followers through the polarization of politics, dividing the world between those who support the cause of the movement and the charismatic leader, and those who support the continuation of the suffering for their own mistaken or selfish ends.

The most recent wave of Latin American populist leaders, including Hugo Chavez in Venezuela, Evo Morales in Bolivia, and Rafael Correa in Ecuador have each employed a discourse which links the suffering of the marginalized segments of their society to the United States and Western Corporations, and once in power, each has implemented policy changes that place their countries in a confrontational posture toward the United States.  Nonetheless, the defining element of populism is not the anti-US stance of the leader, but rather, the use of the popular mandate to transform the system.

Grievances such as corruption, inequality, and poverty are not the causes of populism, per se.  Rather, they create conditions in which the charismatic leader can frame an emotionally compelling message to mobilize segments of the population whose limited formal education does not enable them to effectively evaluate the logic of the leader’s policy platform.  Problems of poverty and insufficient educational institutions that persisted or grew under prior regimes thus contribute to the ability of the charismatic leader to use mass support to expand his power and subvert democratic institutions once elected.  It is difficult for opponents to hold the leader accountable for policy inconsistencies and violations of process, when his or her supporters are marginalized elements of the society whose primary understanding of policy discussions comes from the representation of their trusted leader, and who for whom the particulars of government institutions and processes are little understood and largely mistrusted.

To further understand that objective socioeconomic conditions are enablers, but not causes of populism, it is useful to examine the relationship between populism and raw income inequality in Latin America.  Indeed, when the GINI coefficient is used as the representation of income inequality, with the exception of Bolivia, the countries in which populist movements generally have some of the most equitable income distributions in Latin America.¹⁰

Figure 2 – Income Inequality in Latin America versus the US by GINI Coefficient ¹¹

On the other hand, to date, the countries in which populists have come to power have been economies centered on the production of primary products.  Figure 3 below shows the distribution of countries in Latin America according to the fraction of GDP produced through primary product sectors such as mining and agriculture.

While populist revolutions have not occurred in all of the states whose economies are most oriented toward primary product production, what is remarkable is that to date, none of the Latin American countries on the side of the spectrum representing more economic diversity have had a populist come to power.  Although countries such as Argentina and Brazil have experienced widespread political discontent and social unrest, the diversified economic bases in these countries contribute to conditions which make them more resistant to populism, such as a large middle class with a vested interest in the status quo, as well as the intellectual capital and resources to defend the status quo from within existing institutions.¹² While the evidence does not support the conclusion that economic development and diversification prevents populism, those countries with a more diversified economic base have thus far been relatively more successful in accommodating social discontent within the existing political system and governmental and social institutions.

Figure 3 – Fraction of GDP from Primary Products¹³

Figure 4 below presents an “influence diagram” which depicts one way of understanding the complex dynamics involved in populism, including the interaction between leaders and elements of the population in the context of evolving perceptions and conditions.

Beginning at the top center with the term “Effectiveness of Rhetoric of Populist Leader,” the diagram shows how this rhetoric directly contributes to “Mobilization of the Masses Around the Populist Leader.” The rhetoric also helps to unite potential supporters in a “Perception of Socioeconomic and Ethnic Identity.”  As shown by the diagram, the ability to do so depends on the “Clarity and Historical Rootedness of Cleavages” in the society.  Appeals based on indigenous consciousness, for example, will be more successful in societies such as Bolivia and Ecuador where there is a substantial population that will identify itself as indigenous, and some historical basis for asserting their identity as a collective group.  As the diagram also shows, the “Unification of the Opposition” is advanced when the populist leader can advance a perception of a common socioeconomic identity” and when that identity coincides with perceived grievances.  If the primary grievance is economic marginalization, for example, the unity of the group will be undermined if a large segment of the indigenous population identify with the prosperity of the mainstream society, rather than with the suffering of the group which is targeted by the populist message.

Figure 4 – Populism as a Dynamic Interaction

 The mobilization of the masses around the populist leader is not only a function of the unification of the opposition and the rhetoric of the leader, but also is determined by the extent of perceived differences and desperation within the society, and its willingness to support non-civic solutions. Note from the diagram that perceived differences and desperation that drive mobilization are partly a function of problems experienced by individuals, such as jobs and income and crime and violence, but also a function of problems experienced in a social context, such as economic and social family health.  An economic downturn which produces job losses may not produce desperation at the political level if there is an intact family support structure.  Over time, the absence of jobs and income may lead directly and indirectly to the breakdown of family structures, and through this breakdown, to higher sustained levels of crime and violence.  Economic growth which produces jobs may take years to restore the economic and social health of families, and to reduce crime and violence.

Corruption and civic culture play important roles in determining whether a populist movement can come to power in a society.  As shown by the diagram, socioeconomic problems help to undermine civic culture in a number of ways.  A lack of jobs and the breakdown of economic and social family health perpetuates crime and violence in was that lead to the toleration of political violence and the violation of the rules of the game by political actors.  Poor economic performance, coupled with endemic corruption leads to poorly performing social institutions, including a dysfunctional educational system.  Low levels or quality of public education proliferates people who cannot critically evaluate the platforms and promises of populist leaders, and thus whom are easily led by their emotional appeals.  Corruption also contributes to the sense of inequality in the society, augmenting perceived differences and desperation.  At the same time, it contributes to the “Feeling that the system is irreparable” through existing institutions and processes, and thus contributes to the willingness of certain segments of the population to support non-civic solutions, such as those advocated by the populist leader.

Although the individual relationships depicted in Figure 4 are subject to debate, the diagram illustrates that a complex interplay of forces and conditions ultimately determines whether or not a populist leader will come to power in a particular country, and once in power and whether he or she will be able to utilize that support to restructure institutions and isolate the opposition.

In addition to the socioeconomic dynamics described above, the nature and timing of electoral events are important for understanding populism.  Each of the current populist leaders has initially come to power through a scheduled electoral contest which served as the focal point for the mobilization of supporters.  Moreover, the rules of the electoral process have often been a deciding factor in the outcome. In the April 2006 presidential elections in Peru, for example, when none of the candidates won an absolute majority in the first round of voting, the top two candidates, Alan Garcia and Ollanta Humala, were obliged to compete in a second round.  Garcia was widely perceived as a corrupt politician whose economic policies during his previous term as president from 1985 to 1990 had been disastrous for Peru.  Nonetheless, the voting rules that produced the second round gave supporters of the other candidates, including Lourdes Flores, the opportunity to back Garcia as the lesser of two evils, and thus block the election of Humala.¹⁴

In Nicaragua, by contrast, a change in the electoral rules, lowered the threshold for electing a candidate on the first ballot to 35% of the vote.  This change, which had been part of a political deal in 2000 between the Frente Sandinista Liberación Nacional (FSLN) and the Partido Liberal Constitucionalista (PLC) in the Nicaraguan congress, allowed the Sandinista candidate Daniel Ortega to be elected president in the first round of elections in November 2006, overcoming an opposition divided between two candidates, Jose Rizo of the PLC, and the reform candidate Eduardo Montealegre from the Alianza Liberal Nacional (ALN).  Had the election gone to a second round, as happened in Peru under different electoral rules, it is probable that supporters of Montealegre and Rizo would have united to block the election of Ortega.

In addition to the electoral rules, the timing of elections is also important to the dynamics of populist movements.  As noted earlier, the most recent wave of Latin American populists have come to power through elections.  Correspondingly, electoral events are frequently focal points around which potential supporters are rallied in the pursuit of power.

Figure 5 above displays the Latin American political calendar for upcoming presidential and legislative elections.  Because of the wave of elections that occurred during 2005 and 2006, few opportunities exist for regime change in South America until approximately 2010, other than a coup or other breakdown of democratic processes.

With the exception of Paraguay, which has its next election in April 2008, the greatest risk of populism in South America within the coming years will likely involve political crises in countries such as Bolivia and Ecuador, as their respective leaders Evo Morales and Rafael Correa wage protracted political battles with diverse opponents over changing the structure of the political system through vehicles such as referendums, constituent assemblies, and legislative actions.  These leaders must balance the diverse demands of their support bases, including indigenous and labor movements, while uniting them to overcome opponents entrenched in the political and institutional establishment which they wish to transform.  The greatest risk in these countries in the near term is arguably a breakdown in the political process which would produce widespread violence and chaos, such as a military coup, or a movement by the conservative departments of the “media luna” in Bolivia to succeed from the country. 

If such a breakdown happens, the manner in which Venezuela and Cuba choose to involve themselves will impact greatly how populism is perceived by both the United States and other countries in the region, and whether or not a consensus emerges regarding the need to isolate these regimes and blocking them from influencing how socioeconomic discontent plays out in other Latin American nations.

Beyond the risk of a political breakdown in existing populist regimes, the possibility that new populist movements will come to power can be analyzed as the intersection of electoral opportunity and domestic conditions.  Correspondingly, this study created an index, corresponding to indicators of factors presented in the previous influence diagram in Figure 5.¹⁶ Although an index does not fully reflect the dynamics of how populism is playing out in a particular country, it provides a snapshot of the political and socioeconomic situation, giving a rough indication of susceptibility to a populist movement.  The figure below shows the position of key countries in Latin America on this “populism susceptibility” index, as plotted against proximity to the next election.

Figure 6 – Populism Susceptibility Index versus Proximity to Elections

What is particularly striking about the scatterplot depicted in Figure 6 is the high coincidence between countries which score high for risk of a populist movement, and those facing elections in the near term.   These countries are concentrated in Central America, and have received very little attention in the discourse on populism in Latin America.  They are also, by coincidence, some of the closest supporters of US policies in the region, and key partners in US trade initiatives, such as the Central America Free Trade Act (CAFTA).

Impact of China

For the nations of Latin America, China is both a partner and a source of commercial competition.  In general, China is primarily an importer of primary products and an exporter of manufactured goods.¹⁷ Consequently, in their dealings with China, those Latin American countries which have export-oriented primary product sectors have benefited the most from increasing sales of their products to China, and high prices for those commodities on world markets due to Chinese demand.  On the other hand, Chinese manufactured goods have displaced Latin American producers from traditional export markets such as the United States, and have cut into market share in their own countries.  Although manufacturers in countries such as Mexico and Brazil have been hurt by this competition,¹⁸ the Latin American countries with the most sophisticated industrial bases have been best able to use their advantage to enter into partnerships with the Chinese as part of global production chains.¹⁹

Figure 7:  Balance of Trade Between China and Select Latin American Countries²⁰

Figure 7, above, shows the volume of imports and exports between the PRC and select countries in Latin America in 2006.  Although balance of trade statistics are an imperfect indicator of the net value generated by a trade relationship, a very high level of exports to China compared to imports from China suggests that the relationship with China is generating net foreign exchange earnings for the country.  Conversely, a very high level of imports from China compared to exports to China indicates that the relationship is, on balance, removing wealth from the country.  In other words, when imports from China significantly exceed exports, it is likely that the damage from competition with local manufacturers is not being fully offset by sales of primary products to the PRC.  Figure 7 thus suggests that some countries in Latin America are reaping significant benefits from their trade interactions with China, while others are not.

Figure 8, below, combines the relative benefit of trade with China with the risk of populism. In the figure, the interaction between populism and China in individual countries in Latin America is categorized on the vertical axis according to the relative risk of populism, using the previously presented populism risk index, and the degree to which the commercial relationship with China is beneficial for the country, using balance of trade data for 2006.

In the upper-left-hand corner of the chart appear countries in which a populist regime is currently in place, and in which the impact of commercial interactions with the PRC are largely beneficial.  Because the countries which have “gone populist” principally export primary products, there is an important coincidence between the political situation and the character of the trade relationships, in which the expansion of trade with China by populist regimes, on balance, generates export earnings and other benefits which help those populist regimes to survive and consolidate power.  As nations such as Venezuela and Bolivia have moved to nationalize strategic industries such as hydrocarbons, Chinese mining and petroleum companies have helped to provide the investment capital and technical expertise to ensure the continuity of revenue streams that fund the social programs of the new regimes.  The two countries in Latin America which received the greatest quantities of actual PRC investment in 2006, for example, were Ecuador and Venezuela.  Chinese oil companies CNPC and Sinopec have reportedly invested $5 billion in Venezuela in recent years.²¹ Venezuela received an estimated $1.6 billion in investment from the PRC in 2006 alone.²²  In an agreement announced during the visit of PRC Politburo member Li Changchun in March 2007, the PRC will further contribute up to $4 billion in credits to a $6 billion heavy industry investment fund.²³  In Ecuador, as in Venezuela, victory by the populist candidate Rafael Correa in the 2006 elections coincided with a significant increase in PRC investment in the country.  In 2006, according to Li Changchun, Ecuador received an estimated $1.8 billion in Chinese investment, which was more than any other country in Latin America.²⁴ The possibility of Chinese backing is particularly important for major oil industry projects that Ecuador is pursuing, such as the $5 billion in investment that will be required to develop the country’s largest oilfields, Ishpingo-Tambococha-Tiputini (ITT),²⁵ as well as the construction of a $4 billion refinery in the vicinity of Manta.²⁶

China has also been pursuing technical cooperation deals with populist regimes, such as plans to launch a Venezuelan telecommunications satellite in 2008,²⁷ the installation of Chinese solar panels and windmills for power generation,²⁸ the construction of a cellular phone factory and a computer factory,²⁹ and the installation of fiber optic communications infrastructure in rural areas in the case of Venezuela.³⁰

By contrast to these populist regimes, the lower-right hand corner of Figure 8 depicts countries whose relatively healthy institutions and political culture indicate a low risk of a populist political movement, and whose economic interactions with China have been relatively positive.   Cost Rica, for example, exported $1.7 billion in goods to the PRC in 2006, generating a $1.3 billion trade surplus over the $400 million in imports from China during the same period.  Moreover, Costa Rica actually broadened its trade surplus with the PRC during this period, growing its exports to China by 89.5% during the course of 2006 alone, while its imports from the PRC during this period rose by 78.7%.³¹  Similarly, during 2006, Chile exported $5.7 billion in goods to China, versus $3.1 billion in imports from the PRC.³² Chile has also effectively positioned itself to serve as the gateway for Chinese commerce with South America, given the web of free trade agreements that Chile has signed,³³ including those with both the PRC and the United States, as well as the nation’s relatively efficient bureaucracy, modern deepwater ports and other infrastructure lowering logistics costs and delays, and the increasing concentration of executives who understand doing business in China.  Similarly, Costa Rica’s substantial information technology and services sector are leading the nation into a relationship with China that resembles that of a partner more than a mere vendor.  The examples of Chile and Costa Rica are important in emphasizing that commercial engagement with China may reinforce Western institutions and economic models of countries that are well positioned to leverage the opportunities that trade with China affords, just as interaction with China also supports the consolidation of populism in primary product exporting states such as Venezuela, Bolivia.

By contrast to the cases discussed previously, when we examine the quadrants in the upper right-hand side of Figure 8, we find countries whose political and socioeconomic situations and mixed interactions with China are creating pressures that may deepen crises in these regimes and push them toward populism.

For countries on the right-hand side of Figure 8, the very high ratio of imports from China versus exports to China generally corresponds to the penetration of domestic markets by Chinese manufactured goods, displacing domestic producers in sectors such as textiles and footwear, without a sufficient offset from the growth of a China-oriented primary product export sector, able to absorb workers displaced from domestic manufacturing.  Both Mexico and Colombia have been very vocal about job losses in their textile industries because of competition from China following the expiration of the Multi-Fiber accord in January 2005.³⁴  On the other hand, as suggested by the populism index, the economic situation and political culture of these countries is sufficiently robust to absorb the socioeconomic tensions generated by the China relationship within the existing political system.  The re-election of conservative candidate Álvaro Uribe Vélez in Colombia May 2006, and the victory of Félipe Calderón, the candidate of the incumbent Partido Acción Nacional (PAN) in Mexico in July 2006,³⁵provide additional support to the indicators of institutional health, and puts both countries beyond the risk of electorally-based populism for several more years.

Perhaps the most troublesome cases are those which are both categorized as a moderate populism risk, and which are most severely damaged by commercial interactions with the PRC.  These are countries whose socioeconomic situation and popular faith in democracy are arguably at the breaking point, and which are being pushed further in the direction of crisis.  The Central American countries which appear in this group: Honduras, El Salvador, and Guatemala, for example, are each beset by severe levels of criminal violence, and have legacies of social trauma relating back to recent civil wars.  Moreover, each is tied to party structures linked to landed oligarchies and a troubled past, fostering political alienation over a lack of perceived political change.  Although outside of Central America, the case of Paraguay is similar in that the continuity in power of the Colorado party in power,³⁶ coupled with slow growth and high levels of corruption, have eroded the hope of the population of achieving development and prosperity through the existing system.³⁷

As noted in the previous section, the countries which both score highest on the populism risk index, and whose systems are most stressed by their interaction with China are, by coincidence, those countries whose elections are next in line on the Latin American electoral calendar.

In the case of Guatemala, whose national elections will take place in September 2007, the presidential race has been left wide open by the resignation of the two leading politicians of the Gran Alianza Nacional ruling coalition, Eduardo Gonzáles and Francisco Arredono.  The field is currently split between a number of candidates, including Otto Pérez Molina and the Partido Patriota.³⁸  Pérez is a retired general whose party has considerable following in rural areas, with a message advocating a “heavy hand” against the M-18, Mara Salvatruca, and other criminal gangs which have paralyzed the country.

In Paraguay, whose next election is in April 2008, it is not clear whether a challenge would come through one of the leading opposition parties, such as the Partido Liberal Radical Autentico (PLRA), or from an outside force.  Participation in the 2003 national election was at a historical low, reflecting widespread apathy with the available choices, although at that time, the split in the opposition between multiple parties allowed Nicanor Duarte Frutos, the Colorado Party candidate, to triumph.³⁹ Because the Paraguayan electoral system requires only that the winner have the greatest number of votes, it is easily possible that an emergent populist candidate could capture the field with a mere 25-35% of the vote in a field split between multiple parties.⁴⁰

In the case of El Salvador, municipal elections in March 2006 continued to reflect a relative balance between the conservative ARENA party and the former guerilla movement turned party, Frente Farabundo Marti Liberación Nacional (FMLN).  Although the popularity of the FMLN is still disproportionately concentrated in the poor rural areas in the north of the country, there is still some possibility that the party will re-organize itself to make a more effective appeal in the wake of the death of its ideologically-oriented leader Shafik Handal in 2006.

In Honduras, whose executive and legislative elections are in November 2009, the political system continues to be dominated by the two establishment parties, the Partido Liberal (PL), and the Partido Nacional (PN).  A populist triumph in Honduras, if it were to happen, would probably require the emergence of an extra-systemic movement, such as what happened in Venezuela with the Movimiento de Quinto Republica (MVR), the vehicle that Hugo Chavez used to come to power outside of the traditional Acción Democrática (AD) and COPEI party structure.

Although in none of these cases has a strong populist candidate emerged to challenge the existing parties, the absence of such a candidate does not indicate an absence of risk.  The surge of the populist candidate Ollanta Humala in Peru, for example, suggests that the true strength of a the populist candidate within a broader field of politicians may not become apparent until the final months of an electoral cycle.  Indeed, because such candidates often emerge from outside of the existing party structure and without initial financial backing from the establishment, it would actually be unusual to find a credible populist candidate well in advance of the elections.

Implications

The economic and survey data examined by this paper suggests that the same combination of socioeconomic marginalization and political alienation which helped to bring populist candidates to power in Venezuela, Bolivia, and Ecuador could produce similar phenomenon in a range of other countries, such as Honduras, El Salvador, Guatemala and Paraguay.  It also emphasized, however, that the capture of power and the transformation of the state by a populist leader is not only a function of perceived conditions and frustrations, but depends on the ability of the would-be leader to create and proclaim a message which unites diverse social elements in their discontent, and mobilizes them in such a way that advances the populist cause.

With respect to China, this paper has shown that expanding ties between the PRC in Latin America has very different impacts in different countries…helping populists to consolidate power in some cases, bolstering the health of pro-Western democratic governments and market-oriented economic models in others, while potentially pushing troubled countries toward regime change in yet a third set of cases.

Although there is no evidence that the Chinese are purposefully working to advance any type of regime change in Latin America, it is important to recognize that the capture of leadership by an anti-US populist in any of the countries cited above would benefit Chinese strategic interests in the region, while damaging that of the US.  For example, each of the “at risk” countries mentioned are part of the small group of states, concentrated in Central America and the Caribbean, which continue to accord diplomatic recognition to the Republic of China (ROC), rather than the PRC.  In the case of Paraguay, the capture of power by a populist regime and an associated switch from recognition of the ROC to recognition of the PRC would remove the last nation in South America that diplomatically recognizes Taiwan as the government of China, dealing a serious blow to the international position of the island.⁴¹

From a US perspective, the emergence of a populist government in El Salvador would change the political orientation of the country that is arguably the closest ally of the United States in Central America, and the only Central American country continuing to contribute troops to the war effort in Iraq.  The capture of power by a populist regime in El Salvador, Guatemala or Honduras would also create dangerous new synergies with Nicaragua in the region, in the same way that the election of Evo Morales in Bolivia helped Hugo Chávez to escape from his previous position of isolation in the region. In Paraguay, reversion to a regime hostile to US interests would further isolate Colombia as a US ally in the continent, and would impair the ability of the United States to effectively monitor organized crime and terrorism activities in areas such as Ciudad del Este and the tri-border region as a whole.

In the economic realm, the expansion of populist regimes  in countries such as Honduras, El Salvador, Guatemala and Paraguay would significantly impair the US trade agenda with the region.  With respect to the countries of Central America as a whole, the ability of the United States to fully implement and realize the benefits from the Central American Free Trade Accords (CAFTA) depends on partner governments which support the concept of free trade with the United States.  The transition to power by populist governments in Peru and Ecuador, for example, effectively sidelined the ability of the United States to achieve bilateral free trade accords with those states, even though the process was in a relatively advanced phase in each country.⁴²

As engagement with China interacts with the dynamics of populism, it is likely to inadvertently deepen the divisions between different countries pursuing different solutions to longstanding socioeconomic problems.  Ironically, engagement with China is simultaneously sustaining regimes such as that of Venezuela, straining social structures in states such as Guatemala, and bolstering the institutional health in pro-trade, market oriented countries such as Chile.  The result is likely to be a deepening bifurcation between two sets of countries in Latin America taking very different paths.  In the mean time, China itself will continue to grow at double-digit rates, and through this path, take its people out of poverty.  The United States, it is worth mentioning, will continue to be connected to Latin America through geography, trade, and human connections--guaranteeing that whatever the dynamic between populism and China in Latin America, the United States will share the impact.

Notas:

1. In September 1960, Cuba became the first country in Latin America to recognize the People’s Republic of China.  In December 1971, Chile became the first country in South America to establish relations with the PRC.  “Bilateral Relations” Ministry of Foreign Affairs of the People’s Republic of China.  By 1975, 10 countries in Latin America and the Caribbean had diplomatic relations with the PRC,  http://www.fmprc.gov.cn/eng/wjb/zzjg/ldmzs/gjlb/default.htm.  September 26, 2003.   Bilateral trade during that period, according to International Monetary Fund direction of trade statistics, however, was a mere $200 million. See Claudio Loser, “China’s Rising Economic Presence in Latin America.”  Testimony before the U.S.-China Economic and Security Review Commission, China’s Growing Global Influence: Objectives and Strategies.”  July 21, 2005.  For a good historical perspective, see also Frank O. Mora, Journal of Interamerican Studies and World Affairs, Vol. 41, No. 2 (Summer, 1999), pp. vi+91-116

2. See Claudio Loser, “China’s Rising Economic Presence in Latin America.”  Testimony before the U.S.-China Economic and Security Review Commission, China’s Growing Global Influence: Objectives and Strategies.”  July 21, 2005.

3. “Total Import and Export Value by Country (Region) 2006/01-12).”  Ministry of Commerce, People’s Republic of China.  February 6, 2007.

4. “China y Latinoamérica Alcanzarán $100.000 Millones de Comercio Bilateral en 2010.”  ElUniversal.com.  Caracas, Venezuela.  March 22, 2007.

5. This distinction parallels the distinction used by Jorge Casteñada between “two lefts” in Latin America.  See Jorge G. Castenada, “Latin America’s Left Turn.”  Foreign Affairs.  May/June 2006.

6. Balance preliminar de las economías de América Latina y el Caribe 2006.  Economic Commission for Latin America and the Caribbean.  New York:  United Nations.  December 2006.

7. For an in-depth and authoritative study of the causes and consequences of the inability of Latin America to resolve endemic problems of poverty and inequality, see Poverty Reduction and Growth: Virtuous and Vicious Circles.  The International Bank for Reconstruction and Development.  Washington DC, 2006.

8. “Latinobarómetro Report 2006.”  Corporación Latinobarómetro.  2006.  www.latinobarometro.org.

9. COL G. Alexander Crowther.  “The Resurgence of Populism in Latin America.”  Presentation to the Latin American Orientation Course.  Hurburt Field, Florida.  March 1, 2007.

10. Ironically, as Figure 2 shows, three of the four countries in Latin America in which populist leaders have come to power have income distributions more equitable than that of the US, when measured according to the GINI coefficient.

11. United Nations.  2006.  “Table 15: Inequality in Income or Expenditure.”  Human Development Report 2006, p. 335. United Nations Development Programme.

12. In Argentina, for example, it is remarkable that despite the collapse of the economic system and the resignation of four presidents in quick succession, that the Argentine political system produced a leader who has continued to pursue his policies within the existing party and bureaucratic framework.

13. United Nations.  United Nations National Accounts Main Aggregates Database. 

14. See “The lesser of two evils.”  The Independent.  London, England.  June 6, 2006.  See also “Garcia declares comeback win in Peru.”  CNN.com.  June 5, 2006.

15. Data based on individual country entries in the CIA World Factbook.

16. The indicators normalized to a value of between 0 and 1 relative to the distribution of values for all countries in the sample, and were averaged together without weighting.  The indicators used were: (1) Confidence that democracy as a system could produce economic development in their country (Latinobarómetro 2006), (2) Approval of the Government (Latinobarómetro 2006), (3) Confidence in the Government (Latinobarómetro 2006), (4) Fraction of GDP in primary products (United Nations National Accounts Statistics), (5) Per capita GDP (CIA World Factbook), (6) Perceived corruption (Latinobarómetro 2006), (7) Literacy (CIA World Factbook), (8) Fraction of population below poverty line (CIA World Factbook), (9) Median age as an indicator of political impulsiveness and inexperience (CIA World Factbook), (10) Fear of being out of work within the next year (Latinobarómetro 2006), and (11) belief that political parties and legislatures were not necessary for democracy (Latinobarómetro 2006).

17. See Claudio Loser, “China’s Rising Economic Presence in Latin America.”  Testimony before the U.S.-China Economic and Security Review Commission.  July 21, 2005.

18. See Claudio Loser, “The Growing Economic Presence of China in Latin America.”  China-Latin America Task Force.   December 15, 2006. 

19. In the case of Mexico, for example, the Chinese have begun to partner with Mexico, setting up Maquiladoras in Mexico to perform final assembly of manufactured items for export to the US market, taking advantage of the ability of good to enter Mexico tariff-free under provisions of the North American Free Trade Accord.  The manufacturing of television sets in Ciudad Juarez is one example.  In the domain of primary products, Chinese and South American firms have begun to collaborate to supply finished metal products to Chinese markets.  The Chilean state copper firm COLDECO, for example, is collaborating with the Chinese firm Yunan Copper Industry to build a foundry in China to be supplied by Chilean copper.  See “Codelco estudia fundición en China.”  Diario Financiero.  Santiago, Chile.  December 30, 2006.

20. “Total Import & Export Value by Country (Region) (2006/01-12)”  PRC Ministry of Commerce.  February 6, 2007.

21. “Embajador asegura que Venezuela vende a China 200 mil barriles de petróleo.”  ElUniversal.com.  Caracas, Venezuela.  March 29, 2007.

22. “China estima que inversión en el país llegará a $2.000 millones.”  ElUniversal.com.  Caracas, Venezuela.  March 30, 2007.

23. “En 2008 tendremos un satélite chino.”  ElUniversal.com.  Caracas, Venezuela.  April 1, 2007.

24. “China apoya inclusión de Ecuador a APEC.”  El Comercio.  Quito, Ecuador.  March 28, 2007.

25. “Sinopec y Petroecuador firman acuerdo para explotar el yacimiento Ishpingo-Tambococha-Tiputini.”  El Comercio.  Quito, Ecuador.  March 26, 2007.  

26. “Sinopec y Petroecuador firman acuerdo para explotar el yacimiento Ishpingo-Tambococha-Tiputini.”  El Comercio.  Quito, Ecuador.  March 26, 2007.  

27. “En 2008 tendremos un satélite chino.”  ElUniversal.com.  Caracas, Venezuela.  April 1, 2007.

28. “Chávez: ALBA es la punta de lanza contra el imperialismo.”  ElUniversal.com.  Caracas, Venezuela.  February 17, 2007.

29. “Gobierno lanza ‘computadoras bolivarianas’ desde Bs 870.175.”  ElUniversal.com.  Caracas, Venezuela.  December 19, 2006.

30. “Tecnología china apoyará las telecomunicaciones locales.”  ElUniversal.com.  Caracas, Venezuela.  February 20, 2007.

31. Costa Rica was also the only country in Central America to have a positive balance of trade with the PRC, and the only country in which the balance of trade moved in a favorable direction during 2006.  See “Total Import & Export Value by Country (Region) (2006/01-12).  PRC Ministry of Commerce.  February 6, 2007.

32. Costa Rica was also the only country in Central America to have a positive balance of trade with the PRC, and the only country in which the balance of trade moved in a favorable direction during 2006.  See “Total Import & Export Value by Country (Region) (2006/01-12).  PRC Ministry of Commerce.  February 6, 2007.

33. Chile’s Free Trade Agreement with China was finalized in November 2005.  Within the region, Chile also has agreements in the region with Panama, Peru, Colombia, and Ecuador.  Beyond the region, it is has signed treaties with New Zealand, Singapore, and Brunei, and is finalizing agreements with India and Japan, positioning it as a logical commercial hub for both Asian countries wanting to do business with Latin America and Latin American firms wanting to do business in Asia. See  Sandra Novoa, “Los mercados que se abrieron.”  El Mercurio.  Santiago de Chile.  December 31, 2006.  See also “Chile: el próximo paso.”  El Mercurio.  Santiago de Chile.  March 2, 2007.

34. With respect to Mexico, see “Industria textil busca impedir domino de China.”  El Economista.com.  Mexico City, Mexico.  July 7, 2006.  See also, “SE mantiene arancel a textiles chinos.”  El Economista.com.  Mexico City, Mexico.  March 3, 2006.  See also, “México, el país más afectado por China e India.”  El Economista.com.  Mexico City, Mexico.  September 24, 2006.  With respect to Colombia, see “Calzado no espera buen paso en el 2007.”  La Republica.  Bogotá, Colombia.  January 19, 2007.

35. Calderón won with just 35.8% of the vote, less than .5% above that of his rival in the PRD, Andés Manuel Lopez Obrador.  Although Obrador sharply contested Calderón’s victory, the institutions and political culture in Mexico proved strong enough to overcome the constitutional crisis without a collapse of the political system.

36. The Colorado party has been in power in Paraguay since 1946, representing the longest continual period of one-party rule in the history of Latin America.

37. Polling data from Latinobarómetro 2006 show respondents in Paraguay to score consistently high relative to citizens of other Latin American countries with respect to attitudes troublesome for conventional democratic politics.  27% of Paraguayans surveyed, for example, indicated that democracy did not require political parties or a congress—a score exceeded only by respondents in Bolivia, Ecuador, and Panama.  With respect to approval of the current government, confidence in the government, and confidence in the President, the only nations surveyed with scores lower than Paraguay were Ecuador and Nicaragua.  “Latinobarómetro Report 2006.”  Corporación Latinobarómetro.  2006.  www.latinobarometro.org.

38. Other candidates include Álvaro Colom, of the Unidad Nacional de Esperanza (UNE), currently in the lead with 34.6% of the vote according to a January 2006 poll, and Alejandro Giammattei, the candidate produced by the Gran Alianza Nacional (GANA)following the resignation of Gonzáles and Arrendondo.

40. See “Sistema Electoral.”  Elecciones Generales Paraguay 2003.  http:elecciones.pyglobal.com/systemaelectoral.php.

41. In the somewhat less likely event that a populist regime comes to power in Panama’s May 2009 elections, switches diplomatic recognition, and adopts an anti-US posture, China would increase its confidence in the uninterrupted flow of goods from the Atlantic coast of Latin America through the Panama Canal bound for China from ports on the Atlantic coast of Latin America, including Brazilian iron, Venezuelan heavy oil, and Argentine soy products.

42. Free trade talks between the United States and Ecuador were actually suspended before Rafael Correa came to power, when the previous government of Alfredo Palaccio took action against the assets of Occidental Petroleum in the country.  See “Ecuador oil move prompts US ire.”  BBC News.  May 17, 2006.

Dr. Evan Ellis is an Associate with Booz Allen Hamilton, Inc, with an emphasis on Latin American security issues and business and military simulation, and an Adjunct Professor with the University of Miami.  His work includes studies of the investment and national security implications of Chinese trade and investment initiatives in the region, as well as studies of political mobilization in Venezuela and democratic security in Colombia.  Dr. Ellis’ work also extends to simulation-based analysis in support of the strategic decisions of a variety of public and private sector clients.  Dr. Ellis has presented his work in a broad range of business and government forums in the United States, Peru, Chile, Mexico and the United Kingdom.  Dr. Ellis holds a PhD in political science with a comparative politics specialization in ethnic violence.  His other publications include “The Military-Strategic Dimensions of Chinese Initiatives in Latin America”, “El Nuevo Romance Chino Con América Latina,” “Business as Usual?” (on the 2006 Mexican Elections), “US National Security Implications of Chinese Involvement in Latin America,” “A New Chinese-Led Economic Order for Latin America?,” “The Sociopolitical Destabilization of Venezuela: A system dynamics perspective on the interaction of elite rhetoric, sociopolitical structure, and mass mobilization,” Latin and South America: A Case Study in Emergent Geopolitical Viruses,” “Organizational Learning Dominance: The Emerging Key to Success in the New Era of Warfare” and “Nodal Analysis and its Role in Precision Strike.”

Disclaimer

The conclusions and opinions expressed in this document are those of the author cultivated in the freedom of expression, academic environment of Air University. They do not reflect the official position of the U.S. Government, Department of Defense, the United States Air Force or the Air University.