Latin American Democratic and Economic Governance

Photo by Ben Raderstorf / Inter-American Dialogue

The Bertelsmann Transformation Index (BTI) measures the quality of democracy, market economy and political management in 129 developing and transition countries, on a yearly basis. To present Bertelsmann Stiftung’s 2016 findings on Latin American and Caribbean countries, the Inter-American Dialogue hosted a discussion on “Latin American Democratic and Economic Governance” on Tuesday, April 26^th, 2016. The panel consisted of Hauke Hartmann, Senior Project Manager at Bertelsmann Stiftung, Augusto de la Torre, Chief Economist for Latin American and the Caribbean at the World Bank, and Kevin Casas-Zamora, Senior Fellow and Director of the Peter D. Bell Rule of Law Program at the Inter-American Dialogue. The event was moderated by Michael Shifter, president of the Inter-American Dialogue.

First, Hartmann presented BTI’s main conclusions. Hartmann discussed how there is a notable mismatch: high political participation and weak rule of law, both of which are crucial for democratic governance. He identified Latin America and the Caribbean as one of the two “primarily democratic” regions in the index—with the only exceptions to democracy being Cuba, Venezuela, and Haiti. Chile, Costa Rica, and Uruguay unsurprisingly did well in the index’s evaluation of democracy; Hartmann described them as the “top consecutive reformers.” Jamaica and Brazil are still consolidating democracies. Panama, Argentina, Peru, and Mexico were identified as defective democracies due to weak rule of law. Ecuador, Nicaragua, and Guatemala were described to be at risk of autocracy because of increasing centralization of power. Guatemala was the weakest democracy in the index, added Hartmann. He also warned about the risk of social disintegration facing Mexico and Central American countries due to the high incidence of violence and drug trafficking. On a more positive note, Hartmann observed significant developments in Colombia and Bolivia. Colombia is the 3^rd most successful country in bridging the gap between political participation and rule of law, according to the index. Hartmann credited President Morales with “opening the political system and stabilizing the country” with significant public support.

In terms of economic transformation, Hartmann attributed the regional downturn that these countries face as the cause for an overall declining score in the BTI. While inequality has significantly decreased in the region over several years, Hartmann argued that the gap between the rich and the poor has not been reduced sufficiently. He summarized the main economic challenges in the region as dependency on commodity exports, continuing social inequality, and slow growth. Countries in the region who have been worse off economically this year are Venezuela, Argentina, and Brazil. With regard to quality of governance, Hartmann highlighted an overall improvement over the last decade. He pointed to the development of a new middle class and the increased uncovering of corruption scandals, leading to greater accountability. Hartmann added that protests in Brazil and Chile may lead to democratic deepening as well.

In an effort to unpack the numbers included in Hartmann’s presentation, Augusto de la Torre discussed certain contextual information that he found at odds with index results. For example, de la Torre was particularly interested in how, in terms of economic transformation, Mexico and Colombia were rated similarly to Central American countries, arguing that these countries were perhaps given lower marks than deserved. He praised Mexico’s success with macro-stability and pointed to the “regional mystery” of why Mexico has problems with growth, considering that its fiscal and monetary policies are more efficient than in some European countries and the US. In regard to governance, de la Torre argued that the index underestimated mobility, discounting just how many Latin Americans have been lifted out of poverty. He also considered the reports on protests being a new phenomenon to be “exaggerated,” insisting that protests are commonplace in Latin America and have been used in the past to force changes in governments. De la Torre was interested in what the index evaluated when assessing rule of law, and attributed the increase in reported cases of corruption to improvements in rule of law, not greater deficiencies. He also questioned whether the issue of drugs in Mexico was a democratic failure, as the index implied, or rather an external shock.

In turn, Kevin Casas-Zamora discussed broader trends in the region. While recognizing the importance of following current, short-term trends, he insisted that the biggest changes happen gradually, comparing these changes to plate tectonics because of their slow, mostly unnoticeable yet important movements. He argued that social progress was not merely a result of economic growth but of “deliberate policy decisions and consolidation of electoral democracy.” Similarly, he noted that the continuous uncovering of corruption scandals, which resulted in “unprecedented reactions” in Guatemala, was a result of a gradual effort to increase transparency and accountability that took years to bear fruit. Casas-Zamora also discussed political risks and weakness in rule of law. He explained that while these cases of corruption will benefit governance in the long run, they can be perilous for democracy in the short term, increasing mistrust in the system. He argued that risk of populism and citizen security problems are ways in which the weakness of rule of law in Latin America is evident. Casas-Zamora insisted that improving the distribution of public goods and services should be prioritized in the region.

Casas-Zamora argued that the previous decade was a good one for the region, filled with “robust social policies.” According to him, “the region had perfected a recipe for progress” with the “Brasilia Consensus”—a term incidentally coined by Michael Shifter in 2011. Unfortunately, with the economic downturn, consensus was frayed and managing the downturn is now the priority, leaving the countries with little bandwidth to no focus on innovation and growth. Casas-Zamora emphasized the need to improve productivity through social investment, as a means to foster growth. Yet he noted that there are big challenges to economic transformation at the moment, specifically a lack of institutional credibility in many countries.

Hartmann addressed the concerns of de la Torre and some audience members at the end of the discussion. An audience member asked whether the index considered differing perceptions of governance by racial groups, pointing to seemingly unfair policies towards Mapuche communities in Chile. Hartmann explained that the BTI evaluates social inclusion and equality of access. He also explained to de la Torre that they evaluate the independence of the judiciary, separation of powers, civil rights, and prosecutions of office abuse to assess rule of law. Furthermore, he insisted that while indexes may appear to reduce complex situations to numbers leaving out important pieces of information, the BTI includes a qualitative analysis to provide a comprehensive look at the progress of governance and economic transformation in the world.