From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Wed Sep 08 2004 - 19:34:40 EDT
September 7, 2004 AMERICAS BUSINESS NEWS Free Markets Spur Protest Across Latin America, Many Feel Let Down By Economic Changes By DAVID LUHNOW Staff Reporter of THE WALL STREET JOURNAL September 7, 2004; Page A18 MEXICO CITY -- Mexicans who disagree with U.S.-style economic policies have resorted to some unusual tactics lately. Recently, government health-care workers protesting possible cuts to their pensions threw the severed heads of pigs at government buildings. In July, farmers opposed to free trade sacrificed a cow on a major avenue in Mexico City. Just as surprising as the methods used by protesters, however, have been their sheer numbers. In the past week, Mexico has witnessed some of the largest protests since the late 1980s, manifesting growing disillusionment with a lack of economic growth despite two decades of ambitious change to open borders to trade and reduce the government's role in the economy. Hundreds of thousands of people marched through Mexico City on Aug. 31 to protest President Vicente Fox's plans to overhaul public pensions. >From Puebla, Mexico to Patagonia at the southern tip of Argentina, a >broad movement made up of unions, farmers and Indian groups has >flexed growing political muscle. Widespread impatience with -- or >outright opposition to -- free-market programs threatens to halt >hard-fought movement toward privatization throughout the region. Many Latin Americans feel that economic changes during the 1980s and 1990s, such as selling state-run industries, failed to improve their lives. While Latin Americans still believe a market economy is best, only 19% are satisfied with the way the market has worked in their countries, according to a recent survey by polling firm Latinobarometro. Despite higher average incomes, poverty has worsened in part of the region, creating the sense that changes helped the "haves" more than the "have-nots." Many of the economic benefits to the poor from the 1990s, however, such as vanquishing inflation, are also less visible. Consider the matter of privatization. In many nations, privatized services improved quality and access to public services such as electricity. A third of rural Bolivians now have telephone service, compared with less than a quarter just a few years ago, government figures show. And in Mexico, some $33 billion of privatization income helped increase social spending to 9.5% of gross domestic product by 2000 from 6% in 1984, according to the government. Yet the Latinobarometro poll shows privatization is Public Enemy No. 1, with 75% saying they are unsatisfied with the sale of state companies. "Recent studies seem to be reasonably conclusive that privatization was positive, but there is no question it is less popular. That's a bit of a puzzle," says John Williamson, senior fellow at the Institute for International Economics in Washington. In some cases, privatizations were handled badly or riddled with corruption. Governments also didn't regulate the new companies to ensure competition to drive down prices. Benefits of privatization also are spread widely among consumers and take years to make a difference, economists say. The costs of privatization are more visible. As many as 150,000 Argentines lost their jobs during the sale of state enterprises in the 1980s and 1990s. They now form the backbone of that country's piquetero protest movement. For unions, bureaucrats and consumers who enjoy subsidies from state companies, popular discontent with privatization has allowed them to successfully oppose selling off more assets, from natural gas in Bolivia to electricity in Mexico. In some cases, politicians such as Venezuela's populist President Hugo Chavez have fanned existing suspicions about capitalism. And recently, Argentine leader Nestor Kirchner told the visiting head of the International Monetary Fund, Rodrigo Rato, to "not even dream" about the country's setting aside more money to repay its defaulted international debt. In other cases, public perceptions limit room to maneuver by more-centrist politicians such as Mexico's President Vicente Fox. Mr. Fox scored his first significant legislative success in four years recently with a bill that tries to begin addressing a cash-strapped state-pension system by requiring new workers at the health-care agency to pay more of their retirement costs. Although the bill didn't affect existing workers, the reaction was swift. On Aug. 31, 200,000 people took to the streets to rail against the measures. Health-care workers walked off the job during Mr. Fox's annual state-of-the-nation address. They soon were joined by the union at the state electricity utility, who fear Mr. Fox wants to privatize electricity services. Mexico isn't at risk yet of political instability. And faster economic growth this year in Brazil and Mexico, the region's two heavyweights, could ease brewing social unrest in the region. Officials from Mr. Fox's government say they will continue to press for change, including overhauling labor laws that date from the 1930s. "We are committed to fighting for the economic reforms we consider necessary," said Mr. Fox's spokesman, Agustin Gutierrez. Mr. Gutierrez said the presidency's own private polls show three-quarters of Mexicans behind proposed changes to labor laws, for instance. But the protests may be a symptom of worse to come if Mr. Fox attempts to dismantle what remains of Mexico's economic and political past. Until now, analysts say, Mr. Fox has been unable or unwilling to tangle with the pressure groups and unions that were part of the system under the Institutional Revolutionary Party, which ruled for seven decades until Mr. Fox's election in 2000. "What we're seeing now is something that sooner or later was going to bubble to the surface," says Luis Rubio, head of the Center for Development Studies in Mexico City. "We've had democracy since 2000, but many of the rules of the game continue as before."
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