Does Trade Incentivize Educational Achievement?

By Raymundo Miguel Campos Vázquez, Luis-Felipe López-Calva, and Nora Lustig*

Female student walking by building

A student walks around Preparatoria Vasconcelos Tecate. / Gabriel Flores Romero / Flickr / Creative Commons

Mexico’s experience with free trade has challenged one of the tenets of faith economists know well from reading early in their careers David Ricardo’s Principles of Political Economy and Taxation: that “the pursuit of individual advantage is admirably connected with the universal good of the whole” and that “[trade] distributes labor most effectively and most economically.”  Under this principle, “wine shall be made in France and Portugal; corn shall be grown in America and Poland; and hardware and other goods shall be manufactured in England.”  Mexico reminds us that while these benefits exist in the abstract, there are trade-offs to be faced—that there are, potentially, social and individual costs induced by trade liberalization.

In a recently published paper entitled “Endogenous Skill Acquisition and Export Manufacturing in Mexico,” MIT economics professor David Atkin shows the ways in which individual people experience trade and how it affects their decision-making – sometimes in ways that may not necessarily be socially desirable.  It analyzes a time period (1986-2000) during which Mexico underwent major economic transformations, including a rapid process of trade liberalization after 1989 and the introduction of the North American Free Trade Agreement (NAFTA) in 1994.  Analyzing data for more than 2,300 municipalities in the country, the paper tells us that young Mexicans at the time faced a very basic decision: to stay in school and continue studying or to drop out and look for a job (among the many being created in the export-oriented manufacturing sector), most of which did not require more than a high school education.  Atkin found that, on average, for every 25 new jobs created in the manufacturing sector, one student would drop out after 9th grade.  (The World Development Report 2008 on Agriculture for Development had raised the question about “missing” individuals in this age group, but in relation to migration.)

  • While trade brought positive effects including a higher demand for low skilled workers and an eventual increase in their wages – consistent with David Ricardo’s basic notion – Atkin concluded that in Mexico it had the socially undesirable effect of preventing, or slowing down, the accumulation of human capital. The reduction in human capital investment is a trade-off which can have negative effects on the economy as a whole.
  • Factors other than free trade might explain this effect. First, young students may drop out if the returns to schooling are not high enough to compensate for the additional investment.  Second, a lack of access to credit and insurance for relatively poorer households might make it impossible for aspiring students to finance their investment and obtain higher returns by continuing to tertiary education or to cope with shocks and avoid abandoning school.  Finally, the result could be driven by a lack of availability of information about actual returns to investment in education, which could lead to myopic decision-making.

The movement of capital toward locations with lower labor costs is an expected, and intended, result of an agreement such as NAFTA, pursuing higher export competitiveness at the regional level.  David Ricardo would have said that TVs and automobiles shall be made in Mexico, while software shall be made in Silicon Valley.  What completes the story, however, is that because of distortions like the ones mentioned above – low educational quality, under-developed credit markets, or weak information that skews decision-making – free trade might lead to socially undesirable consequences.  And it did in the case of Mexico, as Atkin convincingly shows in his paper.  It seems that when Ricardo gets to the tropics, the world gets more complex.

November 7, 2016

* Raymundo Miguel Campos Vázquez teaches at the Centro de Estudios Económicos at el Colegio de México, and is currently conducting research at the University of California, Berkeley.  Luis-Felipe López-Calva is Lead Economist and Co-Director of the World Development Report 2017 on Governance and the Law.  Nora Lustig is Professor of Latin American Economics at Tulane University.

Can Latin America Escape the Middle-Income Trap?

By Rick Doner and Ben Ross Schneider*

challenges logo (revised)2

Photo Credit: Inter-American Development Bank / CLALS / Edited 

Most literature on the “middle-income trap,” widely understood as a core obstacle to sustained development in Latin America, focuses solely on economic dynamics and understates the importance and challenges of political coalition-building.  That literature, largely generated by economists in academe and international financial institutions, argues convincingly that in Latin America, as well as Southeast Asia, once countries achieve some degree of success in economic development, they get stuck.  They are unable to compete with low-cost producers in traditional sectors – initial development success brings higher wages and other costs – while they also have failed to gain the capacity to compete with developed economies in frontier industries, where technological capabilities and productivity levels are far higher.  These analysts stress that Argentina, Brazil, Chile and Mexico – or for that matter Indonesia, Malaysia and Thailand – need to build on their achievements over the past half century in order to make the leap into the ranks of the world’s most prosperous nations.  They highlight the trap’s proximate origins in productivity slowdowns and recommend policy solutions that focus on improving human capital through investment in education and vocational training.  But identifying problems and potential solutions does not explain why leaders fail to adopt the solutions.  In other words, it’s not clear from existing writings why the trap is actually a trap.

The literature does not acknowledge that fundamental political obstacles, especially lack of effective demand and pressure for these solutions, are at the heart of the problem.  As is evident from the history of failed programs to improve education and R&D, political will to invest in such public goods is in short supply.  Politicians are rarely willing to forgo the short-term political benefits of satisfying entrenched interest groups for the long-term developmental benefits of creating institutions capable of helping the broader citizenry to upgrade its capacity for technology absorption.  A core reason for this lack of political will is the weakness of the societal constituencies that might demand the necessary policies and effective institutions.  Our research indicates that relations among key societal actors in middle-income countries are less amenable to building the consensus that economists advocate. In a recent article, we argue that the same conditions that facilitated or accompanied movement to middle-income status – such as foreign investment, low-skilled and low-paid work, inequality, and informality – have generated political cleavages that impede upgrading policies and the construction of institutions necessary to implement them.  This fragmentation is why the trap is a trap. Three lines of fragmentation are key:

  • Big business is divided between foreign and domestic firms. The former can undertake productivity-improving measures in-house and/or at their home headquarters, whereas local firms tend to focus in non-tradeable services and commodities whose demand for better training and R&D is lower than in manufacturing.
  • Labor is fractured between formal and large, growing informal sectors. Enjoying longer job tenure and on-the-job training for specific skills, formal workers have little interest in broader skills development.  Informal workers, on the other hand, constantly shift jobs and would prefer investments in vocational institutions offering general training.
  • These societies remain overall less equal and, as is now well known, inequality undermines the will and capacity to provide broad public goods such as quality universal education and support for technology development.

 Pro-growth coalitions of various types have been key to productivity improvements in now-high income East Asian countries, such as Korea and Taiwan.  The fact that these countries had stronger (and more autocratic) governments does not preclude developing or building on such coalitions in countries with messier political systems and weaker bureaucracies.  First, leaders can build on sectoral pockets of high productivity, such as aquaculture in Chile, wine in Argentina (and rubber in Malaysia).  Second, international and regional institutions can help supplement demands for skills by supporting programs that focus on technical and vocational institutions that actually meet and are linked to employers’ needs.  Third, organizations such as the ILO can promote business associations that represent the local firms for whom collective technical training and R&D are especially important.

August 22, 2016

* Rick Doner and Ben Ross Schneider teach political science at Emory University and MIT, respectively.

Can Latin America Achieve Fiscally Sustainable and Egalitarian Social Citizenship?

By Fernando Filgueira*

Uncertain Future

Photo Credit: Jan Tik / Flickr / Creative Commons

Latin America is undergoing a profound transformation of its social policies and of the very concept of social citizenship, but the outcome of this process is far from certain.  Electoral democracy, urbanization, increased educational attainment, and increased exposure to new and broader consumption patterns have destroyed the political foundations for conservative modernization.  The turn of the century has witnessed advances in social outcomes and public policies that for the first time provide a true window of opportunity for achieving more productive and egalitarian societies.

  • Decreasing poverty, lower income inequality, improved and expanded employment, and access to transfers and services to popular sectors were made possible by five critical factors: booming prices for Latin American commodities fueled economic growth and employment; stable prices – a positive legacy of the Washington Consensus era – meant that wages and transfers were not undermined by inflation; increased state fiscal capacity and commitment to social policy enabled a doubling in 15 years of real social per-capita expenditure; a demographic dividend, when combined (the young and the elderly) dependency ratios are lowest as a percentage of the population; and improved education access, completion, and credentials, which facilitated enhanced opportunity and increased productivity.

Yet these five advantages will lose steam in the next couple of decades.  Growth will wither as the commodity boom ends and expansionary monetary policy is limited.  Most Latin American economies are facing increased inflationary pressures. Existing tax structures and in some cases productivity levels will not permit social expenditure to increase at the rate of the last 15 years.  The easy phase of the demographic transition (when dependency rates are going down) is or will be over in most countries towards 2025.  Some countries in the region will face the European dilemma of an aging population, but they will do so with a lower GDP per-capita, weaker fiscal capacities of states, and a significantly more unequal income distribution.  While the soft targets of expanded education – primary school and expansion of lower middle school – have been achieved, the tough ones remain: extended coverage in early childhood, completion of high school, quality improvement, and true reduction of inequality of outcome in learning.

  • Five fault lines in Latin American social regimes make these problems a major threat to the sustainability of both social and economic development. A) Women’s incorporation into the labor market remains low (50 percent) and is highly stratified.  B) The absence of a robust state-led care system for early childhood and the persistence of a patriarchal distribution of care burdens undermines a route to development that is both more efficient and egalitarian.  C) Stark contrasts between insiders and outsiders in informal and formal labor markets and access to social protection and cash transfer  systems contribute to an expansionary monetary and fiscal policy that mainly benefits insiders unwilling to be taxed for redistributional public and collective goods and insurance. D) The region’s middle class and new emergent class, moreover, are not willing to increase taxation, since they do not perceive the quality of public goods and collective social services as adequate. And E) the pattern of fertility shows some of the worst patterns in social terms, including that most biological reproduction is left to the poor: Latin American governments do not equalize opportunity early on and through the educational system – which in the most unequal region of the world with diminishing but non-convergent fertility rates – leads to a productivity failure since underinvesting in the poor is underinvesting in the frontier of productivity enhancement.

These challenges will condition the possibility of a new social citizenship and a social investment model based on robust public goods, expansion of merit goods, and universality of entitlements.  It is not enough that elites are no longer able to control the political and economic game through status enclosure and authoritarianism.  In order to craft truly universal social policies conducive to providing inclusion for all, societies must confront narrow corporatism and restricted targeting – and the political economy they sustain.  Contributory models based on formal wages and targeted social policies based on need will not disappear, but they have to take a back seat to a model of basic universalism where access to quality public and collective goods is truly universal, and entitlements in transfers and services are not dependent on need or labor formality.  There have been important advances, such as a marked increase in non-contributory systems of cash transfers in terms of pensions and child-family transfers, but the commodity boom and the rise of the emergent and middle classes that drove them are not permanent.  A coalition that is willing to forgo private spending power in order to enhance quality of life through collective services is needed.  Such a coalition is made conceivable by these political, economic, and social epochal changes, but it is by no means guaranteed.  If reforms do not make it a reality, the promise will be shattered, and the pendulum between failed populism, with state-led “Robin Hood” incorporation attempts, and a technocratic closure of democracy and state bashing, will remain the central and tragic dynamic of the region.**

July 18, 2016

*Fernando Filgueira is a Senior Resarcher at the Centro de Información y Estudios del Uruguay (CIESU) and Collaborating Researcher the Economic Commission for Latin America and the Caribbean.  He is a member of the International Panel for Social Progress led by Amartya Sen.

**Read the full version of this essay, which is based on research done for the Economic Commission for Latin America and the Caribbean (ECLAC) and for EUROsociAL on social policy, labor dynamics, and demographic change.

Brazil: Sacrificing Anti-Poverty Success?

By Hayley Jones*

Bolsa Familia

Photo Credit: Senado Federal / Flickr / Creative Commons

Brazil’s flagship antipoverty program, the Bolsa Família, faces an uncertain future as the government of Interim President Michel Temer confronts adverse economic and political circumstances.  The program, which provides direct cash benefits to poor households on the condition that children fulfill education and health-related targets, was an important factor in Brazil’s progress on poverty and inequality since the early 2000s – between 2001 and 2013 the poverty headcount ratio declined from 24.7 percent to 8.9 percent, and the Gini coefficient declined from 59.3 to 52.9.  The Bolsa Família (formerly called Bolsa Escola) was a pioneer in the use of cash transfers in social policy in the 1990s.  The idea is enticingly simple: the cash allows families to meet immediate needs, while the education and health conditions ensure poor children are better equipped to lift themselves out of poverty in the long run.  Under Presidents Lula and Dilma, the Partido dos Trabalhadores (PT) put the policy at the heart of its platform, and reaped advantages at the polls with the expansion of coverage and benefits.  The program now reaches about one-quarter of the population.

The social gains made in part thanks to the Bolsa Família may now be at risk.  Brazil has been hit hard by the collapse of commodity and oil prices over the last two years and is currently experiencing what is predicted to be the country’s worst recession since the 1930s.  GDP fell by roughly 4 percent in 2015 and is expected to do the same in 2016.  The deep political crisis gripping the country since earlier this year further threatens the program.  Temer, his party (PMDB), and Finance Minister Henrique Meirelles have stressed the need to cut spending to reduce the deficit.  While many areas of social spending, such as pensions and education, are protected in the budget under the 1988 Constitution,  the Bolsa Família is not.  With the large political constituency benefitting from the program, there is likely little appetite in the interim government to ax the program altogether.  In fact, at the end of June Temer announced a 12.5 percent increase to the Bolsa Família – more than the 9 percent promised by Dilma – to compensate for inflation.  But he also emphasized that benefits should be temporary and that there is a need to focus on exit doors from the program.  Social Development Minister, Osmar Terra, has suggested that the program could be made more efficient and costs cut by 10 percent.

Temer may not be entirely wrong to highlight the need for exit strategies, but they should be exit strategies from poverty rather than from the Bolsa Família itself.  There is so far little evidence that it has done much to change the life trajectories of poor young people that would allow them to move out of poverty. The emphasis on increased school enrollment and attendance as transformative obscures much deeper problems, including poor school progression and completion rates in low-quality schools, a lack of educational infrastructure and resources, poorly trained teachers, and outdated curricula, among others.  If Temer is serious about moving beneficiaries out of poverty and the program, priority will have to be given to correcting regressive spending in public education (which prioritizes higher over basic education); better aligning curricula with labor market demand; and addressing the poor job opportunities for low- and semi-skilled workers. Economic realities and the rhetoric on efficiency and exit strategies do not bode well for such changes.  Under Temer, the Bolsa Família seems likely be limited to a policy tool for risk insurance and meeting basic needs rather than a platform for extending the social gains of the last decade.

July 12, 2016

*Hayley Jones is a DPhil (PhD) Candidate in the Department of International Development at the University of Oxford, United Kingdom.  Her thesis examines long-term poverty reduction in the Bolsa Família program.

How Sustainable are Latin America’s Advances on Poverty and Inequality?

By Eric Hershberg

Brazil Contrasts

“Projeto Contrastes.” Photo Credit: Gabriela Sakamoto / Flickr / Creative Commons

The significant decline in poverty rates and income inequality in Latin America over the past two decades – driven by a combination of sustained economic growth and intelligently designed social policies – may slow or even be reversed as economic conditions deteriorate across much of the region.  Poverty had begun to drop in most countries even before the commodity boom accelerated growth rates in South America beginning around 2003.  The “Washington Consensus” policies of the 1990s impacted wage income and employment negatively, but other factors diminished their impact on poverty.  By overcoming profound macro-economic instability, which among other things produced hyperinflation that devastated disadvantaged sectors of the population, the economic adjustments of that period were not entirely regressive.  Moreover, a concurrent shift toward targeted social programs – which redirected subsidies away from less vulnerable segments of the population in order to protect the poorest of the poor.  By 2002, the number of people living on less than $1.90 a day had declined 4.6 per cent from where it had been at the beginning of the 1990s, according to the World Bank, while the number living on less than $3.10 stayed flat and actually rose (from 135.6 million to 138.1 million).  Performance varied across countries.  By 2012, after a strong decade of growth and a wave of progressive governments, the progress was much more impressive, with poverty dropping to 33.7 million ($1.90/day) and 72.2 million ($3.10/day).

Inequality declined also – a different challenge in the region that Kelly Hoffman and Miguel Centeno aptly labeled the “lopsided continent.”  Measured by GINI coefficients, income inequality in Latin America, which exceeded that of any other world region at the beginning of the century, grew less pronounced under governments of various ideological proclivities.  A substantial body of research shows that this was a product of two factors.

  • Investments in primary and secondary education, which accelerated during the neo-liberal years, meant lower wage premiums for those with more than basic skills: near universal attendance in secondary school reduced the significance of gaps between workers who had secondary education and those who had little schooling.
  • Innovative social policies – particularly conditional cash transfers – meant that the lower rungs of the income ladder received meaningful transfers from the state, enabling them to narrow the income gaps vis-à-vis less disadvantaged sectors. Less frequently acknowledged was the positive impact of reforms on minimum wage policies and the creation or expansion of non-contributory pensions, both of which were pushed aggressively by several governments associated with the “Left Turns.”  Non-contributory pensions were especially important since the most vulnerable of Latin American aged populations, having spent their working years toiling in the informal sector, had previously lacked any sort of retirement pension.  (Read further analysis of pension reform.)

The region’s slowdown in economic growth and the pressure on public finance brought about by the end of the commodity boom – and the infusion of cash into state coffers that it afforded – raise questions about the sustainability of these advances.  The benefits of investments in education will endure for some time.  Even if education budgets decline, the costs in terms of lower educational achievement would take years to become evident, and it is not at all certain that the funding will decline.  However, the social programs are much more vulnerable, as are the ambitious efforts to increase minimum wages and labor protections more broadly.  Should the economic contraction underway in some countries and on the horizon in others generate an increase in informality, the labor market achievements of recent years could be quickly eroded.   This would impact inequality, and it might soon exacerbate poverty as well.

June 3, 2016

U.S.-Colombia: Launching “Peace Colombia”

By Eric Hershberg and Fulton Armstrong

Kerry Santos

Photo Credit: U.S. Department of State / Flickr / Public Domain

The United States, buoyed by good feelings about what President Obama called Colombia’s “remarkable transformation,” last week pledged $450 million a year in continued aid for the next five years, but it’s not clear yet whether “Peace Colombia” will be very different from Plan Colombia, to which the United States contributed some $10 billion.  The new spending includes unspecified amounts to support the reintegration of FARC combatants who lay down their arms as part of a peace accord expected next month, but much of the emphasis appears to be on old priorities, such as “consolidating and expanding progress in security and counternarcotics.”

  • Obama and Colombian President Santos announced the new program in Washington events marking the 15th anniversary of the launch of Plan Colombia. Amid the many remarks about Colombia’s progress, indicators such as homicide rates (down 50 percent since 2002), kidnapping rates (down 90 percent), economic growth (averaging 4.3 percent), and poverty and unemployment (down slightly) stand out.  By most accounts, moving around core regions of Colombia is easier and safer than it’s been in decades.

Some of these gains of the past 15 years remain tenuous, and “Peace Colombia” will face new challenges as well.  In speeches and backgrounders, government officials have acknowledged that coca eradication and crop substitution programs have failed to reverse Colombia’s role as the world’s biggest producer of coca.  Moreover, programs supporting the demobilization of the FARC will be more difficult to implement than those given to the rightwing paramilitaries in 2002-2006.  Tens of thousands of former paramilitaries are now active in bandas criminales (BACRIMs), which President Santos recently referred to as “2,500 miniscule criminal organizations scattered throughout the country.”  Changing economic circumstances could also complicate efforts to advance peace.  During the years of Plan Colombia, the country got a healthy bump from both domestic and foreign investment – because of the improved security environment as well as the external economic environment, including the U.S.-Colombia Free Trade Agreement and Chinese demand for commodities.  Investment remains strong, but the export boom is over, which is lowering growth and squeezing government budgets.

The creation of economic opportunity is at least as important to the success of Peace Colombia as continued support for the Colombian military and security system, although last week’s speeches and press releases did not shed much light on that.  Achieving peace and building democracy will also require addressing infrastructure deficits, educational inequality, inadequate job training, and poverty.  Several Florida congressmen, arguing that “Peace Colombia” supports an accord that’s overly generous to the FARC, say they’ll oppose Obama’s pledged aid.  The assistance will almost certainly advance, however, because of the strong Washington consensus that Colombia is its biggest (if not only) success worldwide in beating back irregular armed groups.  Moreover, as President Santos and U.S. Secretary of State Kerry emphasized in a press conference, there are no conditions on the new assistance – which should assuage Congressional opponents’ concerns that the relationship will get held up by investigations into alleged human rights violations in the past.  The Presidents spoke of pulling Colombia back from the “verge of collapse” in the 2000s to the “verge of peace” now.  A broadening of strategies in both capitals, including a reassessment of the emphasis on military options, could push the country toward becoming a more inclusive democracy, which ultimately may be what is required in order to achieve lasting peace.

February 8, 2016

Belize: The UDP Wins Again

By Victor Bulmer-Thomas*

Dean Barrow, now elected for his third term as Prime Minister of Belize. Photo Credit: The Commonwealth / Flickr / Creative Commons

Dean Barrow, now elected for his third term as Prime Minister of Belize. Photo Credit: The Commonwealth / Flickr / Creative Commons

Belize’s national elections on November 4 gave the ruling United Democratic Party (UDP) an unprecedented third term in office.  The opposition People’s United Party (PUP) had expected to return to power, for the first time since 2008, in view of the country’s lackluster economic performance (except for a tourist boom), a wave of corruption scandals, and falling prices for Belize’s leading commodity exports.  A new third party, the Belize Progressive Party, also participated, representing a coalition of smaller parties.  The UDP won an increased majority (19 out of 31 seats, the rest going to the PUP).  Dean Barrow has therefore started his third, and last, term as Prime Minister.

Public spending on infrastructure, education, and health funded by borrowing from Petrocaribe was a key factor in the election.

  • The concessional loans from Venezuela had a major impact on the government’s popularity. The possibility that they may be cut in future was one reason why the Prime Minister called the elections 18 months earlier than necessary.  (This privilege, known as the “Westminster convention,” is no longer available in the United Kingdom, where elections are now subject to fixed terms.)
  • Many voters in Belize have also become accustomed to receiving party support in cash or kind in the last 20 years in return for their votes. The PUP, reliant in the past on cash from Michael Ashcroft (a British billionaire with Belizean citizenship), was strapped for cash this time because Ashcroft reached an agreement on most of his outstanding disputes with the government and no longer had much incentive to support the opposition.
  • The PUP also suffered from a weak – albeit honest – leader in Francis Fonseca, who had performed badly in municipal elections earlier in the year and who had failed to impose discipline on the party. He has now resigned, although he will stay as leader until a new one is elected.  The PUP, the dominant force in Belizean politics since its formation in 1950 and the party that took the country to independence in 1981, is now in danger of disintegrating.

The UDP government faces a number of challenges.  The sugar market in the European Union is being opened to unrestricted competition, which could lower prices further.  Concessional funding from Petrocaribe could be reduced or even ended as the economic situation in Venezuela deteriorates.  And Belize continues to face considerable pressure from the U.S. government both with regard to its offshore financial center and as a result of sanctions against various individuals under the “kingpin” anti-drug legislation.  Last but not least, Belize will have to pay compensation to Michael Ashcroft for nationalization of the telecommunications company at a rate to be determined by arbitration over which the government will have no control.  The biggest threat to Belize, however, comes from Guatemala.  The disputed western frontier is porous and Guatemalan poachers have become bolder in recent years, even panning for gold in the mountains.  Both governments had previously agreed to take their territorial dispute to the International Court of Justice, but they must first put it to voters in a referendum – a prospect in which Guatemalan President-elect Jimmy Morales has so far shown no interest.  With a population of only 350,000 (compared with 16 million in Guatemala), the new government of Belize may face an uphill struggle.

November 16, 2015

*Dr. Bulmer-Thomas is a professor at the University College London Institute of the Americas, fellow (and former director) at Chatham House, and author of numerous books, including The Economic History of the Caribbean Since the Napoleonic Wars (2012).

Remittances and Sustainable Community Development in Latin America

By Aaron T. Bell and Eric Hershberg

Photo Credit: Futureatlas.com / Flickr / Creative Commons

Photo Credit: Futureatlas.com / Flickr / Creative Commons

Remittances to Latin America hit a record high in 2014 at $65.3 billion, according to the Multilateral Investment Fund of the Inter-American Development Bank, but their impact on development would be much greater with better coordination between sending  and recipient communities.  Mexico receives over one third of those funds, but remittances represent a significant component of GDP for many countries across the region.  The bulk comes from the United States, where 54 million Hispanics include 19 million first-generation immigrants, according to 2013 U.S. census figures.  In several Central American and Caribbean countries, funds sent home by migrants represent the largest single source of foreign exchange.

  • Remittances alleviate poverty by contributing to household income, helping to satisfy basic consumption needs, and sometimes enabling savings and investments in education.
  • Groups of migrants from particular communities sometimes pool resources through hometown associations to support shared objectives back home. A paved road or a new soccer field affects quality of life in tangible ways, and émigré financing of local political campaigns can determine the results of elections for mayors and other officials.
  • But remittances seldom promote local economic development initiatives that will generate sustainable incomes and opportunities for wide segments of the population – missing opportunities to address the causes of migration in the first place.

Some governments, development agencies, and philanthropies look to remittances as a potential mechanism for ensuring that Latin American citizens enjoy living conditions that afford them the “right not to migrate” from home communities.  Last month the Inter-American Foundation (IAF) and the Center for Latin American & Latino Studies (CLALS) convened a workshop to explore the challenges and opportunities for linking diaspora organizations in the United States, their communities of origin in Latin America and the Caribbean, and potential philanthropic partners to advance community development in the region through the effective deployment of remittancesParticipants identified several challenges.

  • Cooperation between immigrant-led diaspora organizations and their sending communities and governments is not a given.
  • Despite some research into hometown associations – created in the United States by migrants to connect with their communities of origin – we have relatively limited knowledge about how they function and the conditions that enable them to support community development.
  • Effective transnational cooperation requires broad multi-sectoral partnerships aligning immigrant-led groups, sending community organizations, and possibly governments and international funding institutions.

Despite information gaps and practical obstacles, there are successes to celebrate, such as the Salvadoran Fundación para la Educación Social, Económico y Cultural, with which the IAF has partnered.  Technical training on how to handle incoming funds and face-to-face meetings between participants and supporters in the United States and El Salvador have promoted transparency and trust.  Participants in the CLALS/IAF workshop offered several potential avenues for community organizations and philanthropic foundations to build enduring institutional connections.  It was agreed that further research should be conducted on hometown associations and other forms of diaspora organization to better understand how they function, how they relate to their affiliated sending communities, and how they can be catalysts to promote local development.  Policy-based research institutions in Latin America should be brought into the conversation, as should mainstream Latino organizations in the United States.  And immigrant associations and their counterparts in Latin America should not have to grapple with complex development challenges alone.  Indeed, U.S.-based community organizations and philanthropies could play a valuable role in catalyzing cooperation aimed at promoting development by making the case for public policies and transnational collaborative efforts that support “the right not to migrate.” Such development-supporting initiatives could, at least in theory, gain resonance across political groupings in the United States, appealing both to those interested in fostering global development and those concerned about immigration.

August 4, 2015

Mexico Elections: Successful Balloting, Mixed Results

By Eric Hershberg and Fulton Armstrong

Preparing for elections in Chiapas, Mexico last week.  Photo Credit: Dimitri dF / Flickr / Creative Commons

Preparing for elections in Chiapas, Mexico last week. Photo Credit: Dimitri dF / Flickr / Creative Commons

Mexico’s mid-term elections last Sunday to select governors, mayors, and local and federal legislators confirmed popular engagement in the democratic process, but deep frustration with the country’s political parties.  Voter turnout – 47 percent of eligible voters cast ballots – was high  despite violence, isolated ballot-burnings, attacks on election board offices, and calls for boycotts.  The elections were carried out under highly adverse conditions. Some 1,400 murders were recorded nationwide in April – the highest rate in a year – and a clash between privately supported vigilantes and suspected cartel members left 13 dead in Guerrero state the day before voting.  Four assassinated candidates remained on Sunday’s ballots (and at least one won).  Pre-election polls showed that some 90 percent of citizens distrusted the political parties, and over half expressed disapproval for President Peña Nieto half-way into his six-year term.  According to press reports, voters were motivated by concern about the government’s inability to deal with the resurgence of violence or even satisfactorily explain massacres, such as the disappearance last September of 43 students who were last seen in police custody.  Mexico’s sluggish economy may have driven people to the polls as well; the government cut growth estimates in May because of lower than expected oil revenues and U.S. growth.

As predicted, the President’s Institutional Revolutionary Party (PRI) and its partners won a parliamentary majority – winning about 40 percent of the votes and, as a coalition, 260-plus seats in the 500-member Congress.  The PRI and the Party of Democratic Revolution (PRD) lost governorships in the country’s two most violent states – Guerrero and Michoacán – in what’s widely seen as a rebuke to both.  The opposition National Action Party (PAN) held largely steady, garnering about 20 percent of the votes.  By most accounts, the big winner on Sunday is Governor-elect Jaime Rodríguez of Mexico’s second-richest state, Nuevo León.  Running as an outsider, El Bronco took advantage of an electoral reform allowing independent candidacies and waltzed to victory with 48 percent of the vote despite a modest campaign and opposition from local media.  He has pledged that his election marks “the start of a second Mexican Revolution.”

El Bronco can legitimately claim to embody rejection of the traditional parties, and in that respect his rise to prominence is not unlike that of many charismatic politicians in Latin America’s recent and not-so-recent past.  Given his campaign’s lack of programmatic clarity, it is not clear that he or the votes cast in his favor represent anything more than that.  President Peña Nieto achieved important reforms during his first three years in office, particularly in energy and education, but these have neither generated enthusiastic support nor their anticipated benefits.  Whether the President has any new compelling ideas to offer for the remainder of his term remains to be seen.  The relatively high turnout last Sunday despite popular cynicism toward the parties and myriad security challenges does testify to Mexicans’ resilient democratic aspirations, but the election also reflects widespread public disillusion with the available options – incumbent as well as opposition.  The ruling PRI failed to offer (or even project) a credible agenda for Mexico during what are clearly times of trouble, and the country suffers from a lack of coherent alternative visions for either conservative modernization (the PAN) or progressive transformation (PRD or its former standard-bearer, Andrés Manuel López Obrador, with his newly established Morena party).  Across the ideological spectrum, Mexico’s politics are stuck, and it’s going to take more than one Bronco to drive out the dinosaurs.

June 11, 2015

The Summit of the Americas: Important Progress

By Aaron Bell and Eric Hershberg

VII Summit of the Americas Photo Credit: OEA-OAS / Flickr / Creative Commons

VII Summit of the Americas Photo Credit: OEA-OAS / Flickr / Creative Commons

The U.S.-Cuba rapprochement has returned the Summit of the Americas (SOA) to the way it was before George W. Bush turned it into a forum in which the U.S. was increasingly isolated – a community of vibrant but respectful debate reflecting the varied perspectives of the hemisphere.  The event in Panama this past weekend was dominated by Cuba’s attendance at its first SOA and Presidents Raúl Castro and Barack Obama’s cordial public encounter and hour-long meeting, the first of its kind between the two nations’ leaders in over half a century.  The next step in improving relations will be for Obama to formally announce Cuba’s removal from Washington’s list of “state sponsors of terrorism,” which the State Department reportedly recommended last week.  Regrettably, the leaders did not take advantage of the Summit as an occasion to announce a target date for the formal restoration of diplomatic relations and the appointment of Ambassadors.  But that, presumably, will come soon, and regardless, in the plenary session Obama set a new tone for U.S. policy when he acknowledged that “the days in which our agenda in this hemisphere so often presumed that the United States could meddle with impunity — those days are past.”  Obama clearly articulated a desire to move beyond not only the legacy of U.S. intervention in the region but also the stale ideological debates that, he observed pointedly, pre-dated his birth.

Statements and activities surrounding the SOA also reaffirmed the broad range of perspectives in the hemisphere,  including in attitudes toward the United States.  The “People’s Summit,” held parallel with the SOA, provided a forum for left-wing critiques aimed primarily at U.S. meddling in the region, in particular its foreign military bases and its recent allegation – which it subsequently backed away from – that Venezuela poses an “extraordinary threat to U.S. national security.”  The sanctions it imposed on senior officials drew critiques from around the region, including from Argentina, Colombia, and from Brazil’s Dilma Rousseff, who summarized regional sentiment in characterizing them as “counterproductive and inefficient.”  The criticism was overshadowed, however, by widespread applause for changes in U.S.-Cuba relations.  Obama also won points from observers for meeting with Venezuelan President Nicolás Maduro, who used the Summit to denounce the 1989 U.S. invasion of Panama and present to Obama a list of 11,000 signatures opposing Washington’s sanctions.  Maduro praised the meeting as the “Summit of Truth” and even “cordial,” noting that it opened the door to further discussions on the bilateral relationship.  Obama also seemed to subscribe to a different role for civil society representatives – as opponents of sitting governments – at the summit, choosing to meet privately, for example, with Cuban dissidents opposed to the Raúl Castro and his government.

Obama’s steps to remove the festering U.S.-Cuba issue from the hemispheric agenda have been game-changing, even if some presidents criticized Washington’s continued enforcement of the economic embargo and the Administration’s bewildering inability to move faster to remove Cuba from its highly politicized terrorist list.  This summit may signal a return to the values and respectful debate that Obama, and before him Bill Clinton, espoused at past Summits, and may pave the way for cooperation over contemporary issues rather than Cold War-era ideological hang-ups.  In the final days before the Summit, senior White House advisors had intervened to ease tensions over the State Department’s national security rhetoric vis-à-vis Venezuela, emphasizing with regret that assertions regarding Venezuela’s posing a security threat were an unfortunate procedural necessity rather than a genuine assessment of the situation.  This recognition that “words matter” turned on their head the words used earlier in the week by Assistant Secretary of State Roberta Jacobson in lamenting that Latin American governments were not using language similar to Washington’s to characterize the deteriorating political situation in Venezuela.  While the correctives from the White House and the focus on the transformation of U.S.-Cuba relations were both conducive to a successful SOA, these developments did overshadow both the official theme of this year’s summit – Prosperity with Equity – and related discussions on energy, the environment, and education.  These crucial issues, all ripe for regional cooperation, are the core of what should become the focus of U.S.-Latin American relations for the remainder of this administration and beyond.

April 13, 2015