Bariloche meeting on Economic and Social Inequities in Latin America

On 10-12 September 2004, Pugwash meeting no. 299 was held in Bariloche, Argentina.

Second Pugwash Workshop: Economic and Social Inequities in Latin America

Report by Darío D’Atri, Jorge Gil and Walter Scheuer (available in Spanish)

The Second Regional Workshop was held in San Carlos de Bariloche, Argentina, from September 10 to 12, 2004 within the frame of the Pugwash Study Group ‘Towards the Solution of Economic Inequities and their Social Consequences in Latin America‘, thus continuing with the work begun at the First Workshop held in late May 2003. Like the previous workshop, this one was organized by ‘Bariloche Group for Science and World Affairs’ (BACyAM Group) and made possible by the generous support of ‘Pugwash Conferences on Science and World Affairs’, Pugwash Netherlands, OSDE Foundation, Buenos Aires and the following Bariloche-based entities: Hayland Travel, Puelo S.R.L., MYD Neumáticos and Biblioteca Popular Sarmiento. Two participants from Brazil and one from The Netherlands, all three with extensive experience in Latin America social issues, met with Argentine participants specializing in various socio-economic and scientific-technological fields.

The workshop was held in memoriam of Luis Masperi, founder of the BACyAM Group, who passed away on December 2, 2003. Internationally recognized for his brilliant career, Luis also developed a deep and active commitment to human rights causes, total nuclear disarmament, and the pursuit of world peace. A BACyAM Group member spoke the following words to commemorate him:

Luis (“Luigi”) Masperi was born in Italy, and took his Ph.D. degree in physics at the Balseiro Institute in 1969. At this Institute he also was a professor and later Director; as well as Chairman of the Argentine Physical Society from 1982 to ´84. He made important contributions to his specific field of research – theoretical high energy physics – and directed the work of many students; he also had an active participation in the concretion of the Auger Project, an international observatory of extremely high energy cosmic showers, whose Southern Hemisphere Section is at present under construction in the Province of Mendoza, Argentina. During his last years he was Director of the Latin American Centre for Physics (CLAF) where his term of office was about to expire.

While internationally known as a research physicist, he was for many years an active member of international movements which endeavour to reach world peace and especially the dialogue between scientists of different nations as a contribution towards resolving international conflict. Among those movements, let us only mention the Pugwash Conferences on Science and World Affairs and the International Network of Engineers and Scientists for Global Responsibility (INES) of both of whose conducting bodies he also participated.

During the 1980´s he was an active participant in actions which led to the creation of ABACC, the bilateral Brazilian-Argentine body which set an end to the nuclear competition between these nations, an action for which he received the Forum Award from the American Physical Society, jointly with Fernando de Souza Barros, Alberto Ridner and Luiz Pinguelli Rosa. He was also one of the organizers of APDH, the Permanent Assembly for Human Rights in Bariloche, as well as a member (for the center-left Intransigent Party) of the legislative body which wrote the municipal chart of this city.

Besides all his virtues as a scientist, researcher and organizer, Luigi was a man of deeply felt convictions about the possibility in the moral progress of human beings, among which he firmly believed that to put the results of scientific research at the service of warfare and the interests of political and economical groups was deeply immoral: it meant to but part of the best of the products of human spirit to the service of the worst of our atavic and tribal instincts.

This report contains seven sections summarizing the issues addressed during the workshop. The text is the sole responsibility of the authors. Further information on the Pugwash Conferences on Science and World Affairs, the Study Group, The First Regional Workshop, the BACyAM Group, texts of the papers discussed during the workshop and papers submitted by other people who had been invited but were unable to attend due to previous engagements or last-minute difficulties, are available at http://www.bacyam.com.ar.

Introduction.

The Second Regional Workshop “Towards the Solution of Economic Inequities and their Social Consequences in Latin America” focused on seven key issues:

1. Analyzing how the panorama of social and economic inequity has evolved in Latin America, over a year during which there were processes of economic and institutional recovery in several countries (Argentina, Brazil, Venezuela), but also a hard struggle among political-economic paradigms after the crises ensuing the experiences of the 90s.
2. Discussing the recent evolution of the problems created by the large foreign debts which are restricting the economy in the main countries in the region.
3. Assessing possible Latin American policies for the integration of their scientific-technological fields, as a tool to revert the present predominance of primary economic activities.
4. Analyzing investment processes in Latin America, as a tool for growth and development.
5. Discussing the relationship between human development, social inequality and political culture in Latin America.
6. Identifying new laws to be proposed to Latin American countries in order to improve the quality of both State and private entities and reduce corruption.
7. Identifying ways to foster the development of transparent, informed grassroots organizations as well as communication channels between citizens and the Executive and Legislative Powers.

In contrast to the First Workshop on Social Inequity, which focused solely on the diagnosis of the socio-economic and institutional situation in Latin Amercian countries, the debates at this Second Regional Workshop focused on the search for concrete proposals for both economic scenarios and institutional areas. During the First Workshop, the debates were strongly influenced by the shock wave created by the crisis in Argentina, which began in late 2001, exponentially increasing the rates of poverty, underprivilege, mistrust of institutions and political instability. At this Second Workshop, the debates addressed Latin America as a whole, compared Latin America to other parts of the world, and included totally new issues such as the connection between political culture, historical conditioning factors and the struggle against social inequity.

1. Evolution of the panorama of social and economic inequity
   in Latin America as from early 2003.

At this first session, participants reviewed recent historical antecedents, which were said to be key in causing and sustaining inequitable conditions. In fact, the maintenance of the so-called Washington Consensus policies (which involve reducing the role of the State and implementing economic aperture and liberalization of market activity) was singled out as one of the main factors causing inequity.

Some of the major changes following the economic and social crises that have affected Latin America in recent years were identified as follows:

• Following Mexico’s 1994 “Tequila” crisis, there were financial cracks in different emerging countries in the region, as a result of the sudden halt in massive financial capital flows towards them. These countries had been using these foreign funds to finance increasing public expenditure and feed the growth of their economies, and the sudden stop caused not only financial crises, but also a domino effect on countries in similar circumstances.
• Neo-conservative style policies suffered a sudden loss of social legitimacy and consensus, due to the rapid, sustained increase in the indices of poverty, underprivilege and inequity in the sharing of national income, as well as decline in the quality of education and health services and, above all, the widespread loss of jobs.
• International context defined by the bursting of the 90s financial bubble, which increased the economic cost to be paid by emerging countries.
• Civil unrest and riots in several Latin American countries, while their governments were putting a lot of effort into changing the ideological orientation of their social-economic policies.
• Upholding of the core of the Consensus policies, though toned down by mistrust of the essential Consensus paradigm, which is the need to reduce – or directly limit as much as possible – the role of the State.

Within this context, it was agreed that the main Latin American governments clearly seem to have taken the political decision to increase public expenditure, which would be directed firstly at assuaging the consequences of poverty and inequity in income, and secondly, at recovering the State’s directive role in the frame of highly de-regulated market economies.

It was also agreed that one of the gravest, though not immediate, consequences of the implementation of the so-called Washington Consensus policies has been the exponential rise in levels of insecurity, which can be classified as:

• Insecurity due to crime.
• Labor insecurity.
• Social insecurity of millions of needy people.
• Insecurity regarding property rights.

It was also maintained that the central countries have promoted asymmetrical demands regarding compliance with the Washington Consensus policies, making them more lenient for themselves in contrast to the demanding level of compliance required from developing countries, e.g. concerning required fiscal surplus or deficit levels.

Nevertheless, objections were voiced against the former, overly structuralistic view of the causes of inequity. One participant said that the phenomenon of inequality is too complex to be analyzed by means of a political agenda alone, because it would risk limiting the understanding of the problem of social inequality to a cause-and-effect relationship, i.e., bad government policies generate inequality.

Equally, from this standpoint, the participant said that the most needy sectors discuss their rights outside the traditional juridical, political and economic scope, with regard to the meaning of their own rights to work, social inclusion, education, etc. The participant summed up this point of view by proposing to discuss whether a certain juridical or political order would be certain to guarantee the achievement of equality targets.

Clearly different explanations of the origin of inequality and inequity were put forward for different countries. In Argentina, social inequality is closely linked to the historical sequence determined by systematic processes of social exclusion. In contrast, in Brazil and Bolivia, the processes of inequality have occurred within the framework of certain historical sequences determined by processes of limited social inclusion.

Another participant proposed to consider these matters as key to understanding that it is impossible to establish a direct relationship between economic growth and the reduction of inequality, given the historical factors that “genetically” impinge on inequality in each country in Latin America.

Finally, it was suggested that there is a need to propose that both government and non-government organizations should implement active policies in order to foster social inclusion, which is a major problem in Latin America, and to revert the recent exclusion processes.

2. Recent evolution of issues related to foreign debt.

Due to the fact that Latin American countries are so heavily indebted, with some of them even having defaulted on their foreign debts (like Argentina, Ecuador or Uruguay), it was suggested that the region is at a crossroads for defining long-term courses of action. Within this framework, it was said, policies addressing foreign debt are crucial to Latin American countries because debt is a major conditioning factor.

It was also recalled that despite some signs of self-criticism regarding events that occurred during the 90s, international credit organizations and the G-7 countries maintain a general stance of fiscal inflexibility towards emerging countries. They uphold a double standard, requiring developing countries to implement policies which are the opposite of those implemented in central countries. It was added that the same kind of asymmetry occurs regarding debt renegotiation, with international finance organizations pressing for better repayment terms, while they ignore the sustainability of the programs implemented to overcome the defaults.

The following proposals were made to address the issue of foreign debt:

• Defining negotiation formulas with more adequate economic policies, which would not condition growth in the medium or long term.
• Creating cooperation among countries to enable them to improve their position in negotiations, e.g. through MERCOSUR.
• Endeavoring to get out of the ideological traps into which the discussion of growth models has fallen, in order to establish more solid bases for sustained development.
• Proposing that the United Nations create institutional mechanisms to supervise both private and public lenders, as well as credit takers.

In addition, it was suggested that a deep analysis should be recommended regarding the conditions under which Latin American debts were contracted, as well whether or not they are legitimate, in order to define how and to whom payment should be made. It was also proposed that the International Court of The Hague should be consulted as to whether it is legal for the IMF to attribute itself faculties to interfere with the policies and economics of developing countries: Latin American countries should demand that IMF action be in keeping with its own statutes.

One participant said that it is impossible to solve the debt problem based on juridical arguments, because it is a political problem which needs to be resolved politically. To this end, the participant proposed the creation of a multinational Latin American organization to study foreign debts and coordinate policies.

At the same time, the authorities of most of the countries in the region were criticized for excluding – or accepting the exclusion of – Congress (Senators and/or Representatives) from the discussion of the foreign debt. According to the Constitutions of most of these countries, the Legislative Power is in charge of dealing with foreign debt.

3. The present predominance of primary activities in Latin American economies and its
   relationship with scientific-technological integration and cooperation in the region.

At this session, different situations in Latin American countries were described, to show how strongly they are conditioned by technological dependence, lack of adequate legislation, and the fact that both governments and companies underestimate the role of local and regional developments in science and technology. A summary of the points and proposals made, follows:

• In the particular case of Argentina, even during the years when local industry was booming, little interest has ever been shown in taking advantage of local scientific and technological capacity. Furthermore, despite some cases of cooperation and transfer among countries in the region, there has never been massive technology transfer within Latin America.
• As from the 70s, there has been a steady return to primary economic activity. At the same time, education at all levels has undergone serious deterioration.
• In Latin America it is essential to:
  – determine what policies each country will follow in order to start up processes of industrialization or re-industrialization, based on the contributions of national science and technology.
  – promote the intelligent use of Government purchasing power, in order to foster the relationship between industry and local science and technology and promote local development of internationally competitive technology in fields where there is high added value.
  – give preference to regional industrial production over imported goods when quality and prices are equal, but avoiding the kind of overprotection of non-competitive industry that took place in previous decades.
  – encourage greater Latin American integration in the field of science and technology, particularly regarding its connections with industrial activity. In particular, exploit the potential for closer integration and cooperation between Brazil and Argentina in the area of highly specialized technology, such as space technology and nuclear technology.
  – develop each country’s biotechnological capacity in order to achieve a relative reduction of their dependence on central countries.
  – explore the possibility of developing technology to produce systems for controlling corruption.
• Due to its own way of handling things, the Free Trade Area of the Americas (FTAA) would prevent several of the above proposals, e.g. the intelligent use of Government purchasing power aimed at overcoming a country’s economy being limited to primary production, which, in addition to perpetuating unfavorable exchange terms, cannot create the number of jobs needed to overcome the crisis in underprivilege and unemployment.

4. Analysis of investment processes in Latin America as a
   factor affecting growth and development.

The overall situation of investment in Latin America was analyzed, both because investment has slowed down as a result of changes in the international context, and because investments do not necessarily increase job availability.

One of the key factors in reducing unemployment is that wealth should have a high growth rate. In view of this, the obstacles to investment were analyzed as factors directly affecting the processes of social inclusion and re-inclusion based on finding employment for the jobless.

Argentina was mentioned as an example. After its spectacular 2003 – 04 recovery, its installed production capacity is being used very intensively, which, in turn, requires the encouragement of the investment processes in order to guarantee sustained growth. In 2002 there had been record low investment in Argentina, with only 11% of GDP. During the second semester 2003, investment level was similar to what it had been during the 80s, with the consequent risk of repeating the kind of stagnation that occurred in those days. It was stated that in Argentina today, investment is 960 pesos per inhabitant, in contrast to the 60s, when it was 1023 pesos, with peaks of 1600 pesos per inhabitant. Of the present 960 pesos, only 100 are government investment.

Secondly, it was pointed out that a problem Argentina shares with most other Latin American countries, is the fact that people are not trained to acquire knowledge, which affects the possibility of future growth. For example, in Buenos Aires Province alone, between 2001 and 2002, enrollment at schools fell by 16%. Chile is confronting this problem by paying unemployment subsidies only to people whose children attend school morning and afternoon.

One participant proposed to use tax policy and public expenditure policy as tools to solve the problem of inequity.

It was also proposed to encourage State’s themselves to plan better resource allocation.

In addition, it was said that international credit organizations should be encouraged to change the way they account for government investment in education and infrastructure, which should no longer be considered as government expenditure subject to fiscal adjustment, but as investment. Nevertheless, one participant maintained that in terms of social research, there is no consensus on whether education is actually increasing social mobility, thus reducing social inequality, or whether, on the contrary, it is reproducing or at least maintaining social inequality.

5. Human development, social inequality and political culture in Latin America.

The main point discussed at this session of the Second Workshop was that until a few years ago, it was believed that growth was related to development. However, the struggle against poverty in Latin America today calls for immediate solutions, which means that the situation should be tackled from a different political standpoint.

Thus, it was recalled that during the period when importation was undergoing regional substitution, the rise in GDP was associated with industrialization, which, in turn, led to a reduction in poverty and social inequality. However, it was added, poverty and exclusion are currently rising due to changes in the rules of capital accumulation, which have brought about changes in economic growth and the balance of power relations within society. There is more inequality in Brazil, for example, than in other much poorer countries; only Botswana rivals Brazil in terms of inequality.

Some participants pointed out that in spite of this situation, sharing concentrated social benefits more fairly is not a top priority for Latin American politicians nor does public opinion believe it to be essential. Both politicians and the public believe that an increase in available resources would be more effective. Focusing on the problem of inequality and inequity from a purely economic standpoint was therefore criticized. It was said to limit the appreciation of the complexity of the problem, inevitably leading to the belief that it can be solved by means of economic growth alone, without considering the cultural and historical background.

Towards the end of the session, the following points were proposed for an agenda to discuss and analyze the issue of social inequity and inequality:

• Social development and social inequality are not systemic, generalizable variables; their proper study requires to relate them historically.
• It is necessary and better to apply several models for development and several models against inequality than to use a single approach.
• The struggle against inequality is not limited to a mere exercise in economic policy, it is an intellectual and political challenge.
• Rhetoric should be left aside, and an analysis carried out regarding what kind of public policies produce the best results in the fight against inequality. For example, issuing magnetic cards to persons receiving social assistance would eliminate the political cost associated to political clientelism.
• Policies to reinforce civil society are needed.

One of the participants wondered whether inequality can in fact be reduced, even when there is political decision to do, given the context of job destruction. Nevertheless, it was considered that the growth phase that regional economies have been undergoing since 2003 offers an opportunity for Latin American countries as long as the model for economic growth and development is being reconsidered, taking into account the incapacity of capitalism to create jobs.

6. Identification of laws and regulations that should be introduced into Latin American
   countries in order to improve the quality of their institutions and reduce corruption.

This session focused on highlighting the fact that the main problem in most Latin American countries is not that they lack of adequate legislation for improving institutional quality and the struggle against corruption, but the fact that these laws are regularly broken.

One participant claimed that foreign pressure on the Legislative Powers to pass laws responding to interests alien to the needs of a country creates distortions which are a form of corruption. He added that when a Legislative Power passes regulations free from any kind of pressure, there may be a direct positive effect against the causes of social and economic inequity, e.g. by passing laws establishing direct, progressive taxation.

Another participant added that lack of regulations is not what prevents corruption from being tackled, because the main regulations that should enable the democratic system to be improved are in force. Nevertheless, he considered that further regulations should be added so that the mandates of public representatives could be repealed.

It was also said that Latin American Legislative Powers should address the problem of tax evasion in the framework of tax legislation. It was pointed out that in Argentina the Supreme Court has jurisprudence to tackle the various means by which multinational companies avoid paying income tax, such as self-loans, intercompany purchase of technology and others.

It was also mentioned that delegating faculties corresponding to the Legislative Power in the Executive Power is a form of corruption, and that emergency decrees are a means of encroaching on the Legislative Power and facilitate corruption in institutions which already have a high level of systemic corruption.

A participating economist pointed out that if Argentine tax legislation were comparable to tax legislation in countries like the USA regarding taxes paid by companies, Government revenue would increase and several methods of tax evasion used by companies would be stopped.

It was also proposed to establish very precise regulations regarding how much money political parties should be allowed to spend on election campaigns, and that the State should subsidize campaign expenses, to allow equal opportunities to all parties and limit campaign expenditure.

At the same time, it was recognized that in most countries there is no political decision to implement mechanisms that would enable grassroots representation to be improved.

7. Identification of ways to foster the development of transparent, informed grassroots organizations and channels of communication between citizenship and the Executive and Legislative Powers in Latin America.

During the final session at the Second Workshop, an analysis was made of how to create transparent grassroots organizations that could generate specific proposals for tackling inequality and exclusion.

The need to create movements that could transform society was stressed. Equally, it was pointed out that in Argentina at least, the defect of the prevailing productivist model is that it does not include adequate corrections to prevent the social consequences it causes. The challenge is therefore how to influence economic and political decision-makers, particularly in the State, so that their decisions are conducive to confronting inequality.

One participant introduced the concept of “quotidian acquisition” as a means of understanding the processes of inequality. The term refers to the demands and activities arising from a set of entitlements (property, contracts, etc.) and a set of responsibilities which the State cannot renounce without a severe further loss of social equity and quality of life of vast sectors of the population (e.g. health and education). Entitlements are classified according to whether they are accessed (a) directly (such as jobs and property), (b) indirectly (such as those acceded through institutions, communities or associations) and (c) via the via the citizen-State relationship.

The participant added that this quotidian acquisition thus takes place in an institutional environment comprising economy, State, society and culture. As its scope is so wide, there were said to be various courses of action to confront the inequalities and inequities manifested in the quotidian non-acquisition of the needy. Particularly, without effective governableness, there can be no justice and inequity cannot be tackled, and without respect for human rights, no actor, company, institution or State can be legitimate.

Another participant suggested looking at the processes of achieving and establishing democracy in two stages:

• A first stage during which democracy should be sought and consolidated, after authoritarian or dictatorial regimes.
• A second stage during which democracy should be criticized and impoved upon, so that it evolves from a formal democratic model to a democracy able to renew party leadership and party democratization.

It was also stated that within this framework, the following points are key:

• Grassroots organizations should work as “citizen watchdogs” capable of carrying out “democratic auditing” and pointing out flaws in the workings of democracy.
• The concept of citizenship should be redefined so that it implies: (a) a recovery of citizen rights; (b) a continuous follow-up of how social institutions work (e.g. the prison system), and (c) the involvement of the media to broadcast the results of these continuous auditing processes.
• Overcoming poverty and exclusion, a problem that will take time to solve and requires social leaders who are better prepared to question the economic decisions taken by companies and the State.

 

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Participants

– Botelho, André (Brazil) – Sociologist. Professor, Univ. Federal de Río de Janeiro. Specialist in the relationship between science and development, society and politics

– Buch, Tomás – Technologist. Consultant for a local advanced technology company. Studies on technology related social issues. (Member, BACyAM Group and Pugwash Conferences)

– Camaño, Carlos Luis – Agricultural Engineer. Serves on the Argentine National Service for Food and Agricultural Hygiene and Quality, which he represents before Mercosur. Specialist in the assessment of food derived from GMOs. Professor, Univ. Buenos Aires.

– D’Atri, Darío – Journalist; specializing in Argentine and international political and economic affairs. Managing editor and columnist at newspaper-owning company CIMECO. Managing editor, Rumbos magazine. Has worked for La Vanguardia, Clarín and Mercado. Argentina. (Member, BACyAM Group)

– de Gaay Fortman, Bas (Holland) – Jurist and economist. Professor, Political Economy of Human Rights, Utrecht University. Emeritus Professor, Political Economy, Institute of Social Studies, The Hague. Member, UNESCO Social Committee. Former head of parliamentary party block. Extensive experience in Africa and Latin America. (President, Pugwash Conferences Holland)

– Gabetta, Carlos – Journalist; political, social and economic analyst. Managing editor, Le Monde Diplomatique, Southern Cone edition. Academic, Univ. de San Martín. Formerly: Director, Le Monde Diplomatique, Spain.; Collaborator, Le Monde Diplomatique, Radio France internationale, France, El País, Spain, El Día, México, etc

– Guerrero, Sandra – Elementary School Teacher. Town Councilor in San Carlos de Bariloche (2003-07). Human Rights Secretary at the Union of Judicial Workers of Rio Negro Province.

– Lozada, Martín – Criminal judge. Specialist in international criminal justice, human rights and privatization of public security. Member, American Society of Jurists. (Member, BACyAM Group and Pugwash Conferences)

– Lozada, Salvador – Former judge. President, Argentine Institute for Economic Development. Founder and Honorary President, International Association of Constitutional Rights. Specialist in foreign debt and human rights. Formerly: Professor, Univ. Buenos Aires, ousted by the military dictatorship in May 1976. (Member, BACyAM Group)

– Szmukler, Beinusz – Judge. Consultant, National Magistracy. President, Continental Consultative Council, American Society of Jurists. General Secretary, International Association of Democratic Jurists. Consultant, Center for the Independence of Judges and Lawyers, International Commission of Jurists. Formerly: Professor, Univ. Buenos Aires; President, Argentine Magistracy.

– Vanoli, Alejandro – Economist. Member, Fénix Group. Professor, of International Finance and Associate Professor of International Economics, Univ. Buenos Aires. Advisor, Board of Directors, Argentine Central Bank. Formerly: public debt negotiation related technical posts at Argentine Central Bank and Economy Ministry

– Viglione, Abel Ramón – Economist. Since 1990, senior economist in charge of the industrial area and coordinator of the Sector Reports, Foundation for Latin American Economic Research. Consultant, World Bank and Interamerican Development Bank, for Latin American issues.

– Villas Boâs, Gláucia (Brazil) – Sociologist. Professor, Univ. Federal de Río de Janeiro. Researcher in sociological theory, Brazilian social thinking, university education and cultural movements.

– Other BACyAM Group members participating in the discussions were: Jorge Gil (engineer), Octavio Gorraiz (psicologist), Karen Hallberg (physicist), Hernán Pastoriza (physicist), Humberto Raiti (engineer) and Walter Scheuer (physicist).