The Foreign Service Journal, November 2007

nificantly reduced, the wall will have to be extraordinarily tall to keep out the natural effects of supply and demand and to dampen the desires of poor people living in rural areas in Mexico, where the only hope for their children’s future currently lies in their neighbor to the north. Disaffection by Exclusion A second sociopolitical phenome- non that must be better understood is a variant of a commonly heard theme: the disaffection with globalization in developing countries. In contrast to the highly visible role of anti-global- ization activists, it is a subtle disaffec- tion. What we are seeing is a frustra- tion that has existed for dec- ades, even centuries, and a disap- pointment that this new model of eco- nomic development does not appear to be any better than past models at addressing the question of socioeco- nomic exclusion. To be sure, benefits have come as a result of the region’s embrace of fiscal discipline and more open economies: namely, more stability and fewer crises. But Latin America’s “man and woman in the street” have not missed the fact that these benefits have been highly concentrated among the rela- tively better-off, those with more access to education and, quite often, those fortunate enough to live in cer- tain geographic zones. In Mexico, this has generally translated to more opportunity for those in the north and parts of the center of the country, those in urban areas, and those near certain markets or infrastructure. Some of today’s more astute politi- cal leaders are quite adept at capital- izing on disaffection. The Economist and other commentators have noted that the most significant pendulum swing in the region is not so much a resurgence of the left, but the emer- gence of democratically elected auth- oritarian and pseudo-authoritarian rulers. Others emphasize the re-emer- gence of populism, on both the left and right, as the defining shift of the last five to 10 years. In any case, politi- cians are responding — both positively and negatively — to the electorate’s demands for governments to address the exclusion in their societies. Clearly, encouraging more demo- cratic regimes in Latin America is important in ensuring a friendly, col- laborative and safe hemisphere. It would follow, therefore, that it is in the strategic interest of the United States to contribute to inclusive soci- eties where such authoritarian ten- dencies do not gain traction. The New Donor in Town The noisiest of the new generation of political leaders who are capitaliz- ing on this disaffection, of course, is Venezuelan President Hugo Cha- vez. As he moves closer to Fidel Cas- tro, and as he recruits new “Bolivar- ian” partners in South America, he gets even more attention. Chavez has challenged the longstanding role and image of the U.S. as the region’s most important and generous donor coun- try, offering cheap oil, cash and social programs modeled after his own, to friendly governments. He has even offered cheap oil to poor U.S. com- munities in an effort to go “directly to the people” with his foreign aid. Recently, Chavez offered the new Evo Morales government in Bolivia $100 million to implement a micro- credit program, to be modeled after Venezuela’s highly distortionary and politicized program. This example is particularly telling because Bolivia is the birthplace of Latin American microfinance, and one of its most suc- cessful case studies. Following the example of Nobel Peace Prize winner Muhammad Yunus, Bolivia has been the “Bangladesh of Latin America,” creating a diverse and competitive microfinance sector that serves the poorest members of society with much-needed financial services such as microenterprise loans, safe savings and insurance. USAID is commonly credited as instrumental in bringing about the Bolivian success story. Indeed, for decades the U.S. has been widely rec- ognized as the most important donor throughout the region, enjoying sig- nificant good will among the people of Latin America for bringing them improved health care delivery sys- tems, better schools, broader access to financial services and better eco- nomic opportunities for the excluded. Equally important, this support did not consist of paternalistic giveaways, nor was it motivated by who was or was not allied with the United States at the moment. It was long-term in nature and oriented toward leaving sustainable development in its wake. But now our status as the hemi- sphere’s most generous neighbor is being challenged by a donor with a fundamentally different view of how best to raise the living standard of the region’s most vulnerable populations. With his targeted support, Chavez may well undo the success of Bolivian microfinance (by flooding the market with cheap, subsidized loans that do not need to be repaid) and simultane- ously demonstrate his ability to “out- give” the United States. 50 F O R E I G N S E R V I C E J O U R N A L / N O V E M B E R 2 0 0 7 Chavez has challenged the longstanding role and image of the U.S. as the region’s most important and generous donor country.